A flagship 1,500 homes regeneration scheme could have its affordable housing reduced “as an absolute last resort” as Guildford Borough Council has to make tough decisions to reduce a more than £50m deficit. The Weyside Urban Village plans for Guildford aims to create 600 affordable homes (40 per cent) plus community buildings, employment space and improved infrastructure.

The £453m project was given outline planning permission in October 2021. But the potential deficit has jumped to more than £50m, as of May 2024, due to high inflation and rises in borrowing rates, which has affected contract costs, according to council documents. The deficit was initially reported in January 2023, which the council attributed to “macro-economic factors” which impacted the construction industry and the cost of materials, coupled with an increase in loan rates.

Various options to reduce the deficit were presented at the council's Resources Overview and Scrutiny Committee meeting on December 2. Methods included borrowing from different boards, using money from asset sales, quickly selling land to developers, long-term lending and reviewing the council's major development programme. While reducing the number of affordable homes in the project was floated as a "last resort".

"Affordable housing greatly needed"

Councillor Phil Bellamy said he had to “hold onto the brakes” when he saw reducing the number of low-cost housing in the report, saying these homes are “greatly needed” in Guildford. Changing the number of affordable homes “defeats the objective of the programme,” added Cllr Richard Mills.

Any reduction to the types of homes would require a planning application, taking a year to complete, and Homes England would also need to be notified that the original business case has changed.

Met with harsh criticism, deputy leader of the council, Cllr Tom Hunt, said cutting the number of affordable homes is “absolutely not a lever [the council] wants to pull”, but for the sake of the complete review of the situation “it must be an option”.

Cllr Hunt said the “implications of not closing the deficit are material and unpleasant”. The increased potential deficit could have a “profound effect on the council’s financial position”, according to meeting documents.

The council’s target is to get the deficit to zero, Cllr Hunt said, as anything else will increase the cost to the council and potentially would have to decrease services. If the council does not reduce the deficit to zero, there will be an annual impact on the council’s budget with interest and paying debt on the money spent on the urban village project.

“So steeped in blood, to go backwards would be worse than going forward,” said Cllr Mills, as he projected a rather grim picture on the council’s situation by citing a line from Shakespeare’s Macbeth. He argued the council seemed to be in a mess, but it would be worse going back on the plans than continuing them.

Acting as a developer, Guildford council is trying to recover the cost of upfront infrastructure investment from the sale of 10 land plots to housing developers. The council has been successful in securing grant funding from Homes England and Local Enterprise Partnership (LEP) of around £60m.

But officers told the committee that Guildford council will have a “cash flow issue” over the next few years as the council has not completed set ‘milestones’ in housing delivery, related to the Homes England grant. When this happens, grant payments are stopped and the council will have to pay out of its own pockets.

Looking at alternative ideas

The original case to finance development was that land sales income was to cover the cost of delivering the infrastructure, but the deficit has altered this. As the plots of land are next to an old sewage treatment works, Cllr Hunt explained: “There’s a fear from developers that no one really wants to live next to a fairly elderly sewage treatment works and with all that entails.” The delays to releasing developer land will worsen the deficit due to a delay in money for potentially two to three years, according to the report.

A “basket of measures” rather than only one solution was recommended by officers. Using cash from asset sales and reviewing the council’s major development strategy will likely be implemented going forward.

The deputy leader asked the committee to come up with alternative ideas to fund the scheme. Cllr Hunt gave a hard deadline of six months’ time when the council needed to decide how it was going to cover the deficit.