Council ‘overspending by £4.5m’ to purchase Peterborough homes, analysis reveals, as formal challenge is rejected

Peterborough City Council is overpaying by millions of pounds to purchase properties at the St Michael’s Gate estate, an independent analysis has concluded.

Tuesday, 29th October 2019, 12:40 pm
Residents of St Michael's Gate and nearby estates protest against the evictions

A previously undisclosed document has revealed that the council is paying up to £4.5 million above the market rate for the 72 properties which it will use for the city’s homeless.

The information has come to light after councillors challenged the purchase of the homes in Parnwell, prompting the Conservative-run council to release the previously exempt information.

The authority has previously admitted it was overspending to get its hands on the properties but did not say by how much.

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The call-in from councillors was defeated by six votes to five last night (Monday) by members of the council’s Adults and Communities Scrutiny Committee with the five Conservative members and single Werrington First member rejecting the formal challenge.

If it had been successful the committee would have referred the decision back to the Cabinet, while it would have also been able to make further recommendations.

The £13.38 million purchase from landlords Paul Simon Magic Homes can now proceed, with some of the money being used to make repairs to the windows at every home as they need replacing in the “near future”.

Senior councillors have previously insisted that the deal was worth doing as the authority’s three year lease to use the homes as temporary accommodation was coming to an end, and it was fearful of another purchaser swooping in.

Losing the homes would force the council to put homeless families in costly B&B-type accommodation.

However, independent analysis from commercial property firm Barker Storey Matthews, which was only released for the call-in, has revealed that a fairer price for the 72 homes would be between £8.79 million and £9.49 million.

Moreover, it describes the initial valuation by the landlords of £13.8 million - which appears to have been negotiated down - as being “significantly higher than the aggregate market value of the individual properties”.

It also criticises the charge for the council to replace the windows which it says is a cost landlords would normally cover themselves.

A second document disclosed by the council has also revealed that the rent was set to increase to more than £1 million a year, compared to £960,000 a year currently which is already above the market rental value.

The report said it would cost the council £197,000 a year over 50 years in borrowing costs to purchase the homes, compared to £790,000 a year to agree a new five year lease.

The council had originally signed a three year lease for the properties with Stef & Philips, which manages the properties for Paul Simon Magic Homes.

Stef & Philips had evicted the families at the 72 homes before signing the lease with the council for it to use the homes as temporary accommodation.

The deal was widely criticised at the time, with the council repeatedly insisting that if it had not agreed the lease Stef & Philips would have partnered up with another authority which would have moved its homeless families into Peterborough.

Despite its argument the council faced heavy criticism for not turning its back on Stef & Philips, while national and international media followed up the PT’s revelation at how an entire community could be torn apart in such a way.

Stef & Philips has criticised media coverage around St Michael’s Gate while insisting “the suggestion that this is all about money could not be further from the truth”.

Cabinet member for housing Cllr Steve Allen, who was not in the administration when the deal with Stef & Philips was agreed, previously told the PT it was worth overpaying for the St Michael’s Gate homes as owning the properties would be cheaper than leasing them when borrowing costs are taken into account.

Describing the deal as a “no-brainer”, he said: “I think we are paying too much, but sometimes in life you have to pay a bit more.

“For instance, if a house you want to buy is a bit more than it’s worth, or as a business, so you have control over a situation.”

“The houses are now available and we are fulfilling our obligations to the homeless.”

At a public meeting when the St Michael’s Gate argument was raging, council deputy leader Cllr Wayne Fitzgerald said the 72 properties had been on the market for £10 million but were only valued by the council at £7 million, with the authority unwilling to get involved in a bidding war.