Norwich City Hall has been accused of “incompetence” after it emerged it plans to liquidate its affordable housing company, Lion Homes, after years of losses.
“The company has come to the end of its current phase of building work,” says Labour Councillor Carli Harper, Cabinet Member for Finance and Major Projects. “This, along with changes to the economic climate and rules regarding council borrowing to build homes, makes it the right time for councillors to consider how best to ensure the provision of new and affordable housing for Norwich now and into the future.”
The company, which is wholly owned by the council, was founded as Norwich Regeneration Limited in 2015 in the hopes of delivering more affordable housing and an additional income stream for the council. But in 2020, the company had to be bailed out by the council to the tune of £10mn and had asked for “the purchase of £3.5mn equity.”
The venture has faced strong criticism and uncertainty in recent years, particularly after it emerged the company had lost £6mn of taxpayer cash when homes in Bowthorpe were sold for less than they cost to build, and the council was overcharged.
Rationale for liquidation
Norwich City council are recommending a controlled winding-down of the company. A council spokesperson told East Anglia Bylines that this approach would represent “the best outcome for the city council, as the sole shareholder, and importantly for our residents and taxpayers”.
The council claims that one of the compelling benefits to their proposal is that it opens up options to complete ongoing housing developments. These include the proposal to build 1,000 homes at the Threescore site in Bowthorpe. Nor will liquidation of Lion Homes have an impact on the planned development of 200 houses at the former Mile Cross depot, previously led by the housing company.
The controversy
Housing companies often record losses and aim to offset these at the point of selling properties. Lion Homes has been struggling financially due to significant losses in the early years of the company. They came during the development at Rayne Park in Bowthorpe in 2020. This resulted in calls for more transparency about the management of Lion Homes and for councillors including Mike Stonard, now leader of the authority, to resign from the company’s board.
The opposition Green Party claims that Labour councillors have blamed economic conditions since 2022 for Lion Homes’ failure. However, Green Party councillors told East Anglia Bylines that problems stretch further back to at least to 2019 when Lion Homes made a loss of £700,661.
Despite loans from Norwich City Council, losses continued every year from 2020 through to 2023, totalling over £4.3mn. No accounts have been filed since the end of 2023 and the company was hit with a compulsory strike-off notice as a formal warning by Companies House. While this notice has since been discontinued, the accounts have still not been published and the recent losses suffered by the company are unconfirmed.
The liquidation proposal has sparked calls for an investigation from opposition councillors. “The Labour-run city council have known about the impending collapse of Lion Homes for a very long time indeed,” claims Alex Catt, leader of the Green group. “Since the council spent £6 million of our money to bail it in 2020, it has never once been profitable. There needs to be a full and public investigation into how this was allowed to happen, and a plan from the council for how it will deliver housing for Norwich at value for money after this failure. The Labour leadership need to come clean about exactly what the impact on the city will be.”
The road to liquidation
Green councillors told East Anglia Bylines that in January 2024 they proposed that the council should begin bringing Lion Homes back in house. This was to improve oversight and financial reporting to all councillors. However the proposal was voted down by the Labour majority on the council.
The Labour-led council has now decided to put Lion Homes into voluntary liquidation. Councillors will consider the future of Lion Homes at a cabinet meeting on 9 July where a report will be presented. But, minutes for this meeting state: “This report is not for publication because it would disclose information relating to the financial or business affairs of any particular person (including the authority holding that information) as in para 3 of Schedule 12A to the Local Government Act 1972.”
The council’s cabinet will be asked to consider a type of formal and controlled process called ‘Members Voluntary Liquidation (MVL)’. This approach “will allow the council to ensure everyone owed money would be paid before it officially shuts down,” says Harper, “This would be the right thing to do.”
Norwich City Council will inherit assets and a pipeline of developments from Lion Homes, and the move has been described as a “technical change” rather than a crisis point. Harper says the move would have “no impact” on the planned development of 200 houses at the former Mile Cross depot, previously set to be led by Lion Homes.
“Regardless of the decision, we will continue to deliver new and affordable homes across our city,” says Harper, “the way we do that will just be changing.”
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