Leaked report shows council knew risk of £6m loan to wholly-owned housebuilder a year before collapse

Leaked documents show Norwich City Council was aware its wholly-owned housebuilder would be unlikely to pay back £6m of public money almost a year before it entered liquidation. 

Housing Today has seen a report by consultancy firm 31 Ten commissioned by Norwich City Council to evaluate if the local authority-owned housebuilder, Lion Homes, was an “effective vehicle to deliver the Council’s objectives” and to assess “the level of financial risk the council is exposed to through Lion Homes”.

The report, which is dated October 2024, warned that Lion Homes faced a “funding cliff edge” with the £6m of public money it had borrowed due to be repaid in March 2025, with interest rates on any refinancing having the potential to double from 4.6% to 9.5%.

The report highlighted that the council’s shareholder panel should function as “the key communication route” between the local authority and Lion Homes. Despite a regulatory rule that it should meet four times a year, the report found the panel met once in three years, and that was in September 2023.

It also found that the local authority’s objectives for Lion Homes were “not clear”, “too narrow and needed revisiting” and were not “clearly linked to key performance indicators nor regularly tracked”.

The 31 Ten report also found a lack of separation between council officers and Lion Homes staff which could “lead to a perception of conflict interest”. This included staff using council emails, desks and systems for both council and Lion Homes work.

A separate report by Grant Thornton UK, also commissioned by the local authority and leaked to Housing Today, suggests liquidating Lion Homes and its assets could recoup the council £4.5m.

In July, Norwich City Council voted to liquidate Lion Homes, previously known as Norwich Regeneration Limited, after years of losses and just five years after it was bailed out by the council via a series of loans. Norwich City Council is the only shareholder in Lion Homes having invested around £3.4m in the business and loaned it £6.1m. 

Lion Homes accrued losses of £5.72m over several years, in spite of the investment by Norwich City Council. The local authority has since written off a £6m loan to Lion Homes. 

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Lion Homes was started by Norwich City Council in November 2015 under the name of Norwich Regeneration Limited. Its formation was linked to the council’s acquisition of development land in Bowthorpe, known as Threescore. The council decided, after two failed attempts to sell the site to volume housebuilders, to develop the site itself. 

The housebuilder struggled to repay its debts and was rebranded as Lion Homes after the local authority intervened financially to prop it up in 2021. No accounts have been filed by Lion Homes since the end of 2023, however. The previous four years of accounts show losses in the hundreds of thousands annually, amounting to total losses of £4.4m over the period. Companies House published a first notice for liquidation for Lion Homes in May over failure to file its accounts. 

In May, Peter Richard Prinsley – who was last year elected as MP for Bury St Edmunds and Stowmarket – stepped down as chair of Lion Homes board and was replaced by Dr Kevin Joseph Patrick Maguire.

At a Lion Homes shareholder meeting on 17 June 2025 the panel agreed “reluctantly but unanimously recommend to Cabinet that Lion Homes (Norwich) Limited should undergo a solvent winding up by way of a Members Voluntary Liquidation process.”

Green Party councillors proposed in January 2024 that the Labour-majority Norwich City Council should bring Lion Homes in-house, but this proposal was voted down.

Green councillor Alex Catt told Housing Today: “The Labour-run Norwich City Council has now admitted what they were warned over a year ago: its housing company, Lion Homes, has failed and will be unable to pay back the £6m of public money it had received from the council as a loan due back this year.”

“It will be wound up, leaving behind a trail of governance failure, wasted officer time, and the loss of millions in public money.”

When Cllr Prinsley stepped away the board became too small to legally meet for two months leading up to the collapse of Lion Homes.

Catt added: “For over two months leading up to collapse, the board of the council’s own company could not legally function. There was no shareholder agreement in place. Now basic framework to define which decisions they could make and which required council approval. Officers and directors were paralysed, stuck guessing what they were allowed to do.” 

“The loss of £6m through sheer incompetence cannot be swept under the rug.”

Cllr Carli Harper, cabinet member for finance and major projects at Norwich City Council, told Housing Today: “Lion Homes’ historic financial challenges have been well documented and widely reported on. Throughout the life of the company, the council has always been transparent about its finances and risks through its own and the company’s annual accounts and other internal forums.

“Taxpayers can be assured that we have been financially planning to guard against financial risks posed to the council. We’ve done this by putting money aside and into our reserves – this, combined with Lion Homes’s significant assets which we will be getting market valuations for, will help us to significantly reduce any outstanding debt.”

Norwich City Council told the BBC it now plans to develop housing projects itself, instead of using a private firm to ensure “the council continues to deliver the housing Norwich needs in a more transparent, accountable way”.