Brick by Brick was ahead of the trend for building unsellable, over-priced shared ownership homes. By BARRATT HOLMES, housing correspondent
Cash blocks: L&Q invested £62m in two of the ‘Queen’s Quarter’ tower blocks
Croydon’s Brick by Brick is not the only housing business that appears to be struggling to off-load its stock of expensively built “executive apartments” through far-from-affordable shared ownership schemes.
Housing Association L&Q has more than 1,000 unsold shared ownership homes on its books, with 100 remaining unsold a year after they were built, according to their latest results just published.
L&Q has nearly 120,000 homes under its management, including interests in several developments in and around Croydon, such as its £62million investment in 172 homes in two blocks on the site of the former council offices, Taberner House, which they are now calling “the Queen’s Quarter”.
There, three-bedroomed flats are being listed for sale on shared ownership terms at £500,000 full market price.
Brick by Brick is the council-owned failed housing developer whose lack of profits, and £200million borrowing from the Town Hall, was a major factor in bankrupting the borough in 2020 and bringing down the council regime of Jo “Negreedy” Negrini, the CEO, and Labour leader Tony “Soprano” Newman.
Last year, outside consultants were brought in to carry out the process of folding the Brick by Brick business.
This June, Inside Croydon reported how there were more than 330 homes around Croydon, all built with public money by Brick by Brick, which were standing unoccupied. In many cases, the homes have remained empty more than a year after their construction was completed. Flats on one site were first placed on the market as long ago as February 2020.
Surfeit of supply: in the middle of a housing crisis for many, housing associations such as L&Q are struggling to find takers for their over-priced shared ownership flats
The empty BxB homes were estimated to be worth at least £110million, with more Brick by Brick flats soon to come on the market with still-to-be-completed projects such as Flyover Towers (also known as Kindred House).
There was an added, special Croydon Council complication over BxB’s shared ownership homes.
It was in January 2020, after Brick by Brick had been operating for almost five years, that Inside Croydon first revealed that while most of the company’s “affordable” housing was meant to be available under shared ownership, their execs had failed to register to be licensed to sell shared ownership properties. As a consequence, eager buyers were stung for thousands of pounds in legal and conveyancing costs when their mortgage providers refused to lend on the Brick by Brick properties.
There’s no such excuses for L&Q, however.
According to its latest trading statement published last week, L&Q has more than 1,500 unsold homes with a combined development value of almost £250million as of June 30.
Flyover Towers: nearly four years since work began on the Wandle Road car park site, this 128-flat, 25-storey Brick by Brick block is still not finished
The update showed that more than 70per cent of homes were left unsold for longer than a month after being completed. More than 10per cent – 150 homes – had been left unsold for more than a year.
According to a report on specialist website Inside Housing, “The vast majority of those, 107, were classed as shared ownership homes.”
In total, L&Q had 1,068 unsold shared ownership homes, with 343 unsold after six months.
What we appear to be seeing is a glut of high-specification, small-sized new homes coming on to the market at prices few hard-working families are able to afford or willing to pay for, even on a shared ownership basis.
Shared ownership has been used by profit-hungry developers, enjoying the government subsidy of Help to Buy, to fill their “affordable” housing quotas.
The majority of council-owned Brick by Brick’s 50per cent affordable housing target was intended for shared ownership.
The harsh reality is that shared ownership is far from affordable.
Releasing its figures, L&Q said its unsold housing reflected “a high quantity of handovers of shared ownership properties in some of our London-based schemes”.
High-rise prices: some L&Q flats in the Queen’s Quarter in Croydon have a full market sale price of £500,000
It said there were no plans to make changes to its model and they claimed that demand for shared ownership remained high. L&Q says that 807 completed homes in the past year were for social housing, with another 488 sold on the open market.
Operating surplus for the quarter stood at £89million, down from £112million in the previous year. Sales as a percentage of turnover stood at 47per cent of L&Q’s revenues.
“It is important to note that, of the total unsold stock, 30per cent has been held for less than one month and over half of the entire unsold stock has been on the market for under three months,” said L&Q director Martin Watts.
“Sales demand, including for shared ownership, remains strong and we are confident that homebuyers will continue to recognise the high quality and standards of L&Q developments.
“We remain fully committed to our vision, that everyone deserves a quality home which provides them with the opportunity to live a better life, and shared ownership is one of the best and most accessible ways to become a homeowner. We therefore have no plans to make any changes to our shared ownership offer and will continue to create homes and neighbourhoods that everyone can be proud of.”
So there.
Read more: ‘Disgrace’ as £110m of Brick by Brick homes stand empty
Read more: Council slips through £5m deal to buy Brick by Brick houses
Read more: Council sells off public green space to Brick by Brick for just £1
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Developers of my acquaintance assert that once a buyer’s budget gets over £500K, they want houses, not flats.
