Lambeth council’s bill for buying up properties on six council estates they want to demolish under their hugely controversial Homes for Lambeth scheme could cost almost £100 million – and possibly double that amount.
The figures come in a report to the council’s cabinet which seeks a £19.7 million loan request from the Public Works Loan Board (the Government ‘bank’ for local council loans) – or from unspecified “internal borrowing”.
The report is headed ‘Cabinet November 18’ but will not be on the agenda at next Monday’s meeting. The loan is set to be signed off by Cllr Paul McGlone, one of Lambeth council’s two deputy leaders rather than go to full council where Conservative and Green councillors could have commented on it if they wished to.
The report – made public by the Brixton Buzz website – says properties will be bought back and then rented on the open market or used as temporary accommodation until Lambeth council or Homes for Lambeth want to demolish them.
The report also reveals:
- The total cost of buybacks of 211 units at an average cost of £447,000 is estimated at about £94.3m. The funding of £19,737,000m relates to 32 units located in three of the estates – Central Hill (Crystal Palace), Cressingham Gardens (Tulse Hill) and Fenwick (Clapham).
- Once the process of letting out buybacks for rent to generate an income has become established, then a request will be submitted for the balance up to the full £94.3 million.
- If every homeowner (resident and non-resident) were to seek to sell their property to the council under the Key Guarantees, then the total liability could be circa £200m (at an average acquisition cost of about £440,000 (including all Key Guarantee costs).
- Many non-resident homeowners could hold out until they are required to sell to the council through the shadow of a compulsory purchase order.
- £5 million currently allocated to the buyback programme to purchase properties has already been spent – but it will be reallocated to design and planning costs once the £19.7 million loan has been approved.
Homes for Lambeth will procure lettings agents to market and rent the properties and to be responsible for internal repairs and maintenance of those properties. The properties will be let out on assured shorthold tenancies (an initial six months, with three month notice periods thereafter). Rent would be received by the lettings agents and an agreed onward payment made to Homes for Lambeth.
The report says: “Actual locations and unit sizes mean returns will vary. “For example, weekly rent on a two bed home in Knights Walk is expected to be £677, more than double a similar home in Central Hill at £314.
“As part of the redevelopment financing of the estate, Homes for Lambeth would then acquire the land and property from the council, enabling the council to repay the funding that was required to acquire the original property.”
Over the course of any estate regeneration project, all non-resident homeowner properties will need to be acquired, the report adds.
“From experience, given that these properties represent an investment, then in a constrained/rising housing market a very significant proportion of these non-resident homeowners will likely hold out until they are required to sell to the council through the shadow of a compulsory purchase order.
“In practice we expect most resident homeowners to wish to remain living on their estate and take up the shared ownership offer under the Key Guarantees.
“Once a property has been acquired, then a decision will be taken as to whether to use that property for temporary accommodation or to be rented out on the open market.
“If a property is to be rented out on the open market, then works will be carried out on the property by the council to bring it up to an agreed standard for being let out on the open market.
“The property will then be leased under a short-term business lease to Homes for Lambeth. “The payment terms of the business lease would cover the council’s costs of borrowing (interest only) and any upfront refurbishment works costs.
“The funding request will contribute towards the estate regeneration buy back programme, but does not represent the full extent of funding resource that will in due course be required to fulfil the council’s commitments in the Key Guarantees.
“Further funding will be requested in due course, once it has been proven that the approach outlined above, using Homes for Lambeth to rent properties out in the interim period, has been proven to be working to support interest costs.
“A financial model has been developed which shows that if properties are rented out on the open market they can generate sufficient income to pay the interest costs of borrowing to support the purchase; the principal amount would be refunded by Homes for Lambeth as part of subsequent transfer of leases when phases of schemes are progressed into construction.
The report states: 1.1 A key community outcome for Lambeth council is that Lambeth residents have access to better quality homes, with a commitment to develop 1,000 new homes at council rent over the next five years.
1.4 Whilst many of these properties are not required for some years hence for demolition to make way for redevelopment, these are people’s homes or investments and it is necessary to make available the opportunity that the council buys back these properties early, so as not to unduly disrupt people’s lives.
(What the report doesn’t say is that this relies on people wanting to sell now rather than stay in their homes until the end. And there is no mention of what happens to people renting privately from homeowners on the estates if they are made homeless as a result of Lambeth’s actions – Ed.).
Further reading: To read the full report please go to the Brixton Buzz website: Lambeth Council looking to borrow £19m to buy homes of residents on estates up for regeneration BY JASON COBB – DECEMBER 10, 2017 POSTED IN: NEWS.
Fourth paragraph down reading: Councillor Paul McGlone, Deputy Leader (Investments and Partnerships) has been asked to sign off the report [pdf] (to access).