Council looks to close its housing company

A company set up and owned by Shropshire Council to develop new homes commercially for the authority looks set to be closed.

Councillors will be recommended next week to approve a "structured closure" of Cornovii Developments Limited (CDL) over the next 18 months.

A report to members of the authority's cabinet said a key consideration was Shropshire Council's financial position, which would stop it from lending the developer funds for new projects.

It said a review had found the best option was to finish two part-built schemes in Shrewsbury and sell other sites before closing the firm, which would limit losses to the council to about £4m.

None of the six options outlined in the paper would return all the money the council had invested, the report concluded, and this would be the "least disadvantageous".

Cornovii was set up by the previous Conservative administration on the council in 2019.

At the time of its launch, it announced plans for its first 90 homes in St Martin's and Shrewsbury, with details of loans from the council to the company not revealed because they were "commercially sensitive".

The arms-length nature of the company means that accounts are published in less detail than for the council's own operations.

But the report on the firm's potential closure for the current Liberal Democrat-controlled cabinet said a total of £35.19m had been loaned up until March this year.

It said a prediction that CDL could reach a "modest overall surplus" by 2033 was based on forecasts about the housing market that were "unlikely" to come about.

A key obstruction to further investment in the company is the ongoing "financial emergency" the council has declared.

One of the terms of loans from the government to help make ends meet is that the authority cuts spending on non-statutory services.

"Any prospect of the council taking out new borrowing to fund CDL activity is, in practical terms, unrealistic in the medium term," the report said.

Summarising CDL's achievements since 2019, the report by interim executive director Duncan Whitfield said nearly 200 homes had been built, with a focus on affordable and rented properties.

It had also provided different housing types, including bungalows, which were less likely to be provided by commercial developers.

A property company owned by neighbouring Telford and Wrekin Council, Nuplace, announced a £588,000 in the last financial year, with much of its income coming from renting homes on the open market

However, the Shropshire Council report said "several other local authorities" had experienced "similar difficulties with trading companies", concluding "there are clearly lessons to be learned from the experience that need to be avoided in future".

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