North Yorkshire Council
Deputy Leader (Finance Portfolio)
21 July 2025
Brierley Homes Affordable Homes Funding
Report of the Corporate Director – Resources
1.0 PURPOSE OF REPORT
1.1 The purpose of this report is to request additional loan facility approval to Brierley Homes of £1.4m. This requirement has arisen due to the provision of additional affordable homes above policy being delivered by Brierley Homes (which was not envisioned when the total loan requirements for the company of £25m were calculated) and which has an impact on the business cases for delivery.
1.2 It was anticipated for this decision to come forward to Executive in August and so it was included on the forward plan but it has been brought forward as an urgent decision to assist in cashflow for the company to ensure that developments can continue and will allow the company time for sales to be received over the next few months. This will provide the company with additional loan headroom to ensure Brierley Homes can make all payments due in the event of some delayed sales in the coming weeks.
2.0 SUMMARY
2.1 At its meeting on the 13 March 2018, the then North Yorkshire County Council Executive approved the recommendations contained in the ‘Land Development Programme of Brierley Homes’ Report. As part of these recommendations, the Executive agreed to grant a loan facility of up to £25m (the “Facility”) to the Company which could be drawn down subject to review by the Section 151 Officer or a representative nominated by the Section 151 Officer for this purpose on request of the Brierley Homes Board. The date given for repayment of loan monies was 31 March 2025.
2.2 On 12 February 2020, delegated approval was given for a loan for Brierley Homes of up to £22.900m for the construction and sale of homes. As at 31 March 2024, £15.99m of loan was outstanding as the business model for Brierley Homes has resulted in profits being reinvested in the business as the number of sites in development increases.
2.3 On 12 June 2024 approval was given by the Corporate Director Resources for the deadline for repayment of the loan to be extended to 31 March 2028 in line with the agreed Business Plan for Brierley Homes.
2.4 As of 31 March 2025, the principal loan with Brierley Homes Ltd stood at £22.493m. In relation to 24/25 there was also £2.346m of unpaid interest outstanding with North Yorkshire Council. Due to a number of construction delays and reprogramming of sales from the 24/25 financial year into the 25/26 financial year, it became necessary for the maximum loan to be increased to the £25m limit agreed by Executive to cover this time until sales income was received.
2.5 On 1 April 2025, the Corporate Director Resources approved under delegation to extend the loan facility to £25m recognising the importance of ensuring cash was available to honour the company’s commitments to its supply chain on the basis that the company produce and consider a cashflow position on a monthly basis and for this to tie in to the pipeline of the business (ie build and sales forecasts over the forthcoming few years).
2.6 Brierley Homes actively manages its cash in order to minimise interest payable and repays monies when excess cash is available in the business, following income from sales being received, but will draw down further loan during construction phases. The increase was to cover the period of construction which has continued while some sales have been delayed.
2.7 It was acknowledged as part of this decision that further work was also required over the next few months to prepare for a possible extension of the loan facility which would be a decision of the Executive and is the subject of this report.
3.0 BACKGROUND
3.1 Brierley Homes was set up in 2016 by the then North Yorkshire County Council to deliver homes for market sale with the profits to be reinvested into frontline services. The company also delivers wider shareholder value for the Council in respect of the profits generated but also loan interest and service level agreements from the Council.
3.2 To date Brierley Homes has completed the delivery of five projects comprising 75 market sale homes and 12 affordable homes. It has a further six sites under construction. It has a development pipeline of more sites.
3.3 After initially delivering homes only for market sale, Brierley Homes has continued to gain momentum in securing a positive pipeline of over 500 homes with over 200 of them being affordable with estimated delivery for all in the next 4 years. Brierley Homes has enabled the grant of £2.6m for a 49 unit affordable scheme at Broomfields, to be secured with the continuation of working relations with Broadacres and the NYC housing team. The confirmed pipeline is made up from all NYC existing sites. Brierley Homes future development profile includes a shift in strategy for forward profiling to where they are delivering 100% affordable homes under contracts with monthly payments. This will improve their ability to predict income more accurately and will have a positive impact on cashflow once this is in place. This will also provide the additional benefit of delivering more affordable homes within North Yorkshire at a pace that would be lacking if it was just left to the private sector.
