The £136 million price tag for Warwick district’s council houses

AT £136.2 million it’s the biggest buy-to-let mortgage in the area, it will take until 2062 to pay back, and it will be taken out by the people who collect your rubbish.

Warwick District Council on Wednesday voted to take out what officials described as probably the biggest loan it will ever take on.

As part of its Localism Act, the Government is abolishing the current system of paying for council housing, in which around £8 million of council house rent from Leamington, Warwick and Kenilworth is redistributed to other authorites.

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Instead, the council must buy the district’s housing stock from the Department for Communities and Local Government and take out ten loans to cover the expense.

In future it will be able to use any surpluses from rent to build new homes - and plans a minimum of 1,440 by 2062.

The district council has been debt free since 2004, and a report to councillors said the ‘self financing’ system would be “the largest financial transaction the district council has ever entered into, or is likely to in the foreseeable future”.

Councillors voted unanimously in favour of taking the loans with 40 years before staggered repayments begin.

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They were told paying in one lump sum in 2062 using investments begun ten years earlier did not allow for fresh borrowing and risked large balances building up. Another option was to pay off the debt between years 11 and 30, but which only allowed building in the first 11 years and would only result in around 1,200 homes.

Council leader Cllr Michael Doody called it a “courageous” decision, adding: “This is for the next 50 years. We don’t want it to go wrong for one day.”

But Liberal Democrat group leader Cllr Alan Boad (Leamington Crown) said: “It was Hobson’s choice - we had to do it and the difference between the options is probably not that significant.”

There are still risks - among them that welfare reform means smaller homes become more popular than larger ones, and Government plans to increase ‘right to buy’ discounts enabling tenants to buy council houses.

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Finance audit and scrutiny committee chairman Cllr Jane Knight had called for close examination of how £100,000 set aside for consultancy was spent. And Cllr Boad called for moves to ensure tenants and senior councillors were involved in managing the housing revenue account.

The interest rate, expected to be fixed at 3.2 per cent, will be announced on March 23.