Council says vehicle has cashflow issues and is assessing possible coronavirus hit
Norwich Council has been forced to come up with a £14m bail-out for its local housing company as it struggles to cope with the onset of the coronavirus pandemic.
In papers submitted to the council cabinet, Norwich revealed the firm, Norwich Regeneration Limited, was facing imminent liquidation if the council didn’t agree to its request for over £10m in loan funding and the purchase of £3.5m of equity.
The difficulties have arisen over the loss-making 170-home Rayne Park development, work on which begun in 2017. Council papers said: “As a result of changing housing construction and market conditions resulting from the impact of Covid-19, Norwich Regeneration Ltd has written to the Council to request both shareholder support and financial backing to complete the Rayne Park project”.
The council said that part of the need for further cash arose from a cash-flow issue around the timing of construction work, more of which was now going to be necessary prior to sales receipts coming in. However, it also said its finances had been impacted by the delays caused by lockdown, and the uncertainty in the future sales market due to the deepening economic crisis.
The papers said that if the council didn’t find the cash, it “would result in the early termination of the construction contract and liquidation of the company”, crystallising losses of £8.4m.
In contrast, it said, putting more money in to the firm would give it the opportunity to repair existing losses. However, the papers also showed the firm has modelled the impact of a 20% fall in house prices caused by Covid 19.
The council has been criticised over its handling of the 170-home Passivhaus project, which council papers said is on course to make a loss of anything between £6.1m to £10.4m.
The news comes in the same week Norwich also approved an overall business plan to build 200 more council houses at a former depot site in Miles Cross, as well as giving the go-ahead to a masterplanning process for a new city quarter with the potential for 4,000 homes.
The council said a public-private vehicle had been formed – the East Norwich Partnership – to steer preparation of a masterplan to create the new city quarter close to the railway station, football stadium and river.
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