3.4 The existing business case for Brierley Homes was based on the company paying market rates for any loans it received from the Council as it was focused on delivering market housing. The company therefore did not get any financial advantage from other market house builders. However as the company has progressed, it has delivered and aims to deliver more affordable housing within North Yorkshire. It is recognised that the Council has the ability to provide a loan at below market rates to deliver affordable housing if it is considered proportionate and necessary. After conducting a financial assessment, it is considered proportionate and necessary in delivering affordable housing in this challenging market to propose granting the company a loan at base rate for delivering above planning policy rates for affordable housing. This recognises the national challenges in delivering affordable housing and uses council’s resources to assist in driving more affordable housing into North Yorkshire.
3.5 In terms of the financial performance of the market sale homes, as with any new company it has taken time for Brierley Homes to establish itself. The company has endured a difficult initial trading period with global impacts, some disappointing contractor performance and some cost overruns, project delays and an erosion of profits. However, there is now more focus on sites being delivered within timescales with Brierley Homes reviewing and improving structures and systems with more certainty being provided over delivery programmes and costs. On this basis the financial position of the company is projected to improve in 25/26 and beyond.
4.0 DETAILED PRESENTATION OF THE SUBSTANTIVE ISSUE
4.1 Brierley Homes have currently developed sites which will provide 127 affordable homes above the number required by planning policy. The cost of creating this pipeline to date is £1.341m. That sum has been loaned to Brierley Homes from NYC at the usual market rate of 6% above base rate, broadly a cost of £150k a year. This funding is part of the £25m loan facility currently granted to Brierley Homes and which Brierley Homes are now utilising in its entirety to deliver its pipeline of schemes.
4.2 This has effectively constrained cashflow making short term planning difficult as expenditure is relatively linear and predictable but income from property sales is very lumpy and not controllable within short time scales and therefore there is an ongoing risk when Brierley Homes is at the ceiling of it’s loan facility that if delays to sales happen, many of which are totally outside of the company’s control, there could be an adverse impact on the company’s ability to pay it’s supply chain and other invoices due in the short term. This will have an impact on the company in delivering affordable housing for the future.
4.3 The weeks to the end of July and through early August poses a risk with a reliance on sales income by the company. The following income is due to be received:
To the end of July 2025 - £3.454m
To the end of August 2025 - £1.270m
Total - £4.724m
4.4 Up to 25 July 2025 payments of £843k are required to be made with a further £1.5m due to be paid out in August 2025.
4.5 Brierley Homes were due to approach NYC to create a loan capacity for the delivery of above policy affordable homes at the August Executive meeting but due to timing of sales, this decision has been brought forward. Due to the risk of market sales in the coming weeks Brierley Homes are requesting the increased loan facility to be approved urgently as an insurance so that all payments can be made on a timely basis even if there is a small delay to the sales income being received to reflect the delivery of affordable housing above policy by the company. An update report will be presented at the Executive meeting on 19 August.
5.0 ALTERNATIVE OPTIONS CONSIDERED
5.1 There is an option not to approve an additional loan but this runs the risk of some payments being unable to be made if there is any delay in sales income being received.
6.0 IMPACT ON OTHER SERVICES/ORGANISATIONS
6.1 There was no impact on any other services or organisations.
7.0 FINANCIAL IMPLICATIONS
7.1 The company reported a draft outturn position as at 31 March 2025 of Gross Profit £0.05m and a Net Loss of £3.2m, after taking account of £2.3m financing costs and £1m overheads. This result was driven by delays in receiving sales income for a variety of reasons. Processes have been implemented to ensure stronger more robust procedures and governance is in place to support the development of Brierley Homes going forward. The Business Plan provides for gradual repayments to be made on the loan.
