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Will Government announcement signal rush of council-owned properties for sale?

11th December 2015

Last week’s Spending Review brought with it an announcement that local authorities will be able to sell £4.5 billion worth of government land and property, creating space for more than 160,000 new homes, and implement a new commercial approach to land and property management.

In addition to this, the government also pledged to support local authorities to deliver more efficient and sustainable services, by allowing them to spend up to 100% of their fixed asset receipts on the revenue costs of reform projects. The government argues that, instead of local authorities holding assets that could be made surplus, councils will be able to sell them and reinvest in their services.

With the ability to spend 100% of receipts from capital assets it will be interesting to see how individual local authorities view the retention of assets over the ability to ease the financial squeeze central government is imposing upon them. Some commentators have said this solution to help boost local authorities’ balance sheet is not a long-term solution to the problem.

This isn’t a new idea either, councils have long been selling off their property assets to boost income – Birmingham is probably the most recent and famous example of this. After getting stung with a hefty legal bill for equal pay claims the council had to resort to selling off some of their ‘family jewels’ – the NEC Group for example. This sale of the arena and conference halls to PE house LDC generated a much-needed £307m.

However, with over £225 billion in assets held by local authorities, inevitably, potential development opportunities will arise for Housing Associations and developers either as stand-alone projects or in collaboration with local authorities.

There is no doubt that opportunistic developers and Housing Associations are already speaking to local authorities on these possible opportunities.

From the local authorities’ point of view, an income generating partnership such as a mixed use development which incorporates residential and a few retail units would be preferable rather than a quick sell and capital lump sum.

Further details still need to be ironed out – the government has said that the detail will be set out by DCLG alongside the Local Government settlement in December. Developers would be well advised to pay close attention to these details.

The full article was published online by PrimeResi on Thursday 10th December 2015.

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