Middlesbrough Community Land Trust: Asset Transfer At Nil Value From Middlesbrough Council. April 2012
Middlesbrough CLT is made up of local residents, many of whom have been directly affected by the Council’s Housing Market Renewal plans and is a Company Limited by Guarantee. The CLT aims to improve and re-use empty housing in Middlesbrough, focusing initially in Gresham, St Hilda’s and Grove Hill. Middlesbrough CLT was set up in June 2011 and at that point it had no property in ownership. Relations with the Council were positive and from the outset there was a desire to work constructively together. The Council helped the CLT to receive support from a local housing provider, Endeavour Housing, who remain really effective and valued in acting as a critical friend and partner without compromising any of the independence of the CLT and its members in securing its goals.
The local authority were approached regarding the transfer of three local authority owned properties in the former Gresham Phase 3 Clearance Area at nil value. With a view to enabling the CLT to bid for funding for the cost of their renovation, from the Empty Homes Community Grants Programme, set up to make it possible for properties to be brought back into use as affordable housing for local people
The Council owned 23 residential properties that were acquired under exceptional circumstances in the former Phase 3 clearance area of Gresham. Many of the properties had been used for a Homeswap Scheme, but the LA had three unallocated properties.
The capital value of the properties is estimated to be in the region of £40,000 to £50,000 each. The Council accepted that the proposal would support their ongoing strategy to support Gresham, including the recent Gresham Improvement Grant programme and the proposed Community Energy Savings Project to address fuel poverty in the area, whilst also establishing a constructive partnership with the CLT. The CLT would also be able to raise borrowing on the improved properties, which would be re-invested to enable the CLT to increase its portfolio.
Options Open To Middlesbrough City Council
The Council considered three options as to how to respond to the request to transfer properties to the CLT at nil value.
Option 1 – No transfer: The Council could refuse the request and continue to offer the remaining Phase 3 properties as part of its Homeswap programme.
Option 2 – Transfer one or two properties: The Council could agree to transfer one or two properties in support of the CLT’s objectives. The CLT may still be able to bid to the Empty Homes Fund but the level of match funding and outputs may not be sufficient for the bid to be successful. The CLT’s ability to raise further finance to support their objectives may also be hindered.
Option 3 – Transfer three properties: The Council could agree to transfer the three available properties to the CLT. The potential match funding and outputs of the CLT’s bid to the Empty Homes Fund would be maximised and the ability to raise private finance increased.
In September 2011, the Mayor approved borrowing of up to £14.8m to complete acquisitions and
demolitions in Phase 2a of Gresham. The figure of £14.8m represented the worst-case scenario in
terms of the funding that would be needed. It was estimated that the borrowing requirement could
be reduced as a result of the successful HMR Transition Fund bid and also by property swaps.
The proposed transfer of the three properties would attract additional resources into the area bring them back into use at no cost to the council, although their value could not used to reduce the borrowing costs of the authority to deliver other elements of its housing programme in the Gresham area.
The Council wanted to ensure that the properties would be used as intended, and not renovated and sold on for a profit, or left empty by the CLT. In order to mitigate that risk, they transferred the properties to the CLT for £1, but with an option to buy them back (for £1), which would be exercisable in the event that they failed to improve and let the properties within a specified time scale. The Council protected that option with a restriction on title which would not prevent the CLT from raising private mortgage funding on the properties although this would still require Council consent.
The Council also imposed a restrictive covenant on the properties, prohibiting their use for anything
other than affordable rented housing, and also required a pre-emption agreement, so if the CLT
wanted to sell the properties at any point in the first 21 years, the Council would have a right to buy
them back for £1.
In agreeing to Option 3 the Council believed it was demonstrating support for the CLT’s aims and objectives and also contributing to its strategy to support the regeneration of Gresham.
What’s Happened Next
The three properties have now been refurbished to a high standard funded by the Government’s Empty Homes Programme and have been occupied for some time. The experience gained by the CLT led to a further successful bid for Empty Homes funding and a further agreement with the Council to bring two shops back into use through conversion into four flats. This agreement is on a long lease basis and will see property in a significant state of disrepair through fire damage and neglect brought back into use to, again to high standard.
The CLT itself has seen its directors skills grow and their appetite to do more along with it. It now has an asset base and a revenue stream to help it develop further at the same time that by the end of this year 9 households have access good quality affordable accommodation. The Community, the local authority and the town centre environment have all benefited from this creative us of redundant assets.
Watch how Middlesbrough CLT tackled their first properties http://mycommunity.org.uk/stories/middlesbrough-community-land-trust/