Questions about the £2.5m budget allowance for the Isle of Wight council’s new housing company were raised at Tuesday night’s Corporate Scrutiny Meeting.
Cllr Chris Quirk (Con) wanted to know how the funding would be split between the company set-up, and pump prime funding.
Chief Financial officer, Chris Ward, said there was “no actual split”, adding that “this is about giving the housing company the best possible start”.
What’s included in the set-up
Mr Ward explained the start-up funds in would allow the council to get the company set up and properly constituted.
He said there were serious considerations to be made about tax efficiency, developing the business case and business plan, as well as the governance documents that will need to exist between the company and the council so that there’s a clear decision-making protocol.
With £25m of borrowing capacity, a loan facility arrangement would also be required between the council and the company.
Operating at arms-length from the council
Mr Ward stressed that the company would be a separate legal entity and will operate at arms-length of the council.
However, he did add that constitutionally, the Cabinet would be the shareholder of the housing company and would be required to approve the business case and funding for developments.
Challenging developments
Challenges around development on the Island was highlighted and that there may be potential development sites that have a compromised viability.
The funding is there, Mr Ward explained, to provide some level of public subsidy in the event that a particular developer might need it.
Quigley: Will £2.5m be recoverable?
Cllr Richard Quigley (Lab) asked how much of the funding would be recoverable in a year’s time.
Mr Ward clarified that all costs associated with setting up the company would not be recoverable. They would be sunk on legal, finance, property expertise, consultants.
He added that there would be a level of recoverable costs if the council decided to sell an interest in any particular development they have helped subsidise.
Find out more
Read more about the Alliance Group’s plans for a new housing company to provide affordable housing for Islanders.
The decision of whether or not to fund this scheme will be made at the Annual Budget Meeting on 23rd February.
