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Bid to bulk-buy properties to solve housing crisis

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Councils are increasing their efforts to buy properties, bring them back into use and then let them out at more affordable rates in a bid to ease the housing shortage in their area – and save money.

In what is thought to be the biggest dedicated operation to date, Enfield LBC is to borrow up to £100m over the next five years to purchase and renovate properties before transferring them to Housing Gateway, a separate company it has set up.

It will initially lease the properties at sub-market rates comparable to the local housing allowance to reduce the number of people the council has to put in temporary accommodation; there are currently more than 2,000 families, over 7,700 people, living in such circumstances in the borough. The company was established under trading freedoms granted to councils under the recently introduced general powers of competence.

A spokeswoman for the council says: “Not only will this model secure better quality local homes for those with housing need, it will do so at approximately 25% less cost to the public purse.”

Four properties have already been purchased while offers have been accepted on a further 40. The council spokeswoman says: “Properties will be acquired in a phased approach so risks can be appropriately managed and to avoid distorting the local market.”

We are seeing more and more local authorities considering company models

Scott Dorling, Trowers & Hamlins

While the current focus is on acquiring existing properties, the council has not ruled out using the company to develop new homes in the future.

Housing Gateway will repay the council over a 35-year period and if the housing market changes ­dramatically over that time it has the option to sell some or all of its property ­portfolio.

A series of service level agreements mean the company has access to a number of the council’s professional services, including legal advice, company management, financial management, property acquisition and housing maintenance and management services.

The structure also means any housing bought or developed by the company will be exempt from the right to buy legislation, thus safeguarding the stock.

A council spokeswoman says: “As the company is separate to the council, right to buy is not applicable therefore this safeguards the council’s investment and sustains financial viability.

She says the council will use its property portfolio to “discharge its statutory duties into the private sector to be accompanied by a package of other interventions to help people get back on their feet”.

Enfield’s initiative is attracting interest. The spokeswoman says: “A number of other councils are exploring similar models and we have been approached by a number of boroughs for advice and guidance on how to take such a proposal forward.”

These authorities include Islington and Wandsworth LBCs and Broxbourne and Runnymeade BCs and the Greater London Authority.

Scott Dorling, real estate partner at Trowers & Hamlins, which advised Enfield on the creation of Housing Gateway, says: “We are seeing more and more local authorities considering company models that enable them to facilitate new-build or to acquire existing stock. Enfield has tackled its ­housing shortage head-on by opting to undertake this innovative and pioneering project.”

But Andrew Walker, policy researcher at the Local Government Information Unit, says buying up properties on the open market will only have a limited impact on the homelessness crisis.

“The fact they have only been able to get four properties so far despite having that amount of money invested and all those people involved shows that getting into the housing market and going up against developers is very difficult,” he says.

“The costs involved are astronomical so, in the long term, it would be cheaper if local authorities built these houses. Of course that comes with a set of whole other difficulties, not least getting hold of the land.”

 

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