EXCLUSIVE: With six parcels of public land, including open spaces, sold for just £1 each, the council has handed its in-house house-builder a secret subsidy worth millions of pounds, in a series of spiv-like deals which potentially could be against the law. STEVEN DOWNES reports
Brick by Brick has a town centre marketing suite to sell privately £600,000 houses that have been developed with a massive public subsidy
“’Ere, mate… fancy buying a bit of surplus land, going cheap?”
“How much?”
“I can let you have it for… how about… a quid?”
Far-fetched?
Not in Fisher’s Folly, the council offices, where between March 2018 and January this year, 24 pieces of public land and property were flogged off, most at massive discounts, in some cases estimated as being worth several million pounds.
According to details obtained through a Freedom of Information request submitted by Inside Croydon, six packets of land in the council’s fire sale of public property were sold for just £1 each.
In four other cases, the sites were sold for less than £10,000, considered well below market value for land in the capital city.
In a couple of those instances, the council sold off public land for just a couple of hundred quid.
In every case, Croydon was selling the land at mates’ rates to Brick by Brick, its wholly owned housing company.
Formed in 2015, Brick by Brick has a target that 50 per cent of the homes it builds should be “affordable”. Yet of the properties BxB says will be available in 2019, just 29 per cent will be “affordable” housing. The company’s longer-term projections suggest that it will struggle to deliver its own, and the council’s, “affordable” housing target.
As council leader Tony Newman was forced to admit during a car crash interview on BBC Radio London before Easter, Croydon has not built a single new council home since 2014, and it has none planned before 2022.
Increasingly, it is looking as if Brick by Brick, with its massive land purchase subsidies, is simply a way to transfer public property into private hands, a favourite policy of Conservative authorities. Croydon, of course, has been under Labour control since 2014.
Listen to how council leader Tony Newman has to be asked FIVE times by BBC London presenter Eddie Nestor before he would admit his Labour-run council is not building any council homes:
In March, nearly four years after Brick by Brick was formed, they finally released the first batch of flats and “family houses” in Upper Norwood, one of the borough’s “up-and-coming” neighbourhoods, as their sales agents working in the BxB marketing suite on George Street – rented on a 10-year lease costing £400,000 – would no doubt say.
Pricy: Brick by Brick’s first properties are predominantly for private sale. Few of the council-owned company’s homes are truly ‘affordable’
As Inside Croydon reported last month, these homes – built using public land and public money, but going for sale on the private market – carry a collective price tag of £16million.
Some of the land used for those homes was, according to a further council FoI response, acquired on March 1, 2018, for just £250.
Brick by Brick acquired the site with planning permission in place – adding to the land’s potential value, and the company only bought the land long after it had begun construction work there.
According to the council’s FoI response, for the sites sold to Brick by Brick, this was, “Sale of surplus land for housing development offering c50% affordable housing”. So clearly, the council has made a link between the value of the property sale and the provision “affordable” housing.
Yet not one of the new homes built by Brick by Brick on this Ravensdale site are available as social housing or council homes. The 14 two-bed flats are being sold on the private market for a tidy £500,000 each, while 15 three-bedroomed terraced houses are being marketed for at least £580,000.
According to figures provided by the council, there is a wide variation in valuations for the sites sold by Croydon, from the six £1 bargain plots, to some, such as the Lion Green car park in leafy Coulsdon, which was sold for £1.5million.
Yet even this sale, property professionals suggest, represents a massive under-valuation of public property.
The council has under-valued this site alone by 66%
The council sold the Lion Green Road car park to Brick by Brick after the site was given planning consent by the council: planning July 19 2018; sale January 10 2019.
The Lion Green Road site in Coulsdon was sold with planning permission for 78 private units in five blocks for just £1.5m
According to an industry insider familiar with local authority land valuations, “Land with planning permission is worth much more than land without, and it is also much easier to value as you know precisely what will be built on it.
“Even accounting for the high level of social housing in the Lion Green Road consent, there is no way that a site this size with full planning consent for 78 private units is only worth £1.5million – especially given that the council probably lent 100 per cent of the funds for the sale to Brick by Brick (100 per cent vendor finance is not a normal commercial term, obviously).
“Looking at this site’s numbers, on a normal arms-length basis with no vendor finance, this site with this consent would be worth between £4million and £7million.”
So the council has under-valued this site alone by at least 66 per cent.
In all, Croydon’s 24 land sales to Brick by Brick raised a combined total of £6.4million. Brick by Brick will have paid the sale prices with money that it had borrowed from… Croydon Council.
At a time of austerity-squeezed council finances, that’s a useful contribution to the Town Hall coffers. Yet if Lion Green Road is typical of the amount of under-valuation on the rest of the sites, then the council ought to have charged around £12million more for the land sales to Brick by Brick.
