The Greater Manchester Housing Investment Loans Fund (GMHILF) was created in 2015 to encourage new housing in the city by loaning money to developers.

Initially worth £300m, the cash was “recycled” multiple times when loans were paid and around £1bn was eventually loaned out.

The fund closed to new applications earlier this year, as always planned.

But on Tuesday, June 17, the government confirmed it will reopen and extend the fund “to deliver thousands of new homes over the next 10 years” as part of its push to build 1.5m properties.

The fund is currently at the centre of a legal battle between the mayor’s combined authority (GMCA) and major Manchester landowner Aubrey Weis.

Mr Weis claims two loans, worth £120m, to one of Manchester’s biggest developers, Renaker, breach the Subsidy Control Act.

At hearings held at the Competition Appeals Tribunal last month, Mr Weis’ lawyer, Joseph Barrett KC, claimed a “striking practice…appeared to be in play”. 

He alleged Renaker owner, Daren Whitaker, told Manchester Council his developments have a “very low profit margin” to avoid making one-fifth of a project’s homes affordable, as council policy dictates.

But he also told the GMCA the same schemes have “high profit margins” to secure public funding at “modest” interest rates, the court heard.

Mr Barrett later argued the loans were approved with “no lawful or proper process”.

He added: “The pricing was agreed by two gentlemen sitting in a room and there was no lawful or proper process in relation to that critical element.”

The GMCA rejected claims it loaned from the GMHILF at interest rates below the market rate, or on “preferential terms”.

But it accepted no due diligence was carried out into Daren Whitaker’s personal circumstances when reviewing the loans.

Aidan Robertson KC told chair Hodge Malek KC the GMCA had processes to stop the “wool being pulled over its eyes” and prevent borrowers receiving “favourable” interest rates.

Each application was appraised by an independent panel before it ultimately went to a GMCA committee chaired by mayor Andy Burnham, he added.

“It has been explained to [independent panel members] if they think it’s way below market rates you can expect them to say so,” Mr Robertson said.

“The role is to provide independent scrutiny and say to the authority we are not getting value for money.”

The hearings have now concluded and chair Malek KC is expected to return a ruling later this month.

Renaker declined to comment when previously contacted.