Housing associations to get £21m loan from city

The new housing will be leased to tenants for a "mid-market" rent, which is set somewhere between social and private rents, and will be built for low-income working families.

The council is planning to borrow the money needed to lend to registered social landlords in Edinburgh, who are themselves finding it more difficult to borrow money in the current financial climate.

The idea is that by lending to social landlords, who provide subsidised homes for low-income tenants, the money will increase the city's chances of meeting the high demand for mid-market rental properties.

Currently, there is a demand for 4000 homes from low-income families unable to buy their own properties, but who are unlikely to be given priority for social housing.

The Capital is the most pressured housing market in Scotland, with around 130 bids for each home advertised by the council and social landlords. It is estimated that 16,500 homes are needed over the next ten years to cope with demand.

City housing leader Councillor Paul Edie said the initiative was an "innovative" way of dealing with the shortage.

"The council can borrow money much more cheaply than registered social landlords so we are using our prudential borrowing muscle here.

"We are going to invite bids so that every registered social landlord in Edinburgh has an opportunity.

"We have a chronic shortage of affordable housing in the city, which includes mid-market rent for hard-working families."

Councillor Ricky Henderson, Labour's finance spokesman, warned the investment was just "scratching the surface".

He said: "It seems to be a very complex funding arrangement that delivers a very modest amount of investment and housing.

"It's a drop in the ocean when assessed against Edinburgh's housing needs."

The 21m being borrowed by the council is expected to fund 70 per cent of the cost of building 200 new homes, with social landlords borrowing the rest of the money from private lenders.

The council has applied to the Scottish Government to underwrite the loan, with a decision expected to be given in August.

The homes will be available for up to ten years and will then be sold off to repay the council loan.

Plans for the 200 new homes come after council chiefs unveiled several sites across the city which will benefit from up to 600 new homes.

Under this separate initiative, the council will borrow 55m to help buy up flats on "ghost estates", where development has stalled because of the recession.

The joint scheme involving the city council, the Scottish Government, Scottish Futures Trust and private developers is expected to involve four firms on five sites in Craigmillar, Leith, Granton and Lochend.