Warrington lends £90m of PWLB borrowing to housing association

Warrington Borough Council has agreed to lend a housing association £90 million to encourage new affordable housing.
The loan, to Helena Partnerships, is aimed at providing around 1400 social and affordable homes in Warrington and neighbouring boroughs over the next five years.
The council will borrow the initial cash from the Public Work Loans Board before on-lending to the association at near-commercial rates over a period of 25 years. In addition, the council will consider a bond issue to raise future resources to fund the loan.
Danny Mather, corporate finance officer at the council, told Room 151: “Helena considered going to the bond market itself – nobody can get a 25 year loan with the banks any more. But we are able to lend to them at a competitive rate.”
He said that another advantage for the housing association was that it would not have to draw down the full amount of the loan at the outset, which would save it interest payments.
The final interest rate of the council’s loan is still being negotiated, he said, in conjunction with financial advisors Capita and commercial law firm DWF.
Mather said: “I would not describe this as a pure investment by the council. Our prime aim is economic regeneration. However, we will make a healthy financial return which we will use for frontline services including social care.”
Warrington made two similar loans of £10 million each in 2010, at a time when it was required to get approval from central government ministers.
However, the introduction of a power of general competence for local authorities means that this approval is no longer needed.
Plans for another loan to another housing association are due to be considered by the council in March, he said.
Helena is a council partner for stimulating housebuilding. But Mather confirmed that the association could use the money to build in boroughs outside of Warrington.
He said: “It will be investing a chunk in Warrington, but we are not sure what proportion because it depends on the development sites which come up.”
He said that the cash could also be used by Helena to refinance its existing portfolio.
Housing minister Kris Hopkins praised the initiative during an appearance on breakfast television, encouraging other councils to follow Warrington’s lead.
Mather said that he had been inundated by other councils across England seeking to find out information on how its loan arrangement will work.