Lib Dem parliamentary candidate for Cheltenham Max Wilkinson has accused the government of “punishing” local communities by hiking the cost of borrowing for affordable housing projects.
The government told councils last week that it was increasing the interest rate on loans from the Public Works Loans Board (PWLB) by 1% with immediate effect.
It means that it will now be more expensive for Cheltenham Borough Council to deliver a £100million project spearheaded by Max to build 500 new affordable homes for young people and families.
Max said: “I’m deeply disappointed that the government has decided to punish local communities like Cheltenham that are looking to provide for themselves.
“The scale of the housing crisis across the country is enormous. While the Tory government’s stated aim is to deliver more housing, it has now made it harder for councils to fund the extra housing that is so desperately needed.
“I’m hugely relieved to find that our ambitious plans for affordable housing for young people and families in Cheltenham will still go ahead despite the government’s decision.
“The Lib Dem administration on the council deserves full credit for ensuring the project’s financial planning would allow for this unwelcome news from the government.”
The PWLB is a government body offering loans to councils for long-term capital projects, such as housebuilding schemes, at rates which tend to be lower than those offered by private lenders.
The Treasury announced last week it would be hiking the interest rate on PWLB loans from 2% to 3% with immediate effect.
It has led to warnings from councils that planned housebuilding schemes up and down the country may have to be cancelled due to unsustainable costs brought on by the rate hike.
The £100million project in Cheltenham will still go ahead because of sensible contingency planning from the council.
Last October, Cheltenham Borough Council approved plans to borrow £100m from the PWLB to be invested in around 500 affordable homes for young people and families in the town.
The council, which will have 40 years to pay the money back, is lending the £100m, at a higher interest rate, to its arms-length housing company Cheltenham Borough Homes to finance the costs of delivering the homes.
Any money made in the scheme will be reinvested in housing for Cheltenham.
The initiative was kickstarted by a motion to the council in 2017 from Max, a Lib Dem councillor for Oakley ward, calling on the authority to tackle unaffordable housing in Cheltenham.
Max has made raising the housing plight of young people and families a key part of his local campaigns to ensure Cheltenham remains a vibrant and competitive place into the future.
Businesses in the town have raised concerns that attracting and retaining younger staff is becoming a challenge due to housing costs and insecurity.
The £100m will be invested in homes to rent affordably on secure long-term contracts, which will help younger people who struggle with high rents and insecure accommodation.
There is also potential for some of the properties to be available on a shared ownership model for those who want to take up a more affordable mortgage.