Councils’ property investments are ‘gambling’ with public money

 

Councils have been borrowing money from the government-funded Public Works Loan Board (PWLB) at low rates and then investing it in commercial property ventures for higher returns.

In response to a Freedom of Information request by Local Government Chronicle (LGC), 94 councils said they had bought property since 2010 purely to generate income, and 37% of these admitted they had invested outside of their area.

Around 20% of the 94 councils said the property they owned outside the area amounted to £10m or more, although several of these said it was “part of the council’s historic investment property portfolio”, not new investment.

For example, Surrey County Council has spent £186m, which is 78% of its total investment properties, on property outside its area, and Mole Valley put £10.8m into an Asda that was almost 200 miles away.

Bridging the gap

After a 37% cut in funding to local authorities between 2010 and 2015, councils have been trying to make up the shortfall in a variety of different ways. Southampton City Council’s head of capital assets Mark Bradbury supports the outside investment.

“If a business goes bust [in your area] it’s not just the rent that you lose, it’s the council tax, business rates, the disposable income of people who worked there. Investing beyond your boundaries is an obvious thing to do as part of a balanced portfolio.”

But many warn there are inherent dangers in the strategy. Liberal Democrat leader Vince Cable has said that the fact councils are investing in commercial property in other parts of the country is “shocking”.

“Local authorities have a long and inglorious history of gambling in financial and property markets,” he said, referring to the 1980s when a number of councils got into financial trouble after betting on interest rates.

He added: “When they are massively constrained in what they can do around council tax – and indeed commercial rates – they are trying to prevent even deeper and more damaging cuts by taking these unorthodox measures. In some cases they may succeed, but there is a very high risk of bankrupting their local authorities. It does suggest a certain degree of desperation.”

Highgrove Mews

High Net Yield Freehold Houses

  • Commutable to London (27 mins to central Paddington station)
  • Rental demand extremely strong with large industry presence in Reading
  • Freehold with 4% net yield

£284,955 - £457,000

St Petersgate – Stockport Manchester

New Launch - Stockport Manchester, apartments from £160,000

  • Discounted launch prices from £160,000
  • Excellent transport links with 3 trains per hour to London Euston and only 9 mins journey to Manchester Piccadilly
  • Experienced development team

Assured Rent Housing Association Leases

Assured Rent Housing Association Leases

  • Assured rent & no rental voids
  • Tenant damage cover & newly refurbished inline with requirements of a corporate sitting tenant
  • Free property and lettings management

From £62,000

Emerging Birmingham Commuter Town With Properties From Just £104,000

The emerging Birmingham commuter town where properties are selling in an average of just 24 days

  • A collection of 62 two bedroom apartments and 28 one bedroom apartments.
  • DE14 is one of the fastest selling postcodes in the West Midlands.
  • 23 minute train journey into Birmingham New Street Station.

Properties from £104,000

Mill, Stockport

The Northwest's emerging property hotspot

  • Discounted off-plan 2-bed prices from £162,000
  • Completion date - Q4 2021
  • Rental yields - 6% plus

Discounted off-plan 2-bed prices from £162,000

South Central – Birmingham City Centre Apartments

Highly anticipated 28 storey launch in Birmingham City Centre with an impressive roof garden and communal facilities.

  • 154 units across 28 storeys
  • Residential multi-media community room, gym, roof garden and sky cinema
  • Excellent future connectivity via the metro system to other key transport hubs and locations around the city

from £205,800

ba-

Talk to us

Speak to our UK property experts today: 

+44 (0) 333 123 0320

Open from 9am-6pm GMT

+852 9865 4446

Open from 9am-6pm HKT

Stamp Duty Calculator

.

Unlock members only investment opportunities and full development details. Join now – it’s free, quick and easy.

Login

Not a member? Sign up for free

risk gambling

Councils’ property investments are ‘gambling’ with public money

Example

By submitting your details via this online form you agree to be contacted via email/phone/SMS by Direct Marketplace Ltd t/a BuyAssociation in relation to property investment and property developments . We do not share your personal details with third parties.  To view our full Privacy Policy click here.