A housing provider that could save Enfield Council almost £2 million a year and boost the supply of affordable homes is to receive start-up funding.

The council’s cabinet committee last night approved a cash injection of £250,000 to get Red Lion Homes (RLH) – a company set up to invest its right-to-buy receipts into housebuilding – underway.

As well as increasing the supply of social housing, the company will save the council £1.8 million a year that is currently spent on renting back former council homes to the homeless.

The Right to Buy policy – introduced by Margaret Thatcher’s Conservative government in 1983 – has led to Enfield losing half of its social housing stock.

It has also resulted in councils such as Enfield paying private landlords in order to provide accommodation for the homeless.

RLH will ensure the council can use its receipts from homes sold under right-to-buy to increase its housing stock.

The council needs to spend £154 million of right-to-buy receipts between now and 2023 – otherwise it must hand them back to the government and pay interest.

As the council’s Housing Revenue Account is not large enough to provide the 70 per cent match funding for the investment, the council took the decision in 2015 to set up a company to invest the money.

If the council had set up a wholly-owned company – an organisation that is expected to get the go-ahead in Haringey – it would not have been able to use right-to-buy receipts to provide funding.

Although the council will not own RLH, two councillors will be on its board, and the local authority does have control over rent-setting and the sale of land to the company.

The £250,000 loan will be used to pay for initial expenses such as a business plan and directors’ pay.

It will be repaid to the council once RLH is up and running, and has raised enough revenue to service the debt.

Ahmet Oykener, cabinet member for housing and housing regeneration, said: “We need Red Lion Homes to increase the supply of social housing in the borough.

“The government restricts our ability to borrow money for housing so we have had to establish this new housing association to raise the funding to build new social homes.

“We are not aware of any other council that is looking to solve the social housing crisis through setting up a housing association in this way, and for that we should all be proud.

“Yet again we are showing the government that we will always find ways to deliver for the poorest in society.”