Is this £85.6m flat purchase a 'Bargain for Brent'?

 

Developer's CGI

The two blocks ear-marked for Brent

There's an interesting article in the current New Statesman by  Will Dunn, entitled the 'The end of the housing delusion' that has many interesting insights, not least that the world's largest ratigs agency, S & P Global Ratings, has warned that property in London and the South East is over-valued by up to 50% and that there will be 'sticky, gradual decline' in prices.

The huge gap between almost static weekly pay and the value/price of homes has meant a financialised housing market creates more space for money than for people.  The decline in the value of state and private pensions means that houses are seen as retirement assets. With an expectation that the house will rise in value older people will hold on to them even when many of the rooms are empty. If prices plummet, a long over-due correction, they will hold on in the vain hope (and expectation) that that prices will rise again.

Dunn quotes Danny Dorling, 'it's such a large amount of money, that people are't in a position to accept that drop in their perceived wealth..We're just not ready for a fall that's a real fall, where it doesn't return again. And the more we don't accept the fall, the sharper we make the fall that actually occurs.'

Dorling remarks that we actually have more space than we have ever had before in the form of empty bedrooms.

So it is these potentially very difficult market conditions that Brent Council has been making acquisitions from private developers, either via Section 106 agreements or straight purchases. The latest is on the site of the former Euro-Car showrooms, bordered by Wealdstone Brook, Fifth Way and Fulton Road.  This to be approved at tomorrow's multi-agenda item Cabinet Meeting.

The aim is to buy a 999 year (less 3 days) lease on 294 of the 759 homes on the development. For this they will pay £85.6m (including fees but excluding Stamp Duty Land Tax and VAT) with expected completion in July 2026.

They say this works out at an average price of £290k per home.

The original Section106 proposal has been changed to remove Shared Ownership and change the tenure to London Affordable Rent and London Living Rent as below.

 The officers' report states:

From a housing demand perspective, whilst there is greater demand and longer
waiting times for larger family sized accommodation, the Council is always ableto allocate 1-bedroom homes. Additionally, the location of Fulton Road in
Wembley Park makes them more desirable. There are currently 799
households living in Temporary Accommodation that have a 1-bedroom need.

This is higher than 2-bedroom demand at 692 and 3-bedroom remains the
highest at 1,096. This highlights the benefit that Fulton Road as a development
will bring in meeting current housing demand.

London Living Rent (LLR) is an affordable housing product as an entry level
option to home ownership. Rents are set by the Greater London Authority (GLA) and are based on average incomes at a ward level. The intention for LLR is thatafter 10 years, the tenant would have benefited from paying a lower rent and build up savings to then purchase their home, possibly as a shared ownership product.

 

These are the latest LLR figures for Brent wards. The development is in Wembley Park ward:

 

See LINK for details on how these rents are worked out. Service charges will be in addition.
 

 The London Living Rent information for local authorities states:

Rents are below market rates so that the tenants are supported to make a regular monthly saving towards their deposit. At the end of the tenancy, they have the option to buy the accommodation they have been living in or to use their savings as a deposit on a different property of their choice.

However Brent wants to lift the commitment to enable  tenants to buy the LLR accommodation. Given what happned with 'Buy Your Own council homes this may be a good move, but may not appeal to potential tenants:

However, the GLA allows Local Authorities to request that LLR stays as rented accommodation in perpetuity meaning it would be classified as ‘Alternative Affordable Homes’. If the Council can secure permission for LLR in perpetuity, then the Council will be able to continue utilising these homes to deliver more accessible affordable housing. The Council’s intention is to lease Block D to a Council owned subsidiary to enable delivery of the 118 units as London Living Rent... The Council’s intention is to lease Block D to a Council owned subsidiary to enable delivery of the 118 units as London Living Rent.

The Council has submitted an application to the GLA for grant funding to complete the purchase of these homes. As this purchase is largely a S106 package and the overall percentage of affordable housing across the site is 40% (based on habitable rooms), then the grant available is capped at £28k per unit. Subject to GLA approval, this means that the total grant requested for this scheme is £8.2m.

 
In order to access this grant, the Council is required to enter a grant agreement with the GLA and delegated authority is bought sought for to the Corporate Director, Resident Services to enable this.

Given recent warning from the Council about some of its in-fill schmes, and proposed changes in Tenure to  meet increased costs there is reference in the report to a wider financial viability or financial risk assessment.

 

It appears ward councillors will only be consulted in the future and not before it was taken to Cabinet:

 

Consultation with Ward Members and Stakeholders

This paper will be circulated to all Ward Members.