Pressure is mounting on housing association to agree sale to co-op at price below build cost
Birmingham City Council says it has “serious reservations” about future partnership work with Green Square Accord (GSA), amid a controversy over the sale of a community-led housing scheme.
Pressure is increasing on the 25,000-home provider to complete the sale of 39 homes and several retail units in Birmingham to a community organisation that was once its partner on the project.
GSA spent nearly a decade working in partnership with Stirchley Co-operative Development on the scheme in Pershore Road, Stirchley, but pulled out of the planned sale of the project to the community group earlier this year after major delays saw cost overruns of £2.5m.
Initially meant to be completed in 2024, the project has been repeatedly set back since the liquidation of the original contractor Tricas Construction, after which GSA opted to deliver it in-house.
The housing association insists it has been clear about cost increases throughout the build process, which is still yet to be completed. But the co-operative claims GSA failed to deliver on promised completion dates and alleges that the scheme has been poorly governed by the housing association, creating turmoil for the businesses and tenants that form the community group.
GSA’s decision to pull out of the sale has been a source of major controversy among local residents and regional politicians, with hundreds attending a recent protest in support of the co-op. West Midlands mayor Richard Parker and local MP Al Cairns have also voiced their support.
On Wednesday, Birmingham City Council’s leader and cabinet members joined the fray, writing an open letter expressing “extreme disappointment and concern” that the provider was no longer willing to sell at the agreed price.
“We understand the need of Greensquare Accord to recoup build costs and know that market changes are likely to have an impact,” the group wrote to GSA chief Ruth Cooke.
“However, we are concerned that Greensquare Accord have moved away from the original intentions of the scheme despite prospective tenants and businesses spending hours of their own time, unpaid, to help design and develop a genuinely community led scheme.”
“We also note that the Stirchley Co-Operative Development have increased their offer multiple times to bridge the gap and these offers have all been rejected. This has caused local businesses to suffer huge financial difficulties, and prospective residents are at risk of homelessness.”
The council, which after May’s elections is being run by a minority administration composed of Liberal Democrats, Greens and the Better Birmingham Independent Group, urged GSA to “re-engage in productive negotiations” to sell the scheme at a price that the co-op can afford.
It said the controversy had “left the administration concerned about Greensquare Accord’s social purpose” and that it had “serious reservations about future partnership working between the Council and Greensquare Accord”.
A spokesperson for Green Square Accord said they “understand the concerns” of the council and the wider community, but stressed that its intention for the Pershore Road scheme had always been to recover costs and “never to generate a profit” and said that if it were to absorb the financial shortfall this would “negatively impact our ability to invest in our other customers’ homes and the services we provide for them”
It added that it had a responsibility to make “prudent financial decisions” for people living in its 26,000 homes.
The back story to the row
The project at the heart of the dispute was conceived by local residents and worker co-operatives way back in 2016, who founded a non-profit co-operative society to redevelop a local high street as a secure place for them to live and work for the long-term.
After a design process led by the future residential and business tenants of the scheme, planning permission was secured in 2021 for 39 affordable rental homes with laundries and common garden spaces, three fit-for-purpose retail units and a new community space.
GSA bought the land from previous owner Seven Capital for a little over £1m - a deal the co-op says it facilitated - with an agreement that it would sell the building to the community group at the end of the build process.
No legal contract was signed however, which the co-op said was due to its inexperience in development and its lack of resources, claiming the associated legal and insurance costs were not within its means.
Tricas Construction began building the scheme in June 2023, but went into administration in February 2024, with GSA’s in-house team taking over construction responsibilities.
According to the co-op, GSA repeatedly gave it expected completion dates which it failed to deliver on, which it said had resulted in one of the prospective commercial tenants, a bakery, serving notice on, and ultimately losing, their existing premises.
By the beginning of this year, with the building still unfinished, GSA gave a new cost estimate which was beyond the co-operative’s means.
“We said we would do absolutely everything we can to make another offer,” Sean Farmelo, director and co-founder Stirchley Co-operative Development, told Housing Today.
“We spoke to the bank. We basically in-housed a lot of our management services that we weren’t ever planning to do”.
However, their subsequent offer was rejected and in March, GSA put out a press release saying it was “now clear SCD can’t meet the cost of the project” and announcing it would retain and manage the scheme itself, explaining that as a not-for-profit provider it would be “irresponsible for us to absorb the £1.16m shortfall between the cost of the development and SCD’s offer”.
In a statement to Housing Today, GSA said that since taking the project in-house it had “been clear with the Co-operative members that the final sale price of the development would reflect the full cost of construction which has taken place during a period of high building cost inflation and rising interest rates”.
Since GSA’s announcement in March, the co-op has launched a campaign to put pressure on the housing association to sell and to raise money for a new bid through a community bond offer.
It is understood that cost overruