Where's The Get Up and Gove?
Wednesday 1st June 2022
By Patrick Bullick
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It’s my observation that most ex-Council flats, sold to Council tenants under Margaret Thatcher’s Right to Buy scheme, are now owned by private landlords.
In turn, the vast majority of these flats in Council-owned buildings are let in the Private Rented Sector to those who are being paid Housing Benefit by the very same Councils.
This is clearly a nonsense. Yet the solution is simple.
Many private landlords in this situation, are individuals who can no longer off-set the interest on their loans before tax and therefore find the investment less profitable than it was when they bought them. Or they may simply be coming to retirement and wish to pay off their loans and put their cash into a more liquid asset class.
Either which way, it would make sense for the Local Authorities to buy back those flats which are already within buildings they manage.
In conveyancing terms, nothing could be easier than handing back the keys and title deeds to the Freeholder of a building in exchange for payment. Plus, there would be no sales marketing costs for the landlord.
Councils could have a scheme to buy back these flats at 90% or even 80% of the market value.
I believe many landlords would see this hassle-free route out of their investment as worth a discounted sale price.
Local authorities are able to access preferential loan rates from Central Government for investment purposes. They could buy back the flats which are already within their buildings. Rather than paying Housing Benefit to the tenants they could use those Housing Benefit funds to service the debt.
The tenants would then become Council tenants and could pay a substantially discounted rent - in the old-fashioned way. Their rent could also contribute to Council costs.
Overall, the cost of servicing the debt on the loans should be less than the Housing Benefits currently paid, so the taxpayer will save money.
UK Housing Benefit expenditure is down slightly but still over £17 Billion per annum.
By this mechanism, the Council would be buying into an appreciating asset, using cheap debt and saving money which could be used for other housebuilding projects.
Pre-Corona Chaos, a friend and I had a coffee with the, seemingly sensible, RBKC Deputy Leader - Kim Taylor-Smith.
He liked the idea but said the issue would be motivating local authorities and Central Govt. to redirect funds in this way. Civil servants like a status quo.
I cannot pretend to understand the exact dynamics of Local and Central Govt funding mechanisms, let alone how to effect change quicker than a snail's pace - but I know a man who can.
Over to you Michael Gove.
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