North Yorkshire Council has agreed to create a £7m reserve in case a loan it made to its own housing company is not repaid.
Brierley Homes was set up by North Yorkshire Council (NYC) in 2017 to deliver housing across the county with profits being put back into council services.
However, at an Executive meeting of the authority this week it revealed Brierley Homes – currently working on a housing project in Whitby – is the only one of the council’s companies not expected to make a profit in the 2025/2026 financial year.
While the final figure is still being calculated, its loss is expected to be £7.5m.
Reports presented at the meeting cite sales income being significantly under projected levels; increasing costs to complete sites; and delays in the completion of homes leading to increased overhead and interest costs as reasons for the loss.
It is anticipated that £7m of the existing loan will remain outstanding over the next five years with provision for the loss being factored into final results for the financial year.
A council spokesperson said: “Whilst it is hoped that this provision will not be needed in entirety, it is prudent to provide for the £7m loan forecast to be outstanding at the end of five years.”
Work has already started on a development at Broomfields Farm on the east side of Whitby with plans for 49 affordable homes having been granted permission.
Keyland sold the site – which requires the development to be 100 per cent affordable and low carbon – to Brierley Homes earlier this year.
NYC also put forward £2m to ensure the site wasn’t lost when previous developers had to withdraw from the project.
Last year, an independent review of Brierley Homes was requested and in February, a new managing director, Tony Dodds, was appointed with a remit to establish a short, medium and long term plan for Brierley Homes placing emphasis on stability, cashflow management, a return to profitability and a debt reduction plan.
The report discussed at the Executive meeting “identifies that £7m of the existing loan will be outstanding at the end of the medium term (next five years). On this basis, a provision for this forecast outstanding loan amount (£7m) has been included as part of the 2025/26 closedown process.”
Speaking at the meeting, Coun Mark Crane, Executive Member for Open to Business, said: “We are keeping a close eye on Brierley Homes and the appointment of the managing director is a positive step forward. He seems to have got to the bottom of the issues, we are on a more sustainable footing.
“I can’t underestimate the amount of affordable homes being built as a result of Brierley Homes.
“If it was not for Brierley Homes there would probably be hundreds of affordable units that had not been delivered and people would not be living in today. That is a record we should be proud of but we need to get under the bonnet of this and make sure we don’t have losses in future years.”
