Council’s homes deal to boost market

Aug 29 2008 by William Green, Paul James, Dan Warburton, The Journal

A NORTH East council is to become the first in the country to buy houses to help shore up the struggling property market.

Newcastle City Council is working to complete the first of a series of planned deals with developers within six to eight weeks.

The homes will then be made available for affordable rents.

And the council is working with building societies to help mortgage holders by allowing them to sell part of their home but stay in it.

Last night experts said the proposals could stabilise the market and maintain the supply of affordable housing.

The news came as the Nationwide Building Society said the average cost of a UK home dropped by 10.5% during the 12 months to the end of August, the biggest fall since 1990.

Newcastle Council wants to purchase 10 to 15 properties on an estate previously earmarked for private sale. The deal will be conducted through its housing arm Your Homes Newcastle.

The commercially confidential plan aims to avoid the “nightmare” of unfinished developments and provide affordable rental homes pitched between social and commercial prices.

Funding is being finalised with £200m available nationally from the Government to buy unsold new homes, although council chiefs say it was insufficient. They may borrow cash against rents from purchased homes and can secure lending at better rates.

Developers struggling to sell homes may also agree to discount prices as other councils look on with interest at the scheme.

Bill Shepherd, Newcastle’s executive member for regeneration and housing, said: “We hope it will be the first of many such interventions.

“The model is mixed- tenure, not creating huge council estates at the moment. The thing we are suggesting is that we have an estate that was up for private sale and buy some of the plots.

“We would be looking to maybe move in and buy a few of these properties to ensure the developer’s cashflow continues and ensure the development is finished, rather than the nightmare of it not being finished.”

A council-backed mortgage rescue scheme potentially involving shared ownership is also being investigated with positive discussions held with building societies – although a national scheme may yet be developed.

Mr Shepherd said: “We need to ensure we have a proper business case to ensure that taxpayers’ money is not at risk.”

He also stressed the need to improve access to debt advice.

Former minister Chris Leslie, director of the influential New Local Government Network think-tank, said banks could not be relied upon to solve the housing crisis and welcomed Newcastle’s plans.

He said: “In terms of anyone actually buying properties, I haven’t heard anyone else being as advanced. It is very positive. I am very keen that we have active councils in the current cycle to ensure developments are finished.”

Mr Leslie said buying homes could be in council taxpayers’ long-term interests by ensuring steady price appreciation and give confidence to other investors.

He said: “Other homeowners across Newcastle should also take heart that the council has confidence as an investor because the council has every reason now to make sure that Newcastle is a great place to invest in.”

The Home Builders Federation said the plans would support firms and maintain supply of social housing.

Regional house prices

Within the North

Page 2: Renting is on the cards