Cheltenham to invest £100m through ALMO and boost HRA housing
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Paul Jones, Cheltenham Borough Council
The removal of the housing revenue account borrowing cap is set to provide a boost to a new £100m initiative launched by Cheltenham Borough Council.
Earlier this week, the council agreed a new plan to borrow from the Public Works Loan Board and provide the money to its Arms Length Management Organisation (ALMO) to build 500 new homes.
The scrapping of the cap means that affordable homes planned under this initiative can now be provided through the HRA, potentially increasing the total number of homes by up to 40%.
Paul Jones, chief finance officer at the councils told Room151: “The removal of the cap now gives us the opportunity to create mixed tenure schemes through both the ALMO and the HRA.
“We can use the ALMO to focus on providing homes at market and just below market rents, while using the HRA to build affordable homes.”
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After the government’s announcement, Association of Retained Council Housing (ARCH) chief executive John Bibby predicted the scrapping of the cap would help with the development of mixed tenure sites.
“Councils will be able to deliver through a housing company in the general fund alongside HRA housing, and there are ways councils can do a bit of cross-subsidy between the two,” he said.
Jones said that the council’s general fund would benefit from the difference between the rate it was paying on the PWLB loans – expected to be 40 years in duration – and the commercial rate it would charge the ALMO.
“If the gap was quarter of a per cent margin then we would benefit by £25,000 for every £10m borrowed.”
Any surpluses from rental income once loans were repaid could be ploughed back into housing development, Jones said.
In addition, the ALMO could now bid for affordable homes provided by private developers through section 106 agreements, he said.
The council is aiming to build out the housing programme within 10 years.
It would aim to provide five-year tenancies on private rented homes provided through the ALMO to give tenants greater security.
