Massive Council Losses
PAUL MCLAUGHLIN reports that ‘bewildering’ housing decisions by the former council will cost Hastings residents dear.
22 Wellington Square
Hastings Borough Council is facing losses of hundreds of thousands of pounds on property investments. At last Monday’s Cabinet meeting (22 July), the new Green leadership of HBC disclosed details of commercial deals signed off by the previous Labour administration. Legal action is being taken to recover debts of more than £400,000 from the Hastings Housing Company, while the council faces the loss of more than £200,000 on a property in Wellington square, bought to provide temporary accommodation.
The Hastings Housing Company (HHC) was set up in 2017, wholly owned by the council to buy and sell properties and to manage them on its behalf. HHC purchased several properties across Hastings with capital loans from HBC. These included mixed residential and retail units and houses in multiple occupation. The council also extended revenue loans to the company to enable it to establish itself and pay running costs while the business got up and running. In total, HBC allocated over £5,489,398 to the company.
On the surface, the investment has been successful. The current portfolio value of £6,518,600 shows a healthy profit of over £1 million. However, it was reported that the HHC has fallen behind on interest payments due to HBC and that the letting agent – Lets2share – is currently in arrears to the tune of £422,405.
The Cabinet was told that the level of debt owed has been growing steadily despite regular engagement with the letting agent, who was due to make monthly payments of £22,875 to HHC; however this money had “rarely been received”. Councillor Glen Haffenden, the Deputy Leader and Housing and Community Wellbeing Portfolio Holder, told the meeting that the letting agent had received rents from residents but had failed to pass this money on to HHC – and ultimately to HBC.
In view of the problems with the letting agent, in June this year HHC decided not to renew the leases but to give them back to the council. HBC’s Legal Department is now pursuing the debt owed.
Paul Barnett, who is no longer a member of the Cabinet but was Council Leader from 2022 when the arrears were mounting, said there was a clear conflict of interest between the council and the housing company, with councillors and council officers having both a public duty to HBC whilst also having a fiduciary responsibility as company directors of HHC. It was, he said, an example of how not to do things. He believed it would be in the best interest of HBC to wind up the housing company with the properties sold and the money paid back to cover outstanding loans.
Cllr Haffenden was critical of the poor management of HHC, but said he was reluctant to call for its abolition as the sale of properties could leave vulnerable residents homeless. He welcomed the Cabinet’s adoption of a recommendation for a review of the housing company, with regular financial reports on its performance.
22 Wellington Square
The Cabinet went on to discuss the purchase of 22 Wellington Square in February 2019. The Grade 2 listed building was bought for £612,000 for use as temporary accommodation, amid ambitious plans to include its renovation as part of the Town Deal programme.
The price paid by the council at the time was above market value, but the purchase went ahead on the basis that it was worth more to HBC due to the potential savings that would be made to the temporary accommodation budget, given that the council already had residents living in the property.
It soon became clear that the plans for the building were unrealistic. The intended renovation as a Town Deal project was shelved due to the complexities of balancing the restrictions associated with listed buildings with the requirements for social housing at a value for money price. Without the investment, the property, already in a poor state of repair, continued to deteriorate. It is no longer being used for temporary accommodation and now requires significant refurbishment works just to bring it up to the council’s ‘Fit to Let’ standard.
The council is currently spending over £30,000 per year simply to maintain the building, and a further £794,000 would have to be found to retrofit the property. In addition, there would be ongoing salary and property management costs to incur before the building could be re-let.
Councillor Darren Mackenzie, the Finance, Assets, Risk and ICT Portfolio Holder, argued that it was not cost-effective nor feasible for the council to fund the repairs and the on-going maintenance costs and that therefore the property should be sold. He said initial advice from auctioneers suggested the property would sell for between £410,000-£420,000. This sum, if realised, would result in the council losing over a quarter of a million pounds on its initial investment.
Council Leader Julia Hilton was ‘bewildered’ at the original decision to buy the property in 2019. She said it was costing HBC a lot of money, and its disposal would divest the council of on-going maintenance liability. She hoped the council would learn lessons from the experience, and that income from the sale would be better invested in more accessible, higher quality and cost-effective accommodation to meet local housing needs.
