A little bit of speculation, a little bit of public guarantee

An interesting little article from Inside Housing about Warrington Council, the essential facts from which are given below, prompting an equally (imho) interesting reaction and question from reader Keith Veness

Ludicrous - why doesn't the Council build and manage its own homes rather than risking money by giving it to unelected and unaccountable RSLs?

On Tuesday, Warrington Council agreed a £30 million commercial loan to Muir Group Housing Association. In July it will consider a proposal to lend £20 million to Plus Dane Group.

The local authority has provided loans to associations since 2010 to stimulate housing development in Cheshire, following the withdrawal of long-term finance by banks in the wake of the 2008 banking crisis. To date, using its cheap borrowing from the Public Works Loan Board, it has loaned £51.8 million to four providers.

Under the terms of the deal, the 25-year loan can be drawn down in up to 20 tranches over a six-year period. The rate of interest payable will be 1.25 per cent above the PWLB’s rate at the date of each drawdown.

The council will gain around £15,000 in interest annually for each £1 million borrowed and plans to use this to reinvest in services to help reduce the scale of future cuts. The deal will also increase its new homes bonus – a government grant to coun­cils for increasing the number of homes and their use – by between £1.1 million and £2.2 million over six years.