Council to borrow another £30m to buy Brick by Brick flats

EXCLUSIVE: A local authority already £1.5bn in debt and nursing a coronavirus overspend of £65m now wants to increase its borrowing further, as the failed in-house housebuilder needs another bail-out.
By STEVEN DOWNES

Alison Butler: after  five years, Brick by Brick has delivered just three purpose-built council homes

Alison Butler and Simon Hall, part of the cabal that has helped to create the council’s financial crisis, have just provided another 39 million reasons why their Brick by Brick housing experiment has woefully failed.

In a paper going before the council’s next cabinet meeting, due to be held a week on Monday, July 20, Butler and Hall recommend that Croydon Council – already in debt to the tune of £1.5billion – should borrow another £30.8million so that it can buy 165 flats from the council’s wholly-owned house-builder.

Together with more than £8million from the council’s Right to Buy receipts, the total cost of this latest bail-out for the struggling Brick by Brick comes to £39million.

Brick by Brick was formed in 2015. To date, the council has lent £260million to Brick by Brick to set up in the house developing business. Brick by Brick has delivered just three purpose-built council homes in that time, while by March this year they had managed to sell just eight of their over-priced homes to private buyers.

In 2019, the company missed its sales targets by 83 per cent.

Labour councillors who have spoken to Inside Croydon over the weekend expressed their astonishment that the council’s leadership is presenting these recommendations at the same cabinet meeting where also up for discussion is a detailed report on the local authority’s financial crisis. Councillors are also angry that this latest chunk of borrowing was never mentioned at a Labour group meeting held earlier this week.

Even some of the Labour-run council’s most senior figures have recently expressed lost patience with the costly and ineffective Brick by Brick experiment, and have stated an expectation that the company would need to start delivering some “dividend” back to the council this year.

But that was before this latest £39million purchase plan was announced on Friday night.

“The narrative is supposed to be that the council’s financial problems are all the government’s fault, after a decade of austerity and the extra spending because of coronavirus,” said one Katharine Street source.

“This report goes a long way to demonstrate that is not in fact the case.

“This must come as a real slap in the face for the council staff. Just as we’re about to make 400, perhaps even 500 council staff redundant and impose 15 per cent spending cuts on the services we provide to council residents, they want to spend nearly £40million on another bail-out for Colm Lacey and Brick by Brick.

“What was it Einstein said about the definition of insanity?”

This will be the second multi-million-pound bail-out for Brick by Brick from the council this year.

In January, the council paid £6million for 24 flats at Longheath Gardens, to be used for social rent council homes.

Brick by Brick had intended the Longheath Gardens flats to go towards its (unaffordable) “affordable housing” quota and be put up for part-ownership sale. Until, that is, Brick by Brick discovered last December that they had failed to get themselves registered as an approved supplier of shared ownership homes.

In effect, the £39million bail-out means that Croydon residents will be paying for these properties three times over.

Brick by Brick’s flats in Longheath Gardens were bought by the council in January for £6m

The flats have been built on what was public-owned land or property, which was “sold” to Brick by Brick at huge discounts (in the misplaced hope that any uplift in value would eventually come back to the council). Six council sites were sold to Brick by Brick in 2017 for as little as £1 each.

Then there is the £260million borrowed by the council (albeit at historic low rates of interest) and loaned to Brick by Brick, which has yet to make a penny in profit from any of the projects it has worked on.

And now the flats, which Brick by Brick has failed to sell, are being bought up by the council to be used for social rent homes.

The flats to be bought are all one- and two-bedroomed; the average cost of each flat works out at around £236,000.

It is not stated in the report going to the cabinet meeting where the 165 Brick by Brick homes are sited, but it seems likely that many of them, like the flats at Longheath Gardens, were intended for shared ownership homes.

The council report, under a heading “Increasing housing supply”, is issued under Butler and Hall’s names and that of Ozay Ali, the council’s “interim director for homes and social investment”.

It may be significant that neither Jo Negrini, the council’s £220,000 per year CEO who was considered a driving force and claimed credit for the Brick by Brick concept, nor Shifa Mustafa, the council’s exec director in charge of housing, see their names come anywhere near this latest admission of Brick by Brick’s failures.

It states, “This report builds on earlier initiatives to demonstrate the council’s commitment in the Corporate Plan (2018) for ‘good decent homes, affordable for all’. This report outlines further initiatives to help address this priority and provide a better standard of homes for families and workers in need of accommodation at an affordable rent level.

Simon Hall: councillor behind Brick by Brick’s failed housing experiment

“Our Community Strategy Policy aims to ensure protection of vulnerable people and a key priority within this is to meet the housing need with good quality accommodation…

“In addition to the temporary housing requirement it is important to increase the general housing stock to allow longer-term solutions to allow people to progress from temporary to more permanent housing solutions. The purchase of more homes from Brick by Brick would help to meet part of this demand and secure quality homes including specially adapted units…”.

The report states that, “The use of Right to Buy receipts and [Greater London Authority] funding will allow the council to deliver new homes that can be let at council rents.”