Whilst years of chronic underfunding and rising demand for services have left councils across the country struggling with severe financial pressures, it is argued that decisions such as these helped to push HBC to the verge of bankruptcy.
Housing Statistics
Bad News
Out of 73 local authorities in South East England, Hastings rates as the 16th ‘worst’ for households on the Housing waiting list, according to construction firm Mobile Annex. Their figures, based on the ‘Local Authority Housing Statistics dataset,’ show that there are currently 1,294 households in the borough on the housing waiting list. Across the entire South East, the figure is 118,000.
Good News
Of all local authorities in the South East, Hastings comes third in a table of new housebuilding. Unfortunately, the table only charts the percentage increase in the number of new build house completions. But on that basis, the borough saw a magnificent 100% increase in housing construction. However, the increase was from the very low base of just 10 last year to a pretty unimpressive 20 this. If the table were for the actual number of completions, Hastings would come almost bottom. Canterbury, Dartford and Tunbridge Wells managed 600 or more new homes, while the front runner appears to be Arun with 930. A full 910 more houses than Hastings achieved
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Just over a year ago I tried to question Hastings council about a private LTD housing company they had created and actually registered at the councils address. On the face of it, the idea was clever if it had been managed by qualified housing professionals. I contacted the directors listed as in control of the LTD company. The response was not to answer questions and simply stick to, this company is under review.
I put questions to the council itself, the response given was far from what the actual questions were? I tried a freedom of information request, another dead end. I simply wanted to know how a LTD company had got the finance to invest millions of pounds and I wanted to know if that money came from the tax payers wallet? I wanted to know which Housing Qualifications those running the LTD company held, were any working for the private company and the council at the same time? I have also never been given a clear answer on this. I went to Hastings council and asked at reception if I could talk to any employee in the LTD Housing Company, I drew a blank, the reception staff seemed to not know of its existence, despite it operating from the same building. I also wanted to know how buying a pub would help the serious housing shortage in Hastings?
I absolutely admire the front line, grass roots housing officers in the council, to call them dedicated, professional hard working players in housing is an understatement. I had a back and forth emails conversation with Hastings Independent Press regarding my interest in this LTD company. Lets be honest here Independent Press, you responded with a response that was highly supportive of what was going on? I still have the email. I responded with, (summing up) I am going to keep looking into this, it does feel odd? Now in less than a year the facts or at least a number of them are here in the Independent Press. I still regard the concept of the council creating a Housing Company as a good dynamic approach capable of having a positive impact on housing availability and I stand by my claim, for it to succeed the project will need qualified Housing and Development staff managing it. When I say qualified, I mean holding a B.A Degree in Housing and not the quick fix housing courses offered by the Institute of Housing. What qualifications were team members in the LTD company holding in relation to Housing? This remains unknown?
The letting agent selected by the council specialises in Working Professional Lets. WHO CHOSE THAT LETTING AGENCY? I am very interested in the activities of local letting agencies, I did in depth research, I created a report as to why the criteria they use when assessing a person wanting to rent a home actually contributes hugely towards creating homelessness and places a crippling burden of homelessness applicants onto the councils duties. I am capable of producing a counter strategy which if applied will significantly reduce the number of applications for homelessness cases and even move those in temporary homelessness housing into suitable private rented or Housing Association properties. Nobody is interested!
I am not going to quit! I am currently going through the process of registering a non-profit LTD Community Engagement Company. The first project for the LTD CIC will be to bring communities on board and reverse housing access and provision failures. I will do this with the aim of supporting the council, not conflicting with it. Housing creation and management is not about throwing lots of money at housing issues so that such money gives a temporary band aid effect. It is all about how the acquisition, use and management of private rented and social housing is done.
Housing is at the core of all successful communities. Hastings and our borough is a collection of unique communities, add them together and we are a huge community. Every person in our communities is entitled to suitable housing, housing is a universal human right.
Buying multi-floor buildings to convert into small units is fraught with difficulties. To try and do that with listed buildings is usually a complete no go area so whoever made such decisions can only be incompetent.