STEVEN DOWNES reports on how Croydon Council has failed to comply with the law by selling land to its in-house house-builders for just £250, where terraced houses are now on private sale for £600,000 each
Brick by Brick’s houses are for private sale, on a site the council sold for £250
Croydon Council did not obtain permission from Whitehall for the under-value sale of land to Brick by Brick, in which potentially millions of pounds of public property is being transferred into private hands.
The Ministry of Housing, Communities and Local Government says that Croydon Council has made no application to the Secretary of State for permission to flog off public land at less than its market value since 2015 – the year that Brick by Brick was formed.
Last week, Brick by Brick took out an ad in the Evening Gideon in an effort to sell its new-build terraced houses on the Ravensdale and Rushden. The homes on the site are all going for private sale, with an asking price of up to £597,000.
This has proved too pricy for Croydon residents, whose Council Tax is helping to fund the Brick by Brick misadventure.
There had been a two-month period when the properties were offered for sale only to existing Croydon residents, though that expired in May. According to Brick by Brick’s own website, by this week only three of the 31 properties at Ravensdale and Rushden have been “reserved”.
Last year, Croydon Council sold the publicly owned of the Ravensdale and Rushden site land to Brick by Brick for a bargain £250. Yes, that’s right: two hundred and fifty pounds.
Kit Malthouse: housing minister said that council did need to seek permission for under-value land sales
Section 123(2) of the Local Government Act 1972 says that “Secretary of State approval should be sought when, subject to a de minimis under-value of £2m (Circular 06/03), land is to be disposed of at under market value”.
In the House of Commons, in answer to a written question from Croydon Tory MP Chris Philp, housing minister Kit Malthouse confirmed that this section of the law would apply even if the disposal was to a council-owned housing company.
As Inside Croydon reported earlier this year, these homes – built using public land and public money, but going for sale on the private market – carry a collective price tag of £16million. So that is an under-market sale of land worth considerably more than £2million.
Croydon Council has been borrowing hundreds of millions of pounds of public money, then lending it on to Brick by Brick, some of which has then been used to buy up property from the council.
In common with a number of its schemes, Brick by Brick acquired the Ravensdale and Rushden site with planning permission in place – thus adding to the land’s potential value. Council records show that the company bought the land in March 2018, long after Brick by Brick had begun construction work there.
Jo Negrini: championed the Brick by Brick model
Council execs, such as Jo Negrini, the £220,000 per year CEO who has championed the BxB model, claim that when the properties are sold, all of the profits will come back to the company’s sole shareholder, the council, where the money will be used to pay for much-needed local services.
It is an argument that demonstrates that Brick by Brick is doing little, if anything, to provide housing for those in greatest need.
And it also ignores the issue of Brick by Brick’s questionable competence to deliver on time and on-budget. For example, as the developers overseeing the over-running refurbishment of the Fairfield Halls, we already know that they have gone overbudget there by at least £11million. That’s money which is almost certainly going to have to come from the house sale proceeds.
According to an FoI response from Croydon Council, for the sites sold to Brick by Brick, this was, “Sale of surplus land for housing development offering c50% affordable housing”.
So the council has tried to make a link between the value of its property sale and the provision of “affordable” housing.
Yet on this site in Upper Norwood, there is no “affordable housing”, and certainly nothing resembling social housing or a council home.
There are 14 two-bed flats on the site that 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.
Brick by Brick has a target, set by the council, to deliver 50 per cent of its new homes as “affordable”. On some sites, however, there is no affordable housing whatsoever. And according to Brick by Brick’s own figures, in 2019, only 29 per cent of the homes it is due to complete will be affordable.
Croydon Council has been Labour-controlled since 2014. In the past five years, the local authority has built not a single new council home.
Ravensdale and Rushden is not the only site which Croydon Council has sold at considerably below its true market value, and without the necessary permissions as required by the law.
As Inside Croydon revealed, among the first plots sold to the in-house house-builder there were six sites that went for a mere £1 each.
In Coulsdon, the Lion Green car park was sold for £1.5million – or less than one-third of its likely value. The site has planning permission for 157 flats. You do the arithmetic on how much the sale of those properties is likely to yield.
Yet Croydon Council is stubbornly maintaining that, despite flogging off the Ravensdale and Rushden site for private housing at £250, those six £1 plots and the Coulsdon car park at a bargain basement price, they have “not sold any sites for housing development within the last five years at less than best consideration that can be reasonably retained based on the planning consent and conditions imposed for the site”. Seriously.
That came in a response to a Freedom of Information request provided just this week.
Brick by Brick’s town centre marketing suite has managed to ‘sell’ just 18 of the 111 housing units completed so far
In its answer to a resident’s FoI request, the council claimed, “Two cases have been referred to the Secretary of State, and the required approval obtained, but these were on the basis that the sites being disposed of had existing dwellings (temporary modular housing) and consent was required under S19 Housing Act 1985 for the right to appropriate the land dispose of the site and not because they were being sold at less than best consideration.”
According to the council, these were sites at Warbank Crescent, New Addington, and at Oxford Road, Upper Norwood.
In a separate FoI reponse, the council has stated, “When the council sells land, if it rises in value through being developed and sold within a certain time we are repaid a percentage of that rise. This applies to Brick by Brick, with the percentage in these cases being 100 per cent of the increase in value.”
And Brick by Brick has stated, “The sites that we acquire are small and often challenging and would often not be developed by traditional developers. Equally other developers wouldn’t tend to deliver as much affordable housing on these sites as we do.”
This, though, is misleading, probably deliberately so.
In the instance of the Ravensdale and Rushden site, because it involves more than nine homes, any private developer would have had to ensure than 30 per cent of the properties would be for affordable housing. So in this case, at least nine of the flats. Brick by Brick is delivering no affordable housing at all on this site in “desirable” SE19.
Brick by Brick further states that “unlike other developers, at the end of every scheme we also undertake a revaluation process which calculates the final land value. This means that if we make more revenue from the project than we thought we would, this is always added to the land price. In this way, we ensure that the price we pay is always the true market value.”
Which would be far more reassuring if Brick by Brick’s sales figures showed more than just three of the 31 properties at Ravensdale and Rushden had been sold, or at nearby Auckland Rise (also advertised in the sub-Standard last week), where 45 of Brick by Brick’s 56 flats remain unsold more than four months after they were placed on the market.
Despite spending £400,000 to rent a retail unit on George Street as its swanky “marketing suite”, Brick by Brick’s sales team appear to be struggling. BxB’s own figures this week show that of 111 flats and houses completed and available so far, just 18 have been “reserved”.
And housing units which remain unsold, of course, generate no profits, only on-going costs for Brick by Brick, and Croydon Council.
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Judicial review time it seems. This time a plaintiff will have an open goal that the Council has acted beyond its powers without seeking the appropriate authority to sell off land below market value.
If only the inept and incompetent Negrini, Councillor Soprano, Bald Ego et al can be surcharged for all the money they have and will continue to lose for the residents of the London Borough of Croydon.
Most of Croydon council need looking into with funds that have not been used for what it was meant for.