And the recommendations to the cabinet state, “Approve the borrowing facility of up to £30.6m to enable the investment in the acquisition of 165 new homes from Brick by Brick Croydon (Limited) (‘Brick by Brick’) to be let at council rents…

“Approve the use of up to £8.04m Right to Buy Receipts to reduce the level of borrowing required.”

Further on in the report, it is explained, “The intention is to purchase the new homes from Brick by Brick to add them to the existing Council stock. The homes will be managed by the Housing team, as with the existing council homes.

Colm Lacey: second multi-million bail-out of BxB this year

“The council will fund part of the purchase cost through [Greater London Authority] funding that has already been secured which provides a grant of £100,000 per property or, for properties where [Brick by Brick] have already secured some [Greater London Authority] funding, it is proposed to utilise Right to Buy receipts to assist in the purchase of these homes.

“This will help the Council to let them at council home rents. The remainder of the cost of purchasing will be funded through HRA borrowing.

“Rents will be charged in-line with existing council rents so that they are truly affordable.”

Council insiders remain deeply sceptical.

Referring to Colm Lacey, the former council housing director who has been promoted to the position of “chief exec” at Brick by Brick, one Katharine Street source said, “It’s taken them more than five years to reach this point. They might as well have just built council homes, and they could have saved us all a lot of time and bother, and the cost of Lacey’s salary.”

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About insidecroydon

News, views and analysis about the people of Croydon, their lives and political times in the diverse and most-populated borough in London. Based in Croydon and edited by Steven Downes. To contact us, please email inside.croydon@btinternet.com
This entry was posted in Alison Butler, Brick by Brick, Colm Lacey, Croydon Council, Housing, Jo Negrini, Simon Hall and tagged , , , , , , , , . Bookmark the permalink.

8 Responses to Council to borrow another £30m to buy Brick by Brick flats

  1. So the Council are borrowing more money to buy the flats that they have already borrowed money to build via BBB. When they pay BBB the money for the flats BBB can then pay some of it back to the Council. There will be deductions because BBB are on a profit share! Nice work if you can get it.

  2. Two questions:

    1. When will this all come crashing down?
    2. Who is going to pay when that happens?

    • AngryResident says:

      The frontline council workers are being made to pay with their jobs and livelihoods, It will then come crashing down when there is no one left to deliver essential council services that Croydon tax payers pay for!!

  3. Another £39 million? There’s only one world for it : Un (expletive deleted)ing believable. Its not madness in the pure Einsteinian sense but in the crazy mock logic of the truly disturbed. Whoever could think that lending someone else’s money (ours in trust to the Council) to yourself, which is what the Council is effectively doing, knowing that you will never be able to repay it makes any sense? Its basically a sort of Onanistic Ponzi Scheme, no more or less. Crazy.

  4. hazel swain says:

    just stop building them in places people dont want them built!

  5. Sebastian Tillinger says:

    The delivery of Planning / Housing in the London Borough of Croydon is broken.

    Brick by Brick is is loosing money hand over fist. It’s a testing market now but that wasn’t the case six months ago. The company has been making poorly judged decisions since its inception and the diligence and checks from the council are non existent.

    The council is making it up as they go along.

    Negrini has no experience overseeing a property development company. Butler and Hall are clueless about property development; its funding and the mechanisms of delivery to produce commercially viable housing.

    And the disconnect between Brick-by-Brick and the council’s planning processes is legendary. Shifa Mustafa, who’s responsible for the delivery of a planning policy that supports the borough’s housing strategy, is noticeably silent on this and in fact on all matters as far as I can see. Ms Mustafa is apparently a friend of Jo Negrini as is Colm Lacey who runs Brick-by-Brick. You only have to look to Tony Newman to see where this breed of nepotism comes from.

    The spiralling decline needs to be stopped.

    I suggest an external organisation such as PwC is called in to undertake a complete audit of Brick-by-Brick and as part of this put forward proposals for how Brick-byBrick can be managed going forward. I expect this would result in the removal of the existing management and an established property development management company such as Stanhope Plc brought in to run existing risks and navigate the complex situation Brick-by-Brick has put itself in; this should include the delivery of projects and provide the council with targeted support in phases where they need it most.

    Money needs to be spent not to shore up existing projects but to put the company on track before, if necessary, winding it up.

  6. Carrie Low says:

    Wow, Am i missing something here? so Brick by Brick already owe £262 million and Croydon Council have to borrow £30m to buy these flats from Brick by Brick!!! Why isn’t the cost of the flats just be deducted from the huge debt they have????? Surely that is more sensible.
    The more articles there are about Brick byBrick the more ridiculous it sounds, when the hell will someone with authority and sense do something to to put this shambolic company to an end??

  7. Sheila W Hall says:

    I agree, a truly independent audit needs to be carried out. The amount of incompetence and nepotism this council has been allowed to get away with is staggering. Not only is there the BBB fiasco, there’s the purchase of the loss making Croydon Park Hotel and the Colonades. And a big question particularly in the South of the borough, targeted for blocks of overpriced flats, is where is all the Community Infrastructure Levy from their developer friends being spent or has it just gone into this black hole? The arrogance and lack of accountability is beyond belief.

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