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Burying the hatchet

‘We didn’t have a positive relationship at all - and this year has completely changed that,’ says David Cressey, head of housing at Scottish Borders Council.

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Burying the hatchet

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Mr Cressey is making something of an understatement. For almost eight years the council was locked in an acrimonious legal battle with Scottish Borders Housing Association after a relatively simple stock transfer went sour.

But a landmark agreement made almost a year ago has transformed the two organisations’ working relationship, had ‘significant financial benefits’ and opened up new ways of providing more, and better, affordable housing. So much so the council now wants to extend the model to work with other housing associations.

The problems began when the council transferred around 6,700 homes to Scottish Borders Housing Association in 2003. The council received £24 million which it paid to the Scottish Government in exchange for writing off the historical debt on the properties - worth £50 million at the point of transfer.

But SBHA claimed it had paid £19 million over the odds for the houses because of inaccuracies in the valuation. In September 2005, SBHA threatened to sue the council for wrongly valuing its stock at the time of transfer. It claimed the lost income left the housing association unable to deliver £73.8 million of investment in homes over 10 years - a promise it had made to tenants as a condition of the transfer.

The dispute was finally resolved in March last year when SBHA agreed to drop its claim in return for a £250,000 out of court settlement and help from the authority.

As a result, the two organisations signed an agreement establishing joint working on 16 projects in order to help the housing association get back on track.

‘We wanted to start working with SBHA to address joint interests,’ says Mr Cressey.

Both organisations said they would increase the supply of affordable housing, work to improve neighbourhoods, and tackle disadvantage. Over the past year there has been joint training of staff, drawing up plans for investment in new supply and shared services arrangements.

‘One of the big problems SBHA had is huge rent arrears,’ Mr Cressey says. ‘This was an issue for us because people were being made homeless, so we agreed we would send our housing support team at the earliest opportunity and provide intensive support for people at risk of rent arrears.’

Julia Mulloy, chief executive of the Scottish Borders Housing Association, agrees: ‘We’ve seen quite a radical change in our approach to rent arrears in the past year. We’ve seen a reduction of more than £120,000 to £720,000 on current arrears, and 500 fewer tenants in arrears, since April 2011.’

The council wants to sign a similar agreement with other associations, and offer loans to aid development.

‘In terms of development, the opportunities for social landlords have become limited because of the level of grant available. The principle of the local authority investing, rather than providing a grant, is a fair one,’ Mr Cressey says.

Last year the Scottish Government cut grant for new homes from £66,000 to £40,000 per home.

Scottish Borders Council would lend to the housing associations at rates similar to the Public Works Loan Board, an agency of the Treasury, currently 1 per cent above government gilts.

‘If the banks are aware that the housing association can come to us for a loan at PWLB rates then they might lend at better rates,’ Mr Cressey explains.

The loans would come with a caveat that the development must be affordable housing including both social and intermediate homes, and must fit with existing council development plans.

‘We’ve only developed a small number of properties since transfer,’ says Ms Mulloy. ‘We have a hard-to-let estate of 190 properties and we’re looking at a £5 million investment for regeneration of half the estate, plus a new build of 42 homes. The on-lending scheme from the council could be the source of funding for that.’

SBHA is in talks with other housing associations to explore more joint working options with the council.

Ms Mulloy says she is positive about the future: ‘The past year has become stage one, and now we want to work with the other landlords to see how we can build on the concordat model to support further work,’ she says.

Timeline: the borders battle

October 2001: Scottish Borders Council tenants are balloted on a stock transfer

March 2003: Scottish Borders Housing Association pays the council £24 million for 6,700 homes

August 2003: SBHA admits financial difficulties and blames an overvaluation of the homes prior to transfer

September 2005: SBHA lodges a £19 million claim against SBC

March 2007: the case is sent to arbiter law firm Burness

March 2011: SBHA drops the case after receiving £250,000 from the SBC in an out of court settlement

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