A local council is to set up a profit-making property company, investing in, renting out and managing residential and commercial properties both inside and outside its own borough.
Reigate & Banstead Borough Council in Surrey says the aim is to help plug the council’s future funding gap caused by the termination of government grant.
The council’s executive agreed to set up the company at their meeting last Thursday.
While a number of councils have attempted to run their own letting agencies – including some that are not-for-profit – this venture goes well beyond that and is thought to be a first for such an overtly commercial property-related venture to be run by a local authority.
Cllr Mrs Natalie Bramhall, executive member for property at Reigate & Banstead, said of the plans: “This is an ambitious vision but one which will help us generate a valuable ongoing income stream for the council to help off-set the cessation of our government funding.
“Our government grant has reduced by 45% since 2010 and is set to end by 2017/18.
“We have so far managed the changes without cutting services by making efficiency savings and looking for new opportunities to bring in income.
“However, if we are to become financially sustainable by 2018 it is essential that we generate additional, secure sources of ongoing income, such as rental income from property assets.
“Setting up our own property company will make it quicker and easier for us to respond to opportunities in the fast-paced, competitive property market in which we cannot currently compete.
“For example, under the Housing Act we cannot as a council invest in and keep residential property because we cannot grant shorthold tenancy agreements.
“To be able to do so would enable us to provide much-needed new homes for our residents and provide a secure source of rental income.
“It also means that we would no longer be restricted to act within our borough borders and can take advantage of opportunities that bring the most benefit, wherever they are.”
The company will be a commercial trading company wholly owned by the council. It is expected to generate a minimum of 6% return on investment.
New acquisitions are expected to include a mixture of residential, offices, industrial and retail properties.
Some of the council’s existing assets will be transferred to the company.
Comments (4)
So nice to know where the council tax payer’s money is being spent!
Has the rules for Local Government changed then. I recall (it was many years ago that I last looked) that councils cannot use public money to run commercial ventures?
So a public funded council is setting up a business to compete with private letting/estate agents. How is that fair?
Letting agents will be paying the council to compete directly against itself. Business rate rise? sure thats to pay the new council run competition to set up – what a great idea.
Perhaps the council should set up a local sandwich shop funded by the public to sell sandwiches in the high street m sure that will bring in extra revenue as well.
The reason the council dont have enough money is becasue they overspend not becasue they arnt being paid enough! They are there to provide essential services as is the govenment they have become bloated and wastefull becasue they are not spending their own money.
I run an efficent and good letting agency, I pay for my own pension, I pay my staff and business rates but its my money that is running this place if I dont run it successfully for my staff and clients I go bust.
Councils should keep out of direct competition with its business rate payers.
East Cambridgeshire District Council are doing the same thing in the guise of ‘Local Authority Trading Company’. They have a CEO for this venture on, we understand, 6 figures. A planning permission was achieved recently (surprise, surprise) in a contentious location owned by the DC after government rejected a plea to call it in by local residents. Not sure how I feel about this, but I’m not 100% sure this is the correct way to plug the funding gap. Conflict of interest and public funds being at risk are just a few points that spring to mind.