Council housing company losses labelled “shambles”, but directors confident of benefits

A South Kesteven District Council housing company, which is currently forecast to make a £132,000 loss on its first development, has been called a “shambles” and “lamentable” by councillors — but bosses say it will still be beneficial.

Gravitas Housing’s financial difficulties on its Wherry’s Lane development in Bourne were revealed when an exempt paper due to go before the Companies Committee on Tuesday was published in error by the council.

Members of the committee called into question the future of the company at the meeting on Tuesday and councillors were told that despite the loss, there had been a number of benefits to the authority.

Council leader Kelham Cooke, one of the company directors, told councillors that most developers would look to earn a 20% profit, but that Wherry’s Lane had only looked for 5% – though it wasn’t meeting that.

He said: “It was seen as a regeneration project for Bourne town centre, it wasn’t seen as a viable for the private sector and part of Gravitas’ original aim was to bring forward developments that the private sector wouldn’t do because we would benefit in other ways.”

He said this included £454,000 of funding for affordable units in Bourne town centre, £150,000 New Homes Bonus and the extra council tax from the scheme.

“This has developed a scheme in the Bourne town centre, for town centre living to support those as well as Help to Buy. It has brought new home owners into Bourne town centre.”

Fellow director Richard Wyles, Assistant Director of Finance at SKDC, explained there had been a change in what people wanted from their homes – including more desire for gardens post-pandemic – and that had made selling the properties problematic.

In a bid to reduce the losses the scheme is due to make, a report before the councillors said the company has also repaid £900,000 of a £1.9million loan.

According to the Project Forecast Outturn Profit and Loss Account – which was published with the agenda, but removed after Local Democracy Reporters made contact – the authority is projecting to have made £116,000 more on sales than it was budgeting.

However, it has also spent £397,000 more on building and selling the properties.

The document said the variance was due to changes to feasibility designs, market prices leading to increases in construction costs, delays in receipt of income and an increased need for “bridging loans”. COVID-19 also features in the list.

During the meeting, Independent Councillor Philip Knowles said he assumed that when the development was fully sold it “would be closed down as a separate company and any future plans of this nature are reviewed by full council”.

“It’s a project that’s not gone well from start to finish,” he said. “I appreciate what it’s done and the benefits, but it’s a shambles at the end of the day.”

He was backed by fellow Independent Councillor Ashley Baxter who said: “It’s an embarrassment, it’s lamentable, it hasn’t worked. We should put our hands up and say that.”

He queried if the houses could come back into council ownership to be used for council housing, but was told this could incur further costs if they were rented out.

Councillors were told it would be a decision for a future meeting to debate.

Leaders denied the company had been set up to make a profit for the council and help it reach a self-sustaining financial situation.

Gravitas was formed in 2017 and gained permission for the 20 apartment and five townhouse in July 2018. Work was officially started in November 2020.

A total of 10 of the apartments have now been sold, with eight reserved – one more than when the report was first published.

There are still two apartments to sell along with the five townhouses – despite reduced prices.

Councillors could not be given a timeline of when the remaining townhouses and apartments would be sold.

They called for full figures, including the a financial breakdown of the benefits to the council, to be brought to a future meeting of the committee.

A full report on Gravitas Housing’s accounts and finances is due before the committee on completion of the rest of the sales.