Councillors draw on oil reserves to help boost housing stock

Councillors have voted 12-9 to award a £3.5 million grant over three years to Hjaltland Housing Association to help it build 75 new rental homes in the isles.

But they will have to dip into their reserves to help honour the pledge, prompting fears the funds could dip perilously close to their £250 million limit.A report called for members to approve the grant, which comes after this year’s budget has already been approved, to help address the continuing shortage in housing.

In a major £11.2 million project, Hjaltland wants to build:

• Fifteen units at what was Lerwick’s North Star;
• Twelve new homes in the town’s Pegasus Place;
• A large development at the Strand in Tingwall with 40 new homes;
• A further eight units at Ladies Mire in Brae.

Work on the projects has been hampered in the short term by government cuts.

The council grant will allow the houses to completed in three years rather than eight, addressing a “significant under supply of affordable rental homes in Shetland”.

At a special meeting of the SIC on Wednesday, members showed unanimous support for helping to boost the housing stock and reduce the island’s 1,000-strong waiting list. The only difference in opinion was where the money should come from.

With the level of reserves expected to stand at £260 million following investments and expenditure for 2011/12, the report says taking £3.5 million out for new houses could reduce the fund even further to £256.5 million by March 2012.

Interim head of finance Hazel Sutherland, however, said the money would be drawn down over the three-year lifespan of the project.

Housing spokesman Allison Duncan moved the money be taken from the reserve funds. Doing so, he said, would help address homelessness and make Shetland a more “vibrant place to live”.

He added the commitment would be “an investment in the community” which would “lever-in” government money which would not otherwise come to the isles. He was seconded by Gussie Angus.

However Bill Manson said the SIC had been dipping into its reserves too much. He said £6 million as a “safety margin” on reserves was too little.

He called for a reduction in the approved capital programme to accommodate the new houses, which would be given priority over other projects.

“To take it out of capital reserves is the easy option. On past performance we’ll get it out of slippage.” He was seconded by Rick Nickerson, who insisted there would be scope to find the necessary £1 million a year.

Jonathan Wills questioned whether the council would be getting best value by giving the grant.

By grant aiding another organisation, the council is giving up a rental stream for that property.

On average the council’s rent levels could secure £120,000 over the 40-year life of a house, which should cover the average capital cost.

Following some rough calculations, Dr Wills said the £3.5 million transferred to Hjaltland would earn the council £245,000 a year in interest and dividends from being invested.

“If Audit Scotland pick this up and don’t like it, are we confident we can make a robust defence?”

That prompted chief executive Alistair Buchan to defend the council, insisting it had made “good progress” in its expenditure reduction.

However Gary Robinson shared Dr Wills’ concerns. He warned the government was counting on the council to get itself out of trouble when it came to building more houses.

However in an impassioned plea Caroline Miller urged members to grant the money out of the reserve fund, insisting housing was “the best way of using reserves”.

“The true cost of homelessness is the effect it has on lives in Shetland. I can’t think of a better way of taking money out of reserves that can have an immediate impact on peoples’ lives. It will be an effect that will continue for years to come.”

Robert Henderson said he wanted to see grants supporting people who wanted to build their own homes wherever they live in the isles.

“We should be looking to give direct grants to first-time builders, building their own homes in whatever part of Shetland they want to bide,” he said.

Members were also asked to bear in mind options for Shetland’s fledgling fibre-optic network which is currently being developed – although the report did not indicate how much investment it will need in the short-term.

It stated the project will be developed “over the next few months” and considered as part of a capital programme review in the autumn.

The objective is to replace the ageing Pathfinder Project, which will be defunct by March 2014, with a purpose-designed, faster system.

Various aims and objectives are being considered, including a new “backbone” in Lerwick which will connect Hayfield with the council’s ICT and the Town Hall.

Another objective is to liaise with Shetland Telecom bringing fibre to Lerwick from Scalloway and Sandwick, and to manage the connection of these long-distance links upon reaching the council’s fibre network in the town.

The report says: “There are clearly significant financial implications, yet to be fully determined, irrespective of the number or combination of these objectives to be realised.

“The potential for external funding is currently being explored, however it is likely that there will be significant direct cost to SIC if this project is to be promoted.”

The question of Fibre Optic took something of a back seat compared with the housing issue. However members were in no doubt of the importance better broadband links would have for the isles and the appetite there now is among businesses for faster communication.

Alistair Cooper said there was a “genuine belief we’re going to get connectivity one way or another”.

“We have to look at both these things today and the way we can take the community forward is to provide housing, and when folk have got a roof over their heads, give them ways to make a living.”