Welsh council could borrow money to upgrade stock

A Welsh council has joined the select band of authorities that have said they can upgrade their properties to government standards using prudential borrowing.

Carmarthenshire council has said it can raise the £60m it needs to invest in its stock using the borrowing system, which allows the council to borrow money as long as it can prove that it can repay it.

The council could also opt to transfer its homes to a housing association – its members will receive a report on the options in April.

Carmarthenshire will be one of a handful of councils that can use prudential borrowing to raise all the money it needs to upgrade its stock. Other councils considering using prudential borrowing include Harrow and Wrexham.

Councils often find it difficult to make the sums add up because they need a source of income to repay the debt. Since rents are tightly controlled by rent restructuring, most councils cannot find the extra money to repay their borrowings.

Carmarthenshire plans to save £1m over 10 years from its £23m housing revenue account in order to help repay the £60m it will borrow. The remaining £59m will be funded from rent and right-to-buy revenues. The savings will be made through better use of IT, longer-term agreements with contractors and a reduction in housing staff as the number of homes left to manage decreases through right-to-buy sales. Savings will also be made from the budgets of other departments that support housing, such as the chief executive’s office.

Robin Staines, head of housing services at the council, said one of the reasons that the council was able to contemplate prudential borrowing was because more than a third of its stock is one-bedroom sheltered housing, which is exempt from the right to buy so the council continues to receive rental income from them. The homes are in reasonably good condition so do not need much money spent on them.