In the face of ever-decreasing funding from central government, Mendip District Council has taken the groundbreaking decision to set up its own housing company to generate additional income.
With the annual financial settlement from central government expected to be completely removed by 2020, councils around the country are having to come up with new and innovative solutions to generate funding.
The establishment of a housing company would see the council build a portfolio of properties to sell and rent at market rates. As well as an income stream from the rented properties, money would also be generated through the sale of properties, New Homes Bonus receipts and council tax receipts. The new homes would also reinforce the council’s key priority of supporting the provision of housing in the district.
Profits would be re-invested in essential frontline services provided by the council.
Proposals to set up the new housing company were agreed by Mendip’s Cabinet at its meeting on Monday 9th March.
As sole shareholder, the council would appoint the directors to the company and approve the business plan and other key decisions. The directors would have responsibility for the operation and management of the company. Specialist legal advisers will assist the council in developing robust governance arrangements.
The council will fund the company by either on-lending at commercial rates using its existing reserves or borrowing funding which it would then on-lend at commercial rates to the company.
Work will begin shortly on identifying council-owned sites around the district that could be suitable for housing. Once these sites have been assessed and considered as viable prospects for developing further, these assets will be either transferred to the company or provided to the company by way of a building license.
The council will not be building properties to rent as affordable homes. While there may be times when planning obligations require the authority to develop a number of affordable homes as part of the development of a wider site, these will be transferred to a housing association as part of the delivery of the site.
Cllr Harvey Siggs, Leader of Mendip District Council, said: “With government funding continuing to reduce, and the annual settlement expected to disappear completely by 2020, it’s essential that councils look at new ways to generate income.
“By establishing a new housing company, Mendip is once again taking a bold and innovative approach to generating income which will ensure we can continue to provide essential frontline services to people in the district.
“In these times of austerity we cannot afford to stand still and have to constantly be looking at what we can do differently to provide excellent value-for-money services.
“I’m proud that once again this council is leading the way on such an ambitious project.”