L&Q must surely know that too, which suggests these have been positioned at the off-plan investor/ speculator market which is weaker than it has been for some time at the moment.
Entirely anecdotally, and instinctively, you would imagine that the price point for the flat market would be almost half that, Jack – at least £300,000, and then unless you are seeking an Eaton Square-like address in central London with a Tube station close by, anyone seeking to buy a family home would hope for and expect to have a house.
Overall, what L&Q’s figures expose, and back up the BxB experience, is that even with government subsidies for builders through Help to Buy, shared ownership is far from “affordable” and cannot replace the provision of millions of units of social housing at social rents, which is what “hard-working families”, especially in London and the south-east, so desperately need.
If only the costly shackles of Right to Buy could be removed.
Agreed to an extent, but there are plenty of sub-9 flatted developments in Purley which have sold out in the £400K to sub-£500K region. This suggests that local and locally aware developers are setting themselves £500K as a self-imposed selling limit, at which point they perhaps start to think about building houses instead. L&Q are not they.
Help to Buy is proving to be problematic for many of its purchasers. New houses/ flats are like new cars – the people that buy them want NEW ones, not secondhand ones. Drive them off the forecourt, so to speak, and the value immediately drops.
Thus HTB buyers find themselves owning properties that are worth less than they paid, and without the benefit of the subsidy, if you can call it that, to market them to secondary buyers. There is a quiet HTB negative equity storm going on out there.
Agree totally re: RTB and always should have been a one out, one built programme.
A property-world person I know told me that here are corporate buyers out there who buy flats as an investment,with the aim of keeping them empty, and pristine for several years. The prices will probably go up, in a few years, so they can sell as new, with only one careful owner, in a pristine condition, with no annoying inconveniences like the need to re-decorate the walls and woodwork, clean the grease out under the cooker, nor get rid of any tenants. As long as the prices go up more than the service charges, managing agent fees to mage an empty property, and exceed normal investment returns, it is a lot more lucrative than putting the money in a piggy bank.
Jack’s mention of Purley prices being attained in thbe £400-£500 k bracket must reflect the addage of “location location location” plus the fact that these blocks of around 9 flats are not high rise, will probably be set in a pleasant and still green suburban area, like Pampisford Road. There won’t be massive bills coming donw the line in 30 years either, not like those incurred with high-rise blocks.
I am wondering and worrying about the future of the people who will be living in high-rise blocks, especially those crammed into polluted areas without ambient greenery, like that one depicted alongside the side of the flyover.
I hate to think whay health issues the people who live in such hot, polluted and airless locations will suffer in the future?.
Will these one day resemble the blocks that one sees crammed up against urban motorways in urban USA, and cities like Malaga and Bibao? The people musy be dying in the heat.
We don’t have the continental tradition of living in multi-storey urban blocks like these.
The very people who did have this tradition are South Americans and people from the EU — who have been forced to go home by the Brexit Yes vote.
If reducing prices creates a foothold for people to start on the property ladder, all well and good. But……….. many of these will have children who need their own garden, or, easy access to a safe park located right next to their blocks, ideally.
It would be a great urban design project to get a team of experts and residents to look at Croydon and identify areas currently occupied by run-down development that could be redeveloped with a mix of accomodation in blocks of low and medium size, set in a landscaped setting with play and gardens for a range of age groups, including older people and young families.
London-wide, we have the large LCC cottage estates like St Helier, and Dagenham , which could be redeveloped in this way, although the right to buy must have made such redevelopmemts much harder to achieve.
The high-rise residential blocks of Central Croydon seem to vary in quality of design, some resembling hamster cages, some really well-crafted.
Some will no doubt be snapped up and sought after. Others don’t look to be more than human storage areas. They built lots of high rise flats round Glasgow in the 50’s and 60’s. Many have been taken down as they failed.
Success or failure seems to depend on
Height, height , height…….
Location, location, location….
Facilities, facilities, facilities……
Management, management, management…..
Design, design, design.
Environment, environment, environment
plus other factors, human, and economic.
Another possible problem facing HTB buyers when it comes to selling, is that upon initial legal completion the developer MAY have entered into a deed of indemnity with the buyer (eligible purchaser), in order to indemnify the buyer, their mortgagees and future purchasers against any costs incurred in relation to any outstanding obligation, breach, or non-compliance (by the developer).
On resale, due to the incompetence (or worse) of the local authority involved, relevant planning conditions may STILL be unsatisfied and/or litigation (such as a Right to Light claim) may STILL be ongoing. Unauthorised development propped up by indemnity policies … not a particularly attractive proposition!
L&Q’s trading update to the end of June shows that, year on year, their vital signs are going the wrong way. They’ve more homes than at June 2021, but financial turnover is down as are sales.
