By Hans J. Marter

9th February 2004

SHETLAND could be forced to transfer its council house stock to a public trust in return for writing off a huge housing debt, it was claimed yesterday (Sunday).

Pressure is increasing on Shetland Islands Council to agree to a stock transfer because of new housing standard rules to be brought in by the Scottish Executive.

Unlike other local authorities in Scotland, Shetland refused to transfer its council house stock to a public body in September 2002.

But new housing standards require the council to develop and finance a 25-year business plan to improve its stock of 2,300 council houses, something the SIC can’t finance.

Islanders are already paying the highest council house rents in the country and the flexibility of the local authority’s housing service is being severely hampered by a £48 million housing debts.

As a result there is not a penny available to deal with the new situation. Shetland pays £3 million annually to service its housing debts.

Last week, the council only limited next year’s increase of rents to 2.5 per cent by digging deep into its own reserves to the tune of almost £300,000.

Without the internal subsidy, council house rents in Shetland would have risen by a substantial 8.6 per cent.

The council’s spokesman for housing, Gordon Mitchell, said the situation was untenable and something had to be done.

“If we didn’t have these debts, we would be able to give a much better service to our tenants and even reduce the rents,” he said.

However, the Scottish Executive is not prepared to write off the debts unless the council agrees to transfer its housing stock.

In September 2002, following lengthy negotiations with the executive, a transfer deal to Shetland Homes eventually collapsed because of a disagreement over the value of the housing stock.

At the time, the government dismissed Shetland Homes’ estimate of the transfer value of the property at around £2 million, and intimated instead a minimum of £10 million as an acceptable figure.

Mr Mitchell said yesterday that such a high figure would have put the new housing association in a bad starting position as it would have started life with another huge debt burden hanging over it, which could have resulted in even higher rents.

He said the effect of such a scenario could now be witnessed with other local authorities who had agreed to a housing stock transfer.

“We backed off the whole deal because it would have put the new housing association into difficulties. However, now we are being forced into a housing transfer and we have to start from scratch,” he said.

Housing officials and councillors will now embarking on urgent talks on how to react to the new policy.

The situation was described by Mr Mitchell as very serious. “We can’t go out and borrow any more money”, he said.

Shetland incurred its huge housing debts in the seventies when hundreds of council houses were built during the oil boom.