7.2 The table below shows the calculation of all costs to date for all projects that are providing a number of affordable units above planning policy as at May 2025.
7.3 The sites at Kirby Malzeard and West Ayton are currently in construction so full construction costs are assumed. The sites at Leyburn, Sand Lane, Broomfields and Eskdale are in pre-construction stage so all planning and consultants costs are assumed. No income has been received in respect of any affordable homes on the sites used.
7.4 The table confirms that there are currently 127 units being provided above policy during the lifespan of Brierley Homes current pipeline. Brierley Homes are contracted to deliver the affordable homes to Broadacres for the sites at Kirby Malzeard, Broomfields and Leyburn. The sites at West Ayton, Sand lane, Eskdale are being progressed with the NYC housing team.
7.5 The calculation of the loan facility being used to deliver these affordable homes above policy is derived using project cost to date and taking a pro rata of the number of affordable homes being provided above policy. The calculation confirms that costs to date attributable to affordable homes above policy is £1.341m which has been rounded to £1.4m for the purposes of loan approval in this report.
7.6 If additional loan is approved in order to recognise the delivery of affordable homes above policy, it is proposed that this will be at the base interest rate rather than a commercial rate due to the social value that it supports and will be repaid in line with income being received for the affordable sites. This policy will be at a cost to the Council of the foregone rate of interest received on investments of 4.65% compared to the current base rate of 4.25% which would equate to £6k
8.0 LEGAL IMPLICATIONS
8.1 The report considers granting a subsidy by way of a loan to Brierley Homes. The subsidy’s value amounts to the difference between what the company would have to pay in interest in the commercial market, compared to the base rate of interest loan proposed to be granted by the Council. This has been calculated to be circa £84k a year.
8.2 The Subsidy Control Act 2022 requires public authorities to ensure that any subsidy provided complies with the principles set out in the Act. Specifically, funding for affordable housing is considered compliant if it meets the statutory requirements for "services of public economic interest" (SPEI) and adheres to the principle that the subsidy must be limited to what is necessary to address the funding gap for the development. The arrangement proposed is for the Council to enter into an agreement for funding for affordable homes above the normally planning policy requirement, which have either been completed, are being constructed or will be constructed.
8.3 Whilst it is unusual to consider subsidy control for development that is already under way, it is not a unique situation as can be seen through advice given by the Subsidy Advice Unit, see as example : : https://assets.publishing.service.gov.uk/media/6746f4707a52b1e407d7774a/Report_on_the_proposed_subsidy_to_Barking_and_Dagenham_Homes_Ltd.pdf
8.4 For smaller SPEI awards, as proposed in this instance, section 38 of the Act provides an exemption from the subsidy control requirements if the total amount of SPEI financial assistance given to the company does not exceed £725,000 over three financial years.
9.0 EQUALITIES IMPLICATIONS
9.1 There are no specific equalities implications arising from this report aside from the delivery of additional affordable housing.
10.0 CLIMATE CHANGE IMPLICATIONS
10.1 There are no specific climate change impacts arising from this report. Brierley Homes houses are built in line or above current policy in tackling climate change
11.0 REASONS FOR RECOMMENDATION
11.1 In order to ensure the company is viable for delivering additional affordable housing an additional loan facility is requested. The reason why this is required as an urgent decision is in order to allow the company time for sales to be received over the next few weeks and therefore this will provide additional loan headroom to ensure Brierley Homes can make all payments due in the event of some delayed sales in the coming weeks.
12.0 RECOMMENDATION(S)
12.1 For the Deputy Leader to approve additional loan facility to Brierley Homes of £1.4m to reflect the reality of Brierley Homes now delivering affordable homes above policy in order to allow cashflow headroom if required and allow the company time for sales to be received over the next few months. Additional loan headroom is required to ensure Brierley Homes can make all payments due in the event of some delayed sales.
BACKGROUND DOCUMENTS:
Gary Fielding
Corporate Director – Resources
County Hall
Northallerton
Monday 21st July
Report Author – Vicki Dixon – Assistant Director - Resources, Environment