Affordable Surrey housing plans shelved due to rising costs
Rising interest rates have taken their toll on councils across England although affordable housing plans risk being scrapped altogether in Surrey.
In 2018, Spelthorne decided to build new homes as part of its housing strategy to increase the amount of affordable, keyworker and private rental properties available for residents.
To do this the council reported they borrowed £1bn to help with costs, but at the time Public Works Loan Board (PWLB) lending rates were ‘relatively low’ – they were on a 50-year fixed term average of 2.3%, but as of August 2023 the rate had risen to 5.4%, adding £350m to the total cost over the loan, at £7m per year.
A meeting of the corporate policy and resources committee on 11th September is set to debate officers’ plans to pause council housebuilding in the borough.
‘The current PWLB interest rate of 5.4%, with further rises predicted, make the current direct housing development plan financially unviable, and the council, must reconsider its options going forward,’ a report, which is due to presented at the meeting, said.
The report also found that the additional interest charge between 2.3% and 5.42% amounts to £350.5m over 50 years, which on average is £7m per annum for the council.
‘Due to the increasing risks associated with residential development, officers in discussion with group leaders have concluded that it is no longer preferable or appropriate for the council to directly bear this risk and additional financial exposure from increased borrowing needs to deliver housing schemes,’ the report stated.
The report also highlighted that construction inflation is also a contributing factor to the recommendation of suspending residential development. According to figures published in April this year, average construction costs rose by 1.5% in the final quarter of 2022 to stand 9.7% up on a year earlier.
New build projects are typically more material intensive and at 11.8% saw the sharpest annual increase in costs.
Images: Ambitious Studio* – Rick Barrett and Ambitious Studio* – Rick Barrett
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