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London council to set up REIT and lease back 300 properties in bid to boost temporary accommodation
Hackney Council is looking to lease 300 properties from a newly established real estate investment trust (REIT) to boost its portfolio of temporary accommodation.
The east London local authority has approved plans worked up with property consultancy Chalkhill Partners to rent the homes from the vehicle that is yet to be formed.
Under the proposals backed by councillors, the deal would see the REIT acquire 165 three-bed homes, 110 two-bed properties and 25 one-bed dwellings that are within 75 minutes of Hackney Central Station via public transport.
The homes would be refurbished to an agreed standard and offered to the council within two years. They would remain a part of Hackney’s temporary accommodation portfolio for 10 years.
The plan is expected to result in savings of 60% compared with nightly spot purchase accommodation.
According to council documents, it is expected that UK pension funds will pump cash into the REIT, which will be set up by Hackney Council and then operate under its own entity.
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Jackie Moylan, interim finance director at Hackney Council, highlighted in the report that the average monthly rent for a two-bed home in the borough last year was £2,600, while the maximum housing benefit that can be claimed is under £1,600.
“While Hackney has established the largest in-house temporary accommodation hostel stock in London, and continues to actively explore opportunities to expand our portfolio, this remains insufficient to meet the level of homelessness demand,” she added.
This has led to more than 500 households being placed outside the borough, with some as far away as Peterborough in the East of England, Ms Moylan explained.
Meanwhile, almost 200 properties currently used for temporary accommodation have been requested back by private landlords.
The report stated: “The proposed leasing arrangement set out in this report will help to address the growing gap in supply as other landlords exit the temporary accommodation market.”
The plan comes as the latest figures showed that London councils were spending £90m a month on temporary accommodation last year.
Sade Etti, deputy cabinet member for homelessness and housing needs at Hackney Council, said: “We would, of course, prefer to offer every family who needs it a genuinely affordable permanent home here in Hackney, but relying on temporary accommodation is the reality in a borough on the frontline of the housing emergency.
“In Hackney, we’re tackling the homelessness crisis head on, including upgrading our in-house temporary accommodation and bringing our housing benefits and homelessness teams together to help prevent risk of homelessness at the earliest stage.
“Yet, rising rents and growing competition are making securing and retaining affordable properties increasingly challenging. This agreement will guarantee a sustainable supply of good standard temporary accommodation nearer to Hackney and people’s support networks, helping us support the growing number of households coming to us needing help with housing.”
A REIT is a listed fund that buy will properties and then lease the homes to local authorities and charities to provide accommodation for homeless people.
But they are not without their own issues. In December, Home REIT confirmed that its properties were worth almost 60% less than the £977m it paid for them, as it struggled to collect rent and seen charity clients go bust in the past 12 months.
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