Enfield funds new housing association with right to buy receipts
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Current housing at Edmonton Green, Enfield. Photo: Enfield Council
The London Borough of Enfield has agreed to fund the creation of a new housing association in which it will take a minority stake, in order to spend £50m of right to buy (RTB) receipts.
The council has approved a deal to lend £250,000 to the new association — Red Lion Homes — for start-up costs.
The council says it cannot afford to spend its RTB receipts through match funding via its housing revenue account and is seeking an existing housing association to partner with on the venture.
Speaking to Room151, James Rolfe, Enfield’s director of finance, said: “This move will enable us to spend our right to buy receipts in line with the rules the government has set us.
“It is consistent with our other initiatives on development, which will form part of the overall strategy to address the housing crisis.”
Current government rules mean that if the council failed to spend its RTB receipts, the borough would have to repay them to the government with compound interest at 4% above the base rate.
The council is planning to provide the housing association with 30% of its RTB receipts, totalling £46.3m over the next five years.
The remaining 70% will come through loan or investment funding, the council said.
Red Lion has plans to build 500 homes within six years, with the majority built as affordable.
This will provide a capital receipt to the HRA, but would result in the loss of rental income of around £10m over 30 years, according to a council report.
The £250,000 loan agreed this week would pay for directors’ salaries, consultant fees, the creation of a business plan and day-to-day expenses.
The sum will be repaid to the council with interest once the company is operational.