GOING CHEAP
How Croydon Council undervalued its land sales to Brick by Brick
In property disposals in 2018 through to January this year, there were some terrific bargains – for the council-owned house-builders. Here’s a selection:
- “Former park” at Whitehorse Road: 1,185 sq m – £215,000
- Coldharbour Road: 821 sq m – £40,584
- Homefield Road, Old Coulsdon: 4,544 sq m – £3,368
- Northbrook Road: 430 sq m – £2,053
- Malling Close/Stockbury Road/Knole Close: 2,706 sq m – £325
- Harold Road/Ravensdale Gardens: 1,792 sq m: £250
- Garages on Eagle Hill: 650 sq m – £210
- Garages on Heathfield Road/Coombe Road: 746 sq m – £1
- Regina Road: 1,984 sq m – £1
- Hermitage Road: 837 sq m – £1
- Garages at Thornloe Gardens: 1,008 sq m – £1
- Station Road: 536 sq m – £1
- Montpelier Road/Kingsdown Avenue: 2,666 sq m – £1
According to the council FoI response, “Valuations were undertaken by In-house valuer and external consultants (Lambert Smith Hampton) and final figure agreed direct with the developer.” Meaning Brick by Brick. Cushty.
But under Section 123(2) of the Local Government Act 1972, “a council shall not dispose of land… for a consideration less than the best that can reasonably be obtained”.
The Kingsdown Avenue/Montpelier Road site, previously a public open space, and one of those sold to Brick by Brick by Croydon Council for just £1
After Inside Croydon revealed that some sites were sold to Brick by Brick for the pittance of £1, Alison Butler, the council’s cabinet member for housing, was asked how she could justify, for example, the sale of a 2,666 sq m plot of land in Purley to Brick by Brick for so little.
Her reply stated: “Valuations for each of the Brick by Brick sites were carried out with regard to the planning consents in place for the site.”
All the planning applications from Brick by Brick were passed by Croydon’s planning committee under the chairmanship of Paul Scott, who our loyal reader will recall also happens to be the husband of Councillor Butler.
Alison Butler and Paul Scott: they oversaw planning permissions and the sales of public property at massive discounts
Sources on Croydon’s planning committee have accused Scott of “whipping” them to vote through BxB planning applications, saying that he had warned them: “If one fails, they all fail.”
The practice of “whipping”, or in any way seeking to influence councillors serving on the planning committee, is a serious offence. Scott denies doing this, but Jo Negrini, the £220,000 per year council chief executive, has blocked calls from Croydon South Tory MP Chris Philp to investigate the well-sourced allegations.
Butler, in her reply to a written question regarding the low valuations placed on council land, said, “Valuations for each of the Brick by Brick sites were carried out with regard to the planning consents in place for the site.
“However, as the initial sites released to Brick by Brick were linked from a planning perspective to ensure delivery of approximately 50 per cent affordable housing across the initial Tranche 1 properties collectively (rather than as individual sites), this was also factored into the valuation for each site.
“The valuations for the sites may therefore not only reflected the gross development value for the properties being developed for the particular scheme but also a ‘commuted’ payment deduction to help offset sites that had a higher percentage of affordable units or would otherwise be uneconomic to develop due to the requirement for the overall 50 per cent affordable housing. This valuation approach was considered acceptable given the clear planning links between the various sites.” Those are our italics.
“The valuation methodology reflected the gross development value for the properties, tendered construction costs, professional fees and other standard construction cost such as finance costs, developers profit and contingency costs thereby adopting a standard valuation approach to arrive at the site value.
“In addition, and to ensure compliance with the council’s requirement to secure best consideration for the site, all the transfers to Brick by Brick contain an overage clause and open book examination of actual costs/values on completion of the development that allows 100 per cent clawback of any additional profit. This is an upward-only provision so there is no risk to the council. This ensures that the council maximise the value for each site bearing in mind the requirement for an average of 50 per cent affordable housing across the tranche 1 sites.”
Glad we’ve cleared that up…
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It bloody stinks!
Wonder if there are any restriction on Brick by Brick selling these nominally acquired sites on the open market. No doubt this will be the scenario if they are unable to sell their developments and it is just politically unacceptable receiving another handout from the Council. The private housing market is tough and trust this Local Authority to enter a field in which they have no real expertise and not focus on what is really needed. Social housing is the last thing on Brick by Brick’s agenda.
If these people were actually any good at property development they would be out earning a fortune with a proper professional company. Not messing about in some ill-conceived local council organisation.
Well said. That’s why Lacey is known as “Mr Developer” in the industry. Aka his delusion about being CEO outweighs his (zero) commercial experience. You only have to look at his “career” rise, without Negrini coat tails he would still be a junior officer at Lambeth . No sensible developer or council will give him a job – he’s a loose cannon.