Poplar HARCA snubs Council proposals as it auctions off homes

Social housing provider Poplar HARCA is auctioning off 43 of its existing homes so it can buy more new homes.

According to Poplar HARCA the sums add up, for others the arithmetic is plain wrong. The auctions take place today Monday 13th February and the new homes will be available in a years time.

To make matters worse Poplar HARCA seems to have deliberately snubbed offers from Tower Hamlets Council to purchase the housing stock which is surplus to requirements.

Poplar HARCA owns 9,000 homes across the borough.

Savills Auctions Lot Details
Savills Auctions Lot Details

1.7 new homes for every home sold

In a press statement released to LW Steve Stride, Chief Executive of Poplar HARCA, stated that Poplar HARCA is selling harder-to-let, and more expensive to refurbish empty properties at auction as part of a normal asset management . For every property sold, we anticipate buying 1.7 new homes due to the discount that can be achieved from affordable housing requirements (known as Section 106).

Mr Stride also says that “We have been liaising with Tower Hamlets Council and the Mayor about the strategy since July 2016.” This dialog came to a screeching halt when Mayor Biggs staff found out about the impending home auction through seeing them on an auction site without the courtesy of any communication from Poplar HARCA.

The full text of the letter from Mayor Biggs to Steve Stride can be seen below and the Mayors’ anger is clear.

Here are the option put forward to Poplar HARCA:

  • One proposal was for the Council to lease the homes from Poplar HARCA to use as temporary accommodation.
  • Another was the Council buying the leasehold or freehold either directly or through an Arms Length Management Organisation (ALMO) like Tower Hamlets Homes.
  • A third proposal was the properties being obtained by two new social housing organisations announced at Cabinet last week, one  a Council-owned company and the other a Council-sponsored charity.

It seems none of these options was right for Poplar HARCA.

According to Poplar HARCA the Council’s offer did not come through until Friday 10th February but it could provide no reason for not informing the Council of their imminent disposal other than that it was not certain the Council would be in a position to purchase until Friday.

So why not sell these houses to the Council?

“Our regulator, the HCA (Housing and Communities Agency) only granted us permission to sell the properties on the proviso that we achieve maximum market rate for them (in order to gain maximum return to put back into building new homes) which is why we have taken the decision to sell at auction,” is the Poplar HARCA answer.

Mayor Biggs is of the opinion that all of the homes auctioned off by Poplar HARCA will be permanently lost to the social housing sector as they will be snapped up, renovated and turned into buy to let investment properties for private individuals.

Letter from Mayor Biggs to Steve Stride 09 February 2017

Dear Steve

I am writing about Poplar HARCA’s proposed sale at auction of around 50 homes in Tower Hamlets.

I understand that you spoke to Council officers several months ago about your plan to raise capital funding for new developments by selling existing properties that are vacant. My staff responded by offering two options for the Council to intervene.

Firstly, the option of the Council leasing homes from Poplar HARCA to use as temporary accommodation, providing you with a higher rental income from a social tenancy, enabling you to reinvest the surplus or fund additional borrowing. Whilst you have agreed to this approach in some cases, it is very disappointing that you do see this as a solution for any of these 50 homes.

Secondly, the option of the Council buying the long leasehold or freehold interest, either directly into Council ownership or through a subsidiary or arms-length company. This would mean generating a capital receipt to support your development plans whilst ensuring these precious homes remain in a form of public sector ownership.

The Council’s Director of Housing and Regeneration spoke to you and wrote to you several times over the last three months to let you know that we are in the process of setting up two new organisations, a Council-owned company and a Council-sponsored charity, both of which would be interested in buying any Poplar HARCA homes you wanted to sell. At Cabinet on Tuesday this week I approved a report to set up these two new housing organisations and provide finance for acquisitions to start as soon as possible. This is not a hypothetical possibility – we are ready to start acquiring now.

So I am writing to strongly urge you to withdraw all the homes currently up for auction and engage in discussions to sell these 50 homes to the Council or one of our new housing vehicles.

I am particularly annoyed that the first news we had of these homes being put up for auction was reading the auction notices, and that there was no courtesy of a written correspondence with the Council, despite our offers to acquire homes from you if you needed to sell them.

You have not provided the Council with any compelling evidence that there is an urgent financial imperative to auction these homes at this stage. The likelihood is that the majority would be bought by buy-to-let investors, then rented out at full market rents, with these scarce public assets lost from community ownership permanently. I want to seek your reassurance that you will take the opportunity to work with me to prevent this happening, and I have asked my Chief Executive to meet with you to discuss this.

Yours sincerely,

John Biggs,
Executive Mayor of Tower Hamlets


LW Comment

Whatever the rights and wrongs of Poplar HARCA’s property auction the clash with Tower Hamlets Council is a symptom of the current changes in the social housing sector.

At one extreme is the case of Genesis Housing Association which manages around 33,000 homes which announced in August 2015 that in future it would only build homes for sale, for rent at full market rates or for shared ownership and would consider selling or raising the rents on its existing social homes once they become vacant.

In contrast to Genesis HA abandoning its core objectives around one third of local authorities in the UK are doing the smart thing and establishing what are in affect their own house building companies so they can stay true to their values.

Tower Hamlets Council is one of these authorities. At Cabinet last week it was agreed to establish Seahorse Homes Limited and Mulberry Housing Society, a Community Benefit Society. Full details can be found here. (PDF)

For further information

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