Housing debt threat to council rents
COUNCIL house rents could rocket if Shetland Islands Council is left saddling its historic £40 million housing debt, councillors have been warned.
The debt also means the council is losing millions of pounds in potential earnings from investing the cash on the global financial markets.
A tripartite meeting between the SIC, the Scottish and UK governments is being organised to find a way to reduce the debt burden on Shetland.
The meeting will follow a six strong SIC delegation travelling to Downing Street to discuss the issue with the UK’s chief secretary to the treasury Danny Alexander last month.
Currently the Scottish government pays the interest on the £40 million sum through the housing support grant, however this will be scrapped next year with no sign of anything yet to replace it.
Furthermore councillors were told last Friday during a private seminar that if the SIC could invest that £40 million on the global financial markets it could have earned around £2.5 million, quadruple the amount received through the government grant.
Tenants have already been warned to expect above inflation rent rises of five per cent next financial year, despite already paying the third highest rents in Scotland.
However if the debt problem is not resolved rents could sky rocket further the following year, alongside severe restrictions being placed on the council’s ability to maintain existing and construct new buildings.
Council leader Gary Robinson spent time over the festive season in the Shetland archives investigating the origins of the housing debt, which was built up during the oil construction era.
“Some of the documents I have been looking through indicate that in 1973 and ’74 the government were increasingly desperate to get North Sea oil flowing. This was the time of the Yom Kippur War and rising oil prices,” Robinson said.
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On the surface it would appear the UK government had promised to cover the final cost of building extra home to house construction workers in Mossbank, Firth, Brae, Voe and Lerwick.
Robinson said the reality was more complex, but pointed out that the millions spent paying interest on the debt probably exceeded the original capital sum.
“If all the money that’s been paid to service the debt over the years had been paid in a lump sum we would practically have no debt.
“This leaves us with really an extremely difficult situation and it’s one that I hope we can resolve one way or another in the next 12 months.
“We have reached the point where we can’t invest in any more housing. We could even have difficulty maintaining the standard of housing that we have.”
He admitted that tenants may face increased rents unless a solution can be found, but he hoped to avoid that.
“We are going into these negotiations and our aim is to write the debt off,” he said.
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