Plans for Havering Council to sell off car parks and pursue new housing projects have stalled after councillors criticised their lack of certainty.

The authority had put forward a complicated-sounding plan to sell six parcels of land in the borough to its sister holding company, Mercury Land Holdings Ltd, with a view to building homes.

While it is expected to turn a profit for the council in the long-term, it would begin with Havering loaning Mercury £8.6million in equity to purchase its car parks, spread across Hornchurch and Romford. 

Havering would profit from the interest accrued on the loan, it has not disclosed the exact amount it expects to make, nor the value of the land – owing to “commercial sensitivities” – or the number of homes it would build across the six bits of land. 

The council is keen to bring in as much money as it can, as quickly as it can, after taking on a £54m loan to cover its £32.5m budget gap. 

So far, plans have only been put forward for six homes on the Keswick Avenue car park

Other car parks, such as Como Street in Romford, were described as “unpopular” and bringing in “nominal” amounts of revenue. The multi-storey car park in nearby Angel Way operates at an annual loss, the council says. 

Havering will retain other car parks in Hornchurch, such as Billet Lane and Appleton Way, which it expects will absorb the displaced demand from Keswick and Dorrington Way. 

The decision to “dispose of” the land to Mercury – which is fully owned by the council – was tentatively approved in April, but a coalition of Conservative and Labour councillors challenged it at last night’s overview and scrutiny meeting (7 May).  

Though the scheme had already been approved at a previous cabinet meeting, scrutiny members attacked the lack of hard data and said a wider discussion was needed on the scheme’s logistics. 

Conservative councillor David Taylor said the documents offered “no understanding” on its financial viability and he disapproved of the six sites being “lumped together,” rather than being approached individually. 

He said: “We’re not just approving just one plan, but a multitude. Some might be loss-making but we don’t have enough information to know.

“All we know is we’ll borrow £8m from the Public Works Loan Board, taking on £500,000 a year to service the debt.

“We’ll only get repayments if and when Mercury gets planning permission, which is a self-admitted slow process. We’ll be carrying excess debt to loan money to a company that can’t tell us what they’re going to build.”

The debate soon reached a stalemate: councillors said they could not support the plan without seeing a clear breakdown of housing and costs, while housing officers argued they could not provide those figures before the land had been sold. 

Tory councillor Keith Prince attacked the housing team’s assumptions the skeletal plan would yield a profit, asking: “What if it all goes pear-shaped?”

“What if something like Thurrock happens? Who sucks up all the loss? None of the returns will come to fruition.”

Last June, Essex County Council published a report on Thurrock Council’s “serious” financial issues, which had been exacerbated by excessive borrowing. 

A housing official reassured Cllr Prince that Mercury was a “prudent” company and prioritised the minimisation of risk, but it was not enough to win the committee over. 

Councillor Gerry O’Sullivan, chairing the committee, said: “We’re not in a position where we can guarantee return on council’s investment

“Is this a sound investment today? There’s not enough information to see if this is going to be viable and I don’t want us to be another Thurrock.

“I can’t see what we’re likely to achieve, and that worries me considerably.”

Though a frustrated council housing executive said he could not see why the committee “struggled to understand something that is quite straightforward,” the scheme was put on hold by nine votes to zero (with one abstention). 

Though the process sounds convoluted, it is not uncommon. The decision to lend Mercury the funds to purchase land in Harold Hill to build nine homes was similarly challenged, but ultimately approved. 

Members of the scrutiny committee said last night they had been able to approve such a scheme because an in-depth business case had been provided, which they were “yet to see” for the six sites. 

The scheme will next be discussed at a council cabinet meeting and has been tentatively pencilled in for the upcoming session on Wednesday, 15 May.  

Councillors made several recommendations for the housing team, requesting a detailed business plan for each individual site and to investigate why the council could not seek planning permission itself. 

The full list of sites includes Como Street car park in Romford, Keswick Avenue in Hornchurch, Dorrington Gardens in Hornchurch, Angel Way in Romford, Century Youth House in Albert Road, Romford and land off Priory Road in Romford.

They would remain in operation until work began on each individual project, the council has said. In the meantime, the council would rent the land back from Mercury at a very low, or “peppercorn,” rate.