Pioneering deal for East Lothian HA approved by Holyrood
East Lothian lends landlord £25 million
The Scottish Government has given permission for a housing association to access up to £25 million borrowed by a council from the Treasury.
The loan, understood to be the first of its kind, will allow East Lothian Housing Association access to development funding over an unlimited time period.
Under the terms of the deal, payments will be made to ELHA by East Lothian Council for new affordable housing projects where it has secured grant.
The association is hoping the cash will enable it to more adequately cope with the 3,000 new applications for housing it receives a year.
ELHA will make regular payments to the council at the Public Works Loan Board interest rate plus a margin of 0.1 per cent, likely to be cheaper than borrowing from banks or building societies.
ELHA has had an anxious wait for more than a year for the government to consent.
Martin Pollhammer, chief executive of ELHA, said: ‘We look on the agreement as a form of bulk procurement of finance and this deal beats the rest of the current market hands down.
‘The deal is flexible, if we find a better deal elsewhere we can go with that instead.’
Mr Pollhammer said the form of borrowing is simple, as there are no arrangement fees and more simple terms and conditions than bank borrowing.
He said: ‘The deal is also good for the council as money is made available for housing at no cost.’
The Housing (Scotland) Act 2001, allows authorities to make loans to housing associations for the provision of new homes.
If authorities have to borrow to make the loans, ministerial consent is required.
A housing finance expert said there is no equivalent in English law, meaning the model is less likely to be viable south of the border.
He said: ‘I don’t see this as a model that is going to be used extensively.
How many local authorities have the money to make loans? And will the Treasury approve them? It is difficult to see in the current climate.’
Andrew Field, deputy chief executive of the Scottish Federation of Housing Associations, said he hopes associations show an interest in developing models similar to that in East Lothian. He said: ‘They provide a good deal for associations and are an example of authorities and landlords working together.’
He said political decisions about funding and individual councils’ ability to borrow may prevent the loans being rolled out across Scotland.
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