A council is set to invest up to £8 million of tax payers’ money in building new homes and business units in order to generate income for its future.
South Norfolk Council is developing one housing and business unit project in Poringland, south of Norwich, and will start work on a second project at the former Cygnet House care home site in Long Stratton towards the end of this year.
The Poringland site, called Rosebery Park, will see 43 homes and six business units constructed, while the Long Stratton site, called Maple Park and will feature 43 homes and 800 square metres of business space.
Property development carries risk, but South Norfolk Council leader John Fuller said the authority has £35 million in cash deposits, which are otherwise collecting a return of just 0.9 per cent in the bank.
The plan is to retain all of the business premises for lease to companies while also deciding whether to rent out a portion of the homes to private tenants at both sites.
Cllr Fuller said: “It is a very low risk investment. The council has owned land in Poringland, for example, for years, and for years it has yielded about £100 a year for grazing. That has been a waste of resources. It is incumbent on us to add value to the land, especially if it creates places for people to live and work.
“This is not about turning a quick buck.
“Developing this and retaining ownership means that the tax payers of South Norfolk have a stake in this forever. The income that will be generated is not just for one year, but for many years and will keep council tax low for everybody in South Norfolk.”
The council has created a separate company called Big Sky Developments, wholly-owned by the authority, to develop the sites.
Cllr Fuller said this was to keep the operation separate from the council’s day-to-day running. Although the council’s officers would hold positions in the company, they would not receive any additional money from the responsibility.
Work to complete the projects is put out to tender for building firms and other professionals to bid on.
But the opposition Liberal Democrat group on the council has expressed concerns about some of the detail of the authority’s commitment to the schemes.
Cllr Trevor Lewis, the group leader, said: “It (the council) is becoming much more of a commercial operation. Our concern was whether we had the capacity to do that. I think we might still raise that as an issue at the full council meeting on Monday, but that’s up to my fellow members.”
Although Cllr Lewis said the principle of the council developing land was sound, he still had concerns about risks. He said: “Once it (a development) is underway, you only know you have problems when it is at a stage too late to do something about it.
“What happens if the market drops, or if house prices were to drop by as much as they did seven to eight years ago? The finances of the council could look quite a lot different.”
The Diss Express asked what rate of return South Norfolk Council could expect on its property investment, but was told any projected figures were confidential.
The Poringland development will be complete by the end of the year, while in Long Stratton, the development, in Swan Lane, is expected to see its first house in February 2016, and be completed in May 2017. Both are phased developments.
Cllr Fuller said South Norfolk Council’s strategy was more than just about building homes, and pointed to its planned £4 million investment in leisure centres in the district, including Diss, as part of a broader plan to draw in more income.
“Councils are under a huge amount of pressure to retain services in tough times,” he said. “The money is of limited use in the bank. Our job is to invest in the local economy.”
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