Perry about to giveaway millions in social housing flog-off

CROYDON COMMENTARY: The new Mayor wants to run a ‘minimal council’, and is getting pensioners and the worst-off to pay for its financial turmoil while he arranges a £36m property deal that seriously undervalues public assets, says ANDREW PELLING

Bargain sales: property prices in Croydon have soared in the past decade. Mayor Perry’s asset disposal plan does not reflect that

Nothing has really changed at Croydon Council.

Tonight’s council cabinet meeting is expected to agree a multi-million-pound giveaway of residents’ money, with the selling of more publicly owned assets.

And to add to the pointless cruelty of flogging off its assets at less than their true value, at the same meeting the council is going to short-change Croydon’s pensioners and the working poor by making further reductions to the terms of Council Tax benefit.

Back in 2014, the last Conservative Town Hall administration bought £29,389,808-worth of properties inside the M25. It’s not just been the Labour-run council that has been spending public money to buy private property.

The 2014 purchases were homes to house those in need. This was done in partnership with St Mungo’s, the homelessness charity which also had a housing association that has since been taken over by Notting Hill Genesis.

In all, 259 mainly one- and two-bedroomed properties were bought, and now 146 tenants are housed. The council has a 51.7per cent majority interest in the properties.

According to official papers in a report to tonight’s cabinet meeting, the council wants to sell its stake in those homes for £36million. That’s an increase in value of 22.4per cent over the nine years since making the investment.

Asset stripper: Mayor Jason Perry has discovered that you can sell anything if you make the asking price cheap enough

On the face of it, for Mayor Jason Perry’s cash-strapped council which needs every penny it can lay its hands on, that might seem like a good deal.

But it isn’t.

Even using the most pessimistic property index for Greater London over the period, the index for Greater London flat prices, as produced by the Land Registry, shows that there has been a 31.4per cent increase in property values since 2014.

During the same period, the Land Registry say that the average property price in Croydon is up 62per cent. That would make Croydon’s property nest egg worth £47.6million now.

But let’s set that aside, and link to the more conservative flats price index.

Let’s assume all these properties are flats. Even then, whoever buys the share in this financial structure, probably some very wealthy City institution, is going to be handed a gift worth at least £2.6million.

In the past, the council has had dividends from this property portfolio, but with interest rates having increased, the council’s cost of borrowing is a lot higher than it used to be. So theoretically, the cost of carry for the structure is negative.

However, there are real risks, downplayed in the report to Croydon’s cabinet, that the 146 tenants are at risk of a need of rehousing and that rehousing in a tight rental market could be very costly indeed.

Debt will get paid down. But paying off debts does not mean you have to sell cheaply.

This is especially the case when Mayor Perry and the Conservatives are now going to renege on a pledge to inflation-link the qualification income rates for Council Tax Support. Now that inflation is higher, the council says it wants to forget about inflation linking.

Instead of an undertaking that delivers a 10.6per cent increase in Council Tax benefit, the council has arbitrarily chosen a 3per cent figure. That snaffles £425,000 from hard-pressed residents already suffering from the cuts Labour made locally to Council Tax Support last year, just as energy and food prices were galloping ahead.

This time, though, it will be pensioners as well as working families that will be hit.

There are 28,860 claimants of Council Tax Support in Croydon, and 72per cent of single person applicants are female.

Hitting the poor: pensioners will suffer because of the removal of the inflation link to Council Tax support

I still contend that these “savings” on Council Tax Support are a chimera, as demand just gets displaced to other council services, such as from people needing rehousing when they can no longer afford to pay the rent, or when carers have to take on extra work to pay bills and so reluctantly pass on the care of relatives to the council.

There are other areas where the council’s rush to unload assets is failing to maximise the value of those public assets.

The council has started transferring public buildings on 25-year leases at peppercorn rents as “community asset transfers”.

The purpose of this is to limit the council’s costs for things such as maintenance, while preserving the buildings for community users. These are often community users that politicians can be tempted to see as vote-winning opinion-formers or specific vote-holding communities.

But it all means that significant asset values are being lost.

It’s just a few weeks since Mayor Perry’s administration ran up the white flag of surrender over its finances, issuing Croydon’s third Section 114 notice in two years, admitting it would not be able to balance its budget in the coming financial year, 2023-2024.

Now, they appear to have given up the ghost also by claiming it is impossible to get the best price for its assets, or putting other assets at arms’ length.

I appreciate that it’s all very difficult. Another report going to tonight’s cabinet says that even this year’s council budget is running out of control and might be more than £10million overspent by April 1. I expect that the Mayor’s financial guru, Councillor Jason Cummings, might staunch that bleed, admittedly by drawing on contingencies among other measures.

There are ways, though, that the council can recover from its financial troubles. Income flows, asset sales, pension fund management, voluntary community effort and different ways of doing the council’s business are there to be captured.

