Council could pull plans to create housing company

An item to be discussed at this week’s cabinet meeting – ‘Feasibility of establishing a council owned housing company’ – will see senior councillors debate whether to continue to put together a business case for a housing company.

The housing company, in essence, aimed to build more homes via a private company. Figures show the borough requires 27,873 properties built by 2039 but only has enough land to deliver 9,158 – leaving a major shortfall of 18,715.

Unprecedented events – including the coronavirus pandemic, the invasion of Ukraine, and the cost of living crisis – are cited as reasons for the council to exercise a “prudent” attitude to the housing market.

An extract of the cabinet report reads: “Many housing developers and housing associations are now re-visiting their business plans and scaling back development activity due to the levels inflation and the volatility of uncertain market conditions.

“From a council perspective it is not considered prudent to enter this market as these market conditions are not conclusive to delivering a validated business plan with acceptable levels of risk.”

The idea of a council owned housing company, first discussed in February 2020, aimed to find “innovative ways and opportunities to

maximise housing delivery” in the borough.

Sandwell council had partnered with Savills to create a business case detailing the benefits and risks the local authority faced by creating a housing company.

Cabinet papers suggest the initial focus of the business case was to build homes on Sandwell owned land to “diversify and intervene with the housing market”. The council had ambitions to “hold” properties long-term and rent on the market via its housing company.

But the council admitted they do not own “an adequate pipeline of sites” – or land –  to create enough homes to justify the costs of its own housing company.

The council had also considered acquiring vacant office blocks and large supported housing to redevelop into rented accomodation, but all options were “either borderline viable, provided only marginal gain or gave a negative overall impact to [Sandwell council] in early years”.

Council housing companies have had mixed success across the country.

Some have had great success – Barking and Dagenham council’s Be First has been lauded for its quick housing programme.

Liverpool city council’s Foundations, which promised to build 10,000 homes but was mothballed 18 months later after delivering just 18. The company also recorded losses of £700,000.

Brick by Brick, Croydon council’s housing company, promised 500 homes a year in perpetuity with the backing of £200 million, but only 460 homes were ever built. The money invested, as well as a myriad of other issues at the council, led to the south London authority declaring itself bankrupt in 2020.

A study earlier this year by the Home Builders Federation suggested housebuilding in England was set to fall to 120,000 a year – the lowest level since the Second World War.