Elizabeth Huggins Cottages Charity Housing Association
The Cabinet were advised of an approach to Gravesham Borough Council by Elizabeth Huggins Cottages Charity Housing Association (the Charity) seeking the potential for the Council to grant a long term loan to the Charity. Such a loan would provide the Charity with access to borrowing which would be used to fund development of housing at their site at Cross Lane West and provide a long term investment income stream to the Council. Additionally, their approval was sought to negotiate and agree the final terms of a long term loan with Elizabeth Huggins Cottages Charity Housing Association.
The Assistant Director (Corporate Services) guided Members through the report giving a summary of the arrangements under which any such loan facility may be made available to Elizabeth Huggins Cottages Charity Housing Association. The full conditions for the loan advancement to Elizabeth Huggins were listed at paragraph 4.8 of the report.
The Committee raised general concern over the Charity’s ability to pay back the loan and what would happen to the loan if any Government policies changed how much was required to be paid.
The Assistant Director (Corporate Services) stated that if the Council were made aware of any changes in Government policies prior to the formal agreement of the loan then they would be considered as part of the loan agreement however the validity of the loan could become an issue with any significant changes. If anything changed during the course of the loan agreement then the Council would engage with the Charity to address those loan conditions.
The Director (Corporate Services) admitted that it was a risk to the Council but they had approached the loan agreement in a similar manner to what was entered with the St Georges Centre redevelopment deal. Following the principles of an income strip deal, officers had mapped out how much the rental income will grow over the next 50 years using retail growth estimates with the principal repayments of borrowing to the Council increasing in line with the rental income growth. It was estimated that during that 50 year period the Charity will generate sufficient money to payback their loan as well as the accumulated interest. Additionally, the level of income the Charity should generate was of a high enough level that there was a safety buffer if there were any issues.
In response to further concern and questions, the Director (Corporate Services) and the Assistant Director (Corporate Services) explained that:
· Phase 1 of the loan agreement was self-contained and prior to release of the £2 million loan the Charity would need to secure the remaining funding from external sources. Cllr Pritchard was actively seeking additional grant funding from external sources to fund the rest of the payments required to complete the project. Originally the external funding was delayed as the organisations were reluctant to offer grant funding until there was a determination to bring the scheme forward. As a result of the Council agreeing to loan the £2 million to complete phase 1, the external companies that Cllr Pritchard approached had indicated a willingness to contribute towards the remaining payments needed.
· Cllr Pritchard had been liaising with the residents of Elizabeth Huggins scheme and they were supportive of the proposed developments expressing a wish for the work to start as soon as possible. Additionally, the Director (Corporate Services) advised that he had been approached by a resident at the Remembrance Parade who was keen to see the proposed scheme come forward.
The Chief Executive outlined a number of key points to the Cabinet:
· The risk was not the same as lending money in other ventures, both the Director (Corporate Services) and the Assistant Director (Corporate Services) had been very diligent in considering all financial aspects of the agreement and ultimately there was long term security against the assets. Further security conversations could be held in the future if needed.
· The proposed development will count towards the Councils housing stock which will help the targets for housing delivery in Gravesham.
· It was very pleasing to see the scheme moving forward as it was initially led by the late Cllr John Cubitt who worked very hard to achieve that outcome and actively secured the planning permission that was needed. Additionally, it was beneficial for other former Councillors such as Les & Sue Howes who were big supporters of the project.
Resolved that Cabinet:
1. Agreed in principle to the issuing of a long term loan to Elizabeth Huggins Cottages Charity Housing Association, subject to the conditions outlined within Section 4.8 of this Report.
2. Recommended to Full Council that delegated responsibility be given to the Director (Corporate Services)(in the role of S151 Officer), in consultation with the Deputy Leader, Lead Member for Housing, Chief Executive and Monitoring Officer to negotiate and agree the final terms of any loan and enter into the necessary associated legal agreements on behalf of the Council.
3. Recommended to Full Council that the Treasury Management Strategy Statement is updated to reflect that the Non-Specified Investments time duration for term deposits with unrated counterparties is increased to 50 years, to reflect the potential loan arrangement with the Charity.
4. Recommended to Full Council that an amount of £2m is added to the approved capital programme for 2019/20 for the purpose of providing long term funding up to that defined level to Elizabeth Huggins Cottages Charity Housing Association as a means of enabling the Charity to provide additional social housing in Gravesham.