Hundreds of empty homes in Birmingham, originally designed as an athletes’ village for the Commonwealth Games, will be sold by the council at a loss of more than £300m to the taxpayer.
Ayoub Khan, the independent MP for Perry Barr where the apartments are located, said it was an “absolute scandal” that the Labour-led authority had agreed last week to sell more than 700 homes to a private company in a deal forecast to result in a multimillion-pound loss.
Birmingham city council, England’s largest local authority, declared itself effectively bankrupt last year due to a financial crisis largely caused by an equal pay claim bill and a failed IT system update.
It is also facing a housing crisis, with 23,000 households on the waiting list for social housing in the city, and 450 new applications every week.
The new-build Perry Barr estate, described by local people as a ghost town, with many flats standing empty for more than a year, was intended to be an athletes’ village for the Commonwealth Games, which Birmingham hosted in 2022.
Due to delays caused by Covid, the development was not completed in time for the event so athletes were housed in student accommodation. The council said the Perry Barr apartments would become homes for local people instead.
But the properties have sat empty for months, with the council unable to sell them due to a lack of “market appetite” for one- and two-bedroom apartments in the area, and issues with mortgage providers valuing the properties at less than they were being sold for.
A report presented to the council’s cabinet last week said selling off 755 properties to a private bidder, who has yet to be named, would result in a “significant loss to the public purse” but was the best outcome.
It added that selling the apartments off individually would take more than five years, during which time the council would have to maintain the buildings “at significant expense” and would have to deal with unstable market conditions.
The council has spent £325m on the development, of which £292m was borrowed. After selling off the homes, it is expected that £142m-£152m of debt will remain unpaid, costing £8m-£9m a year over a 40-year period to repay, taking the projected total loss in the region of £320m.
The report said: “This will be an additional pressure to the already strained financial position of the council, and compensating savings will need to be made elsewhere in the council’s budgets.”
Robert Alden, the leader of the Conservatives on the council, said it was “one of the worst financial property mistakes a council has ever made”. “It’s a disgrace when the council has such a large housing list that it left blocks of completed flats empty for so long,” he said.
“It’s a real treble whammy on local residents, because there’s that housing need that could have been met, there’s the loss of money, but then there’s also the debt repayments that now have to be made for 40 years.
“That means things like our local library services going to go to pay back for the financial mistakes made on this scheme.”
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Birmingham city council said 213 of the newly built homes would be retained for council housing use but Khan said he would call on the government to provide the funding so that all 968 homes could be kept.
He said: “Here is an ideal opportunity for the government to pin its colours to the mast, to show that it really cares and to support Birmingham city council with the extra resources so that we can retain these 1,000 units for social housing, rather than selling them off at a scandal to the taxpayers, where private investors are going to profit.”
Commissioners brought in by the government to help run the stricken council supported the decision to sell off the apartments but urged that a “full lessons learned analysis is undertaken”.
The commissioners’ comments on the report said: “These blocks, which provide much-needed new homes, have stood empty for far too long, during which time the council has incurred costs of heating and securing them without using a scarce asset.”
A spokesperson for the council said the economic impact of the pandemic and Liz Truss’s disastrous mini-budget in September 2022 had “negatively affected sales valuations of the plots on Perry Barr residential scheme – a trend seen nationally”.
“After careful consideration of all available options, the proposed sale of plots 6-8 remains the best option. The sale will bring forward the supply of much needed housing via a third party, as well as raising funds that will support the council’s budget obligations and remove its ongoing costs and liabilities,” the spokesperson said.