In the wider economy, interest rates are rising, mortgages are therefore becoming more expensive, energy costs are soaring and property prices are falling, by 3.5% in London in one month, says the Financial Times.
Who’d buy a home right now?
Capitalism means that high supply and low demand will lead to lower prices, right? Or will it perhaps just be empty flats and bailouts?
Why has no-one thought of housing associations and councils retaining the ‘equity’ discount in RTB properties? The RTB discount is applied to the purchase price, but when the owner decides to sell, the % equity/ discount provided by the HA or Council is paid into a central ‘Housing Development Fund’?
How rewarding to see some real proof that my five-year-old prediction was accurate! Then (following the Brexit referendum result) I posited that the UK population would shrink by some millions as mainland European residents ‘returned’ to the EU, and that Croydon would be especially hard-hit because its population (related to the presence of the Home Office in the borough) was unusually heavy with temporary EU immigrant residents.
I recall a report in 2020 which suggested that some 60,000 mainly Polish residents of Croydon had returned to the EU in the past year. Of course free movement of EU residents between EU countries was never counted properly by the Home Office, so actual figures are not available … but I recall an estimate of 5 to 8 million being suggested for the whole of the UK, which would be around 10% of the census population.
I think that all off this is good news. Chris Flynn is right in saying that this must result in a large reduction in property prices – the idea of a bailout is impossible in the current fiscal climate!
The prospect of £350,000 properties being sold at half-price will be the greatest boon to British society. Young people will again be able to buy their own properties, rents will reduce in line with property prices, homeless people will be housed as Councils replenish their stocks of Council houses and flats, reducing mortgages and corresponding reductions in mortgage repayments will have a massive effect in reducing inflation. The only people who will LOSE will be the heirs to their parents’ houses, but even that “loss” will be less relevant because those heirs will be able to buy property in their own right!
There has been a huge amount of talk in past months about “price caps”, but surely the most important cap SHOULD have been a cap on property prices. Perhaps at last the ‘free market’ will do the government’s job for it.
Think you need a new theory Martin, and definitely some better numbers.
First, and most screamingly obviously, “temporary EU immigrant residents” had no need of the Home Office and/ or Croydon as, er, being from the EU they had residency and work rights from the get-go.
EU immigration slowed after Brexit, but showed net increases until 2020, coinciding with Covid and the lockdowns.
As for for the population ‘shrinking by millions’ since 2016, that’s way off.
The reduction of EU citizens caused more by Covid and lockdowns in the UK is said to be less than 10% of their previous total, while the loss of EU nationals has been eclipsed by net migration from elsewhere.
The population has increased by approx. 1.8m since 2016, with the latest ONS figures showing a net increase in the year to June 2021 of 239,000. In fact, the UK population has increased EVERY SINGLE YEAR since 1979, including the five years since the referendum.
The reason overpriced flats are getting stuck has more to do with issues like the Chinese investment property crisis – and the woes besetting corporations like Evergrande – and wage stagnation than it does with a weird form of emigration that only sees the population increase annually.
Jack, the Home Office handles UK citizenship applications, not just work permits.
You admit that EU immigration slowed after Brexit. What makes you assume that it will now start to speed up?
I have some experience of the ONS (as a ‘customer’) and I can definitely confirm to you that the data they used (in my case) was incorrect. You do yourself a disservice by taking their ‘facts’ as an accurate basis for statistical prediction. There are times when common sense combined with personal observation are a more reliable indicator of the future … and I think this is one of those times 😉
For now I’ll stick to my own theory. But I’ll certainly accept any criticism for optimism …
funny that ,, locals have been saying this all along ..no more flats … its family homes that are needed …. and yet still these monsters are being built
Not only are they too expensive, they do not provide parking for someone like me who is looking to own a property that happens to own a car.
L and Q “We do not make dividend distributions; our annual surplus acts as a buffer against changes in our operating environment and, over the longer term, finances our growth ambitions.” They are very unlikely to change their property model based on the statement above. Brick by brick has compounded the pile um high and jam them in philosophy” finished to a high standard “. The market isn’t in Croydon for these properties. Brick by brick will end up taking a hair cut on their valuations, in addition to any existing price reduction. Even if prices come down 20% potential buyers will want to look at any shared ownership scheme with a magnifying glass. The none shared ownership segment has already dried up. L and Q maybe in a position to rent some of their stock rather than leaving buildings empty for years. It’s possible some housing could be offloaded under shared ownership with a company like L and Q retaining the majority stake in shared ownership. How’re L and Q aren’t in a position to effectively buy housing stock from brick by brick, it’s likely to be someone else. The law needs to be changed so that councils can’t carry out this type of speculation without some form of external regulation.