"Councillors want to buy rundown buy to lets"
Councillors want to dabble in property investment by spending millions on purchasing ‘substandard’ buy to let homes.
The plan is for Newham Council, East London, to buy and let the homes to improve housing standards – and to make a killing on capital appreciation as well.
The council is banking on cheap borrowing rates offered to local councils to underpin the scheme, but throw the deal open to private and institutional investors.
The scheme depends on the outcome of financial negotiations with the government ministers. No details of how the scheme would work and how much investment would be needed to refurbish and manage property are not finalised.
Blackpool Council had a similar scheme on a smaller scale that recently failed. The council bought property worth £2.7 million with the intention of renovating and letting them as homes only to run out of money – the portfolio was sold to a housing association for £3.
The council area that has benefitted from investment billions generated by the new London Olympic 2012 stadiums and infrastructure.
Newham has an estimated 35,000 buy to let and houses in multiple occupation (HMOs) and the council claims tenant turnover rates are 60% compared with just 5% for social housing.
Councillors are formulating a social lettings allocation policy that pushes employed people ahead of those on benefits in queues for social housing.
Sir Robin Wales, Newham’s directly elected mayor, told Inside Housing magazine: “It is clear to us that we have to stabilise the private sector or we will just become a transit camp. That’s why we want to invest – there is a logic driving us.
“We want to purchase property in the private sector and run our own private rented sector. That way we can have longer tenure. That is a big issue for me.”
Sir Robin added that buying private properties would increase the council’s options for housing people on benefits.