A £6m loan to create at least five new affordable homes is to be made by Mayor James Palmer’s combined authority to the same firm that secured a £4.5m loan to convert offices into flats in Ely.

Cambridgeshire and Peterborough Combined Authority (CAPCA) agreed the new loan to Linton Road LLP to build a minimum of five but potentially eight affordable homes in Linton Road, Great Abingdon.

The company is part of Laragh Homes, the same firm that is re-developing Alexander House, Forehill, into flats and which is also delivering community land trust housing at Stretham and Wilburton. It receivced a £4.2m loan for the Ely project.

All but one CAPCA board member voted for the Linton loan on Wednesday (November 27), with the Labour leader of Cambridge City Council, Lewis Herbert voting against.

Cllr Herbert took issue with the number of affordable homes being created using the money.

CAPCA has been given £100m from central government to deliver 2,000 affordable homes. £40m of that money is being used for a scheme which loans the money to developers to build affordable homes, and the money then returns to CAPCA.

According to a report to the board, "it is projected that repayments of the loan capital will commence in February 2021 and by June 2021 re-payments will have repaid the loan with interest in full".

CAPCA is expected to make a profit of between £250k and £320k depending on the type of development built.

Cllr Herbert said he was "not against the business model" but noted the loan is for £1m per affordable home.

"I take the point that the money is going to come back in a couple of year's time," he said, but added it is "tying up money". He expressed support for using housing associations instead to create a faster rate of building.

Cllr Chris Boden, leader of Fenland District Council, said CAPCA was still set to reach its affordable homes targets within the timescales, "plus extra".

He said: "And that plus extra is largely because of the way that this £40m is being utilised, which will return to us. So I think it really is an exceptionally good scheme which still allows us to achieve what we are trying to achieve".

Cllr Anna Bailey, leader of East Cambridgeshire District Council, said without this loan scheme "we go cap in hand back to central government to ask for more money".

She said this loan scheme "allows us to add numbers to the 2,000, and nil cost to the taxpayer, and I think it's something to be extremely proud of".

Mayor Palmer said: "I make no apology for trying to radically change the way that housing is delivered."

He said CAPCA could continue the "cosy" relationship with housing associations, but that "has put us in the situation we are in".

He agreed with Cllr Herbert's ambitions to create more affordable housing, and added "we are in a time of housing deficit, and not just affordable housing deficit but housing deficit. We are building 3,500 homes a year in Cambridgeshire and Peterborough, and we need to build 8,500".

"This may be only 13 homes, but potentially eight of them could be affordable, in a very expensive part of Cambridgeshire, and it's more than just 13 homes, it's an example to the rest of the community and housing development world of what can be achieved if they come and knock on our door and work alongside us," he said.

And he said it is "unacceptable to sit back and rest on our laurels and accept the status quo and carry on doing what we have always done in the past".

Cllr Boden also raised concerns over the risk of the loan, and picked up on another point made by Cllr Herbert that the same development company has now been in receipt of two such loans.

"It just looks as though its first come first served," he said, "which obviously isn't the best way of making decisions of how to utilise a scarce resource".

CAPCA director of housing and development Roger Thompson said: "The risks of failure are quite low," but said the combined authority would take control of the land as a guarantee.

He said "we are talking to other developers," but seemed to concede demand for the loan scheme has not been high.

He said "to be frank" he does "not want to be saying no" to schemes if the alternative is the money just "sitting in the bank". He said "looking ahead I can see more opportunity and we might have to start saying no to some people and being more selective" but said "I would like to try and support as much as we can".

County council leader Steve Count said: "I just don't think the public have fully grasped how differently we're operating at the moment, the excitement which should be out there, and the queue of developers that should be around the block for this".