Aston Mead welcomes move to ban councils from gambling on the property markethttps://astonmead.land/wp-content/uploads/2020/06/AM-PRESSS-RELEASE-.jpg 370 230 Aston Mead Land and Planning | Land with development potential across Surrey Aston Mead Land and Planning | Land with development potential across Surrey https://astonmead.land/wp-content/uploads/2020/06/AM-PRESSS-RELEASE-.jpg
Leading land agents Aston Mead have welcomed proposals to ban local authorities from making risky investments in commercial property and say councils should spend the money on affordable housing instead.
The move follows revelations that since 2016 local authorities have borrowed £6.6bn to buy shopping centres and office blocks, to replace revenue lost by government cuts – 14 times more than in the previous three years. Over a third of that spend was made outside their boroughs. Last month it was reported that the Treasury now intends to “severely restrict councils’ ability to borrow for the sorts of out-of-area investments which are for yield rather than for policy reasons”.
Aston Mead Land & Planning Director Adam Hesse said: “We’ve been warning councils about their wild property gambling spree in a series of press releases, articles and interviews for the past two years.
“For instance, we know of one local authority which bought a shopping centre for an eye-watering £40m just weeks before the lockdown came into effect. Not surprisingly, more than 90% of its stores are now shut. And there’s another which paid £6.2m for a hotel that the tenant has said will go bust without a rent cut of up to 80%.
“Let’s face it – the authorities concerned are hardly experts in property speculation. And yet they are risking vast amounts of taxpayer-funded debt on commercial premises, often outside their districts, and about which they know next to nothing. These councils are massively over-exposed and putting public services in jeopardy. I’d be astonished if they got half of their money back or half of their rents paid!”
The British Property Federation says that only one third of retail rents and two thirds of office rents were paid on time in March of this year. It expects those figures to halve again this month. Meanwhile, Property groups are finding it difficult to sell retail parks even at rock bottom prices, and analysts forecast lower office rents for years to come, as more people chose to work from home.
However, it has since been suggested that the proposed ban may contain a major loophole because whilst the plans will force councils to hire a qualified independent accountant, it appears that they may not have to follow the advice provided.
Adam Hesse said: “This is absurd. For this ban to work, it should be mandatory to follow the guidance given. No exceptions, no exemptions, no excuses.
“In fact, we would propose that councils go even further. Local authorities have been funding their property speculation by borrowing from the Public Works Loan Board at incredibly low rates.
“No one begrudges councils being able to access money cheaply, of course. But we think that this cash should be used to build affordable homes on council-owned land instead.
“Local authorities are some of the largest landowners in the UK. As one of the South East’s most proactive land agents sourcing sites for our developer clients, we are amazed at how much council development land there is in our town and village centres, and yet they’re doing nothing with it!
“We suggest that councils could continue to invest in property by selecting their own sites on which to build, provide the planning permission required, and decide how many properties should be constructed – all in their own local regions – the circumstances and needs of which they intimately know and understand.
“The homes would enhance the value of the land, as well as provide a regular rental income for the council. The level of risk the authority would be exposed to would immediately diminish, and it would mean that we could start to construct the affordable homes that people in this country so desperately require.
“Perhaps the Government should issue Compulsory Development Orders on local authority land where there is an acute shortage of affordable homes to offer those on the waiting lists.
“It’s estimated that this country needs to build 100,000 genuinely affordable homes over the next five years – many of them for key workers. Our proposal would be the perfect way to thank them for their sterling efforts through the Coronavirus crisis.”