After all, at the end of the day, it is residents’ money we are talking about here.

It is not acceptable for Mayor Perry to be making Croydon into the highest Council Tax charger in Greater London in return for offering up only a “minimal council”.

Read more: Mayor Perry must get at least £33m for BxB’s Coulsdon flats
Read more: Labour council benefit cuts will hit 20,000 ‘horrendously’

  • Mayoral candidate Andrew Pelling, pictured right, was a Labour councillor from 2014 to 2022, when he was expelled from the party. He has previously been a Croydon councillor, London Assembly Member and MP for the Conservatives

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4 Responses to Perry about to giveaway millions in social housing flog-off

  1. derekthrower says:

    These are all generalisations, which do require some more detail to be really made pertinent to the practical problems being faced by the council. Mr Pelling mentions that the homeless leased property partnership is majority owned by whatever temporary formation of a Housing Association is running it at the time and so whoever is acquiring this asset does not have formal control of the asset. Further many of the properties will have sitting tenants and this all marks down the value of the property asset in real terms. An assumption is made that a private financial investor is also acquiring this. Is this confirmed?
    With regard to the community asset transfers. These properties do require constant maintenance and older properties will require investment to keep up to a reasonable standard of use. As we know the Central Regime of the last decade has been miserly with such investment to keep such assets from disrepair and to be upgraded to current standards. So really further detail is required about which properties are being disposed and the terms on which they are being disposed on.
    As a former member of the Conservative Party Mr Pelling does seem rather naïve about them in practice. No real analysis needs to be undertaken to see that they well always give favourable terms to private investors for taking on such transfers, but in these cases a rather large cherry may be required to get them to bite. In the current circumstances of a deflating property market we may find out that Part Time is optimistic in the values he hopes to receive.

  2. Thank you to Mr. Thrower for taking an interest in the obscure but costly subject of disposals of council interests in 2014 social housing arms length entities.

    Mr. Thrower has misread the article in his opening premise that the council has a minority interest in the structure. The story states that the council has a majority 51.7% stake.

    Mr. Thrower states that all in the article is generalisations which require detail. Twenty-three items of mainly financial detail are provided in the story.

    Tenanted assets paying an income tend to have a higher value unless vacant possession is needed for different use or complete redevelopment which is an unlikely route here for a new investor in this structure.

    The final ownership of the sold assets is not confirmed as the article’s conditionality states. Notting Hill Genesis is the first counterparty and will not be showing quickly whether the interest is passed on to a yield seeking investor. Maximising capital usage to provide as many homes as possible for a 55,000 unit housing association seeking the highest economies of operational scale suggests that the original shared partnership model would benefit Notting Hill Genesis thus making the case for a new external investor. It is possible of course that the story is too kind to Notting Hill Genesis in that, once in majority control of the structure, the housing association could sell on income bearing tenanted undervalued assets for capital profit to others in the sector.

    IC has had another story about a possible sale at a price to be queried to Notting Hill Genesis at Coulsdon’s former Lion Green Road car park.

    Empirical data supports Mr. Thrower’s analysis that “As a former member of the Conservative Party Mr Pelling does seem rather naïve about them in practice.”

  3. derekthrower says:

    Let’s face it, Croydon is in a desperate position and will have to make desperate choices.

    The remedies provided by Mr Pelling are more wishful thinking than practical, but then again he was also a member of the last Labour Council. I do recall in his role as administrator of the Pension scheme he stated that he would consider Brick by Brick as an investment for the scheme if it could provide a return.

    If only he knew from the start what a money pit it was and actively protested against it at the time.

  4. It is really kind of Mr. Thrower to take an interest in this subject.

    The desperate situation for the council does indeed mean that the council must secure the highest value from its asset sales.

    I think that Mr. Thrower has got confused about my interest, as chair of the Pension Committee, in the Pension Fund receiving a highly-geared initially 1 to 40 downside protected play on the value of Croydon Affordable Homes properties. This was decidedly not Brick by Brick. My view was that if the council wanted to make a gift to the Pension Fund that was a ludicrously generous geared play on a strongly bullish property market with no risk on the downside until we reached fully funded status then that was a bargain worth looking at.

    In my on and off time as chairing the Pension Committee with occasional punishment breaks (for voting for seeking legal advice on Labour wanting to ban black music in the town’s clubs and for speaking up at Labour party meetings for a Directly Elected Mayoral system) the peer group out-performing Fund doubled to £1.7279 Billion, up £864.7 Million, the equivalent of £5,963.40 gained for each and every Croydon household. An underperforming 66 % funded scheme became, under some definitions, fully funded and Croydon council tax payers’ contribution to the Fund was cut by £6 million. The fully funded status has slipped subsequently.

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