Westminster Council plans to sell 175 Council flats, at £13 million less than they are worth, to households earning over £60,000 a year.
Labour Councillors have asked Westminster Council if they think it makes economic sense to sell hundreds of Council flats at millions of pounds less than they are worth to households earning over £60,000 a year. Under new Government Right to Buy (RTB) changes, up to 300 Council tenants will each get a £75,000 subsidy from public money in order to buy the homes in which they already live and which are worth £300,000 on average.
There are approximately 12,000 Council tenants in Westminster and the 300 households earning over £60,000 a year, who will benefit from the Government’s increased £75,000 RTB discount, comprise just 2.5% of Westminster’s Council tenants. The Council expects to sell 175 flats over the next 3 years, representing a public subsidy of over £13 million to households earning over £60,000 a year.
At the same time, Westminster Council has revealed that there are 55 families who have been in Bed & Breakfast accommodation for over 6 weeks. A year ago, in April 2011, just 10 families had been in B&B accommodation for more than 6 weeks. Labour Councillors say that this five·fold increase is costing the Council thousands of pounds extra.
The Council say that the average value of a Council property in Westminster is about £290,000 for a two-bedroom flat. With the new discount of £75,000 announced by the Government, the purchaser will have to fund £215,000 and will have other costs such as legal fees and stamp duty which could add another £5,000 or so. To borrow £220,000 with a 100% mortgage, a household would need an income of about £63,000 (assuming mortgage at 3.5 times household income).
The Council estimates that approximately 300 council tenant households in Westminster have incomes which would allow them to raise a mortgage in the region of £220,000.
The Council says that it received 34 applications in April, compared with 36 for the whole of 2011/12 and expect to sell 100 homes in 2012/13; 50 in 2013/14 and 25 per year after that – a total of 175 over the next 3 years.
The Government has said that the receipts from Council RTB sales can only fund 30% of the cost of building a new Council property and that Councils are not able to include their own land in the cost of building new homes. The Local Government Association says; “by preventing councils from including their own land as part of their share of the cost of new homes, this will prevent them building as many replacement properties.”
Labour Councillors have asked 6 key questions of the Council:
* Does it make economic sense to sell 175 Council flats at £13 million less than they are worth to households earning over £60,000 a year?
* Why are 300 Council tenants getting a £75,000 hand-out from public money at a time when services and jobs are being cut because of economic austerity?
* Why are those who already have a home and a job being given a huge financial subsidy when there are so many residents living in overcrowded conditions who would benefit from a larger home and who are currently not able to move?
* Is it right that poorer tax payers on average incomes or below should be subsidising those with incomes of over £60,000 a year to acquire a capital asset of £300,000?
* Is it right that public subsidies should be given to Council tenants to buy property that they would not normally be able to afford when this is not available to tenants renting in the private sector?
* How many new Council properties will be built to replace the 175 that the Council is planning to sell over the next three years (at a discount of £13,125,000) and where will they be located?
Councillor Paul Dimoldenberg, Leader of the Labour Group, said; “Home ownership is the aspiration of many people, but at a time of economic austerity why are some people getting a huge helping hand in the form of a £75,000 subsidy, when so many people are living in overcrowded conditions or who are paying ever-increasing private rents with no prospect of getting on the first rung of the housing ladder for decades?
“The vast majority of Council tenants in Westminster, over 97%, will see no benefit from extending the RTB discount to £75,000 as they do not have the level of income to get a mortgage of over £200,000. Why is so much money going to so few people at a time when the Council has already slashed over £60 million from its budget and there are five times as many people in B&B accommodation for over 6 weeks than there were a year ago?
“And how does selling off 175 Council homes in Westminster help those in housing need when the Government says that the receipts of these sales can only pay 30% towards building new homes?”Other news from Westminster Labour