BARRATT HOLMES, housing correspondent, identifies some troubling similarities between the collapse of Croydon’s failed housing company and recent auditors’ warnings over a GLA-owned development firm
Bricking it: London Mayor Sadiq Khan is encountering significant problems over house-building
A housing company established by the Greater London Authority which has received £300million in loans of public money may require a bailout from London Mayor Sadiq Khan’s already stretched budget, after missing its repayments and failing to keep proper records.
That’s the stark warning from GLA auditors. It is one which ought ring a few alarm bells for anyone familiar with the Reports In The Public Interest issued four years ago by Grant Thornton into Croydon Council’s affairs and its failed housing company, Brick by Brick.
GLA Land and Property Ltd owns a vast amount of land in Docklands and on the Greenwich Peninsula, prime property for development into tens of thousands of homes, but where projects have long been stalled. The fund — which is one of the largest public sector land owners in the country — is a commercial subsidiary of GLA.
The story was uncovered by London Centric, the capital new capital news website, which defied City Hall secrecy to “unredact” key paragraphs from an official report published on the London Mayor’s website about the flagship development fund.
The company may require financial “support” from Mayor Khan’s tax-payer funded budget to fully repay the loan, according to an internal auditors’ report, according to the Financial Times.
GLA Land and Property was set up in 2012 when Boris Johnson was London Mayor.
Land banks: the massive Thames side sites owned by GLA Land and Property, but where building work has only progressed very slowly
It owns more than 1,500 acres of real estate. The commercial vehicle was created from the merger of previous public development bodies and inherited the £300million liability owed to the GLA when it was formed.
The money was due to be repaid from 2018, but GLA Land and Property failed to make any payments over successive years. It was late repayments from Brick by Brick that forced Croydon Council into effective bankruptcy in 2020.
GLA Land and Property is staffed by GLA officials. Mayor Khan’s chief of staff David Bellamy and Tom Copley, the deputy mayor for housing, sit on its steering group.
When Croydon Council established Brick by Brick as its housing company in 2015, it staffed the fledgling development company with council employees and lent it £200million. Senior council directors sat on its board of directors, creating significant conflicts of interest, as confirmed by the recently released Kroll Report.
Concerns over GLA Land and Property were raised by City Hall’s internal auditors last year, who said they were “not provided with evidence” why repayments were repeatedly missed.
“No supporting documentation to formally agree the non-repayment of the loan was provided,” the report said. It added that “minutes of meetings are… not taken showing any decisions made”.
This has further echoes over the Brick by Brick scandal, when company directors and senior council execs withheld financial information from elected councillors, even doctoring reports from outside experts.
At City Hall, their 2023 audit report warned: “There is a risk that decisions made on the loan have not been formally agreed, documented and processes are not in place for the management of risks.” Sound familiar?
GLA Land and Property said it paid £33.3million towards its outstanding loans in March this year, and the auditors’ report from this year said some management improvements had been made, including the taking of minutes. Which is nice.
London needs to double its annual housing supply in order to hit its targets, even after the new Labour government reduced the capital’s target by 10%.
The GLA told the Financial Times that 13,460 homes were completed within GLA Land and Property’s portfolio from 2016 to March of this year.
It added the repayment schedule for the loan was revised “due to the prolonged national economic downturn that severely impacted property and construction industries across the UK”.
Our Kroll Report archive…
Click here for 260 pages of the Kroll Report in all their glory – after all, you paid for itRead more: Negrini doctored specialist reports and withheld finance details
Read more: After four-year delay, council to submit complaint reports
Read more: Police drop all investigations into council’s financial collapse
Read more: CEO Negrini’s long campaign to shut down Inside Croydon
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The obvious lesson is that we need to stop using private sector models in the public sector. This Thatcherite idea that all public sector is bad and all private sector is good has been shown to be wrong so many times and with dreadful consequences.
As we’ve seen in Croydon, the use of “commercial subsidiaries” just allows senior managers to pay themselves a fortune while building up massive debts that are left to the rest of us to pay off when everything falls apart. Those responsible then run off and just get another job working for someone else.
If we build social housing then they can be built and rented out straight away to start generating an income back into the public sector. This avoids being affected by changes in the housing market and you aren’t left with a stock of properties that end up being flogged off at rock-bottom prices just to get some money back into the system. It also means that we will get the type of housing people actually need, rather than more tiny flats built just to make a profit.
The public sector should be given back the power and resources to build social housing directly. The public sector doesn’t do everything right but all the accounts will be public and people can be held directly responsible for their actions. This is how we successfully built masses of affordable proprties through most of the 20th century, there is no reason why we can’t do it again.
Not sure you have emphasised how much of a Boris Johnson legacy project this is.
From the era when the Chinese were courted by the Conservatives to provide investement in national infastructure such as nuclear and transport, which they spend all their time backtracking from now. Further this area on Docklands as with most things with Boris Johnson has the deep stench of corruption around the funding arrangements provided to incentivise the Chinese to come into this web of deceit. No wonder there is not much transparency around it as they hope to unravel the huge losses in this hopeless piece of business conducted by the utterly incompetent.
You really need to have a chat with your old pal Michael Crick about it.
https://www.channel4.com/news/boris-johnson-london-propery-deal-china-albert-dock