European and External Affairs Committee

EUR(3) 03-07 (p1): 23 October 2007

Scrutiny Inquiry: Valleys to Coast Housing (V2C) & the European Investment Bank (EIB)

• V2C was set up in 2003 as a result of the Large Scale Voluntary Transfer (LSVT) of 6,500 council houses from Bridgend County Borough Council following a successful ballot of tenants in November 2002
• V2C’s objective is to "provide good quality, affordable homes within vibrant and sustainable communities”.  There is a commitment within the formal offer to the tenants to improve the housing - up to the Welsh Housing Quality Standard (WHQS) and maintain a high quality housing service. In 2003 it was estimated that the estimated cost of bringing all the housing up to WHQS and then keeping them in that condition over the next 30 years was £290 million.
• Within V2C it was recognised that the opportunity that such a large scale investment in housing could be used as a catalyst for a broader socio-economic revival within the Bridgend County Borough Area should not be missed. Therefore we have set up a Community Development and Regeneration Team whose role is to add value to the investment made by V2C and its partners through the development and implementation of community development and regeneration initiatives. Activities include the transformation and improvement of the environments around some of the estates, setting targets for the use of local labour, investment in training initiatives in the construction industry, supporting social enterprises and the creation of a Community Support Fund.  
• Funding of the investment required comes from V2C’s internal cashflow (from rents), The Welsh Assembly Government - up to £18.5 million, and from the Nationwide/Principality/EIB syndicate - £45 million.
• £10 million of the £45 million facility is provided by the EIB. This results in a lower cost of funds and currently results in a saving of approximately £10,000 per annum in interest costs (10 basis points). The EIB funds are not provided directly but were arranged through the Nationwide Building Society and are embedded within one loan agreement. There are no onerous or additional requirements set by the Nationwide or EIB as a result of the EIB funding.
• EIB funding was only available to V2C on the basis of eligibility criteria. The key reasons why V2C was considered to be eligible were the fact that Bridgend was designated as an area eligible for European Structural Funds (Objective 1) and the fact that the investment was part of an integrated urban regeneration strategy which would also improve the environment and lead to job creation in the vicinity of social housing.
• The funds are part of a £100m facility managed by Nationwide, of which £19m has been allocated to RSL projects in Wales.
• Nationwide are the 'credit risk’ for EIB as they remain liable for repayment of the £100m debt, which helps to keep the cost of funds as low as possible, and reduces the amount of due diligence required by EIB.  Funds are passed through 'at cost’ to the RSL borrowers, subject to addition of the Nationwide margin.
• From Nationwide perspective this was a way of differentiating ourselves from our competitors, in a way that added value to our customers.
• What of the future? EIB have changed their product such that it does not offer such good value - 5bps saving rather than 10bps. How will the 'credit crunch’ impact?

Alun Rawlins
Valleys to Coast housing Limited

Keith Reeve
Nationwide Building Society