A leading land broker is calling for councils to spend money borrowed from the Government at discount rates on building affordable homes, rather than on risky investment projects.
The comments from Adam Hesse at Aston Mead Land & Planning follow the recent trend for local authorities to invest in core income-producing assets – both inside and outside of their jurisdictions. This includes the likes of Spelthorne Borough Council in Surrey buying Sunbury Business Centre for £360m, and Runnymede Council purchasing M&G Real Estate’s Chiswick office for £63m.
Aston Mead Director Adam Hesse said: “You can understand why a local authority will jump at the chance for a five or six per cent yield, and in some cases it may be wise to do so. But the problem is that they are using cheap money to make investment decisions – which is often a skill set they don’t have. Surely this money should be invested in local homes instead?
“Local authorities are one of the biggest landowners in the country. As they can borrow money from Government at discount rates well below 1 per cent, why don’t they use it to build affordable homes precisely where they need them? After all, developers will fight calls for affordable housing on their sites. But councils already own the land so they can build whatever homes they like. They can also build more cheaply, as well as deciding the precise location, number and design of the properties concerned. They should have no trouble getting the schemes through planning, and the results would be seen very quickly. The ones they let out on affordable rental packages would bring in a guaranteed rental income and become a genuine investment. Meanwhile, the ones they sell at reduced rates would pay for the costs of development, before the council moved onto a new site.”
Adam says that such a process may lack the glamour and excitement of making big property investments all over the country, but would produce instant advantages closer to home.
He added: “Let’s face it, building local authority housing is not exactly ‘sexy’. But local councils aren’t there to take exciting or risky investment decisions. Their taxpayers want them to produce tangible benefits in their communities which will be instantly felt – and providing affordable housing is one of the most important issues of our generation.
“It would mean councils would have a guaranteed captive audience, and be able to replace the local authority homes sold-off in the Margaret Thatcher era. It would assist locals onto the property ladder who otherwise couldn’t afford to buy, and get large numbers of low income families out of expensive bedsits and B&Bs into their own homes. Plus villages across the country wouldn’t be ruined with ugly council houses – which is what happened in the 60s and 70s. In other words, it’s win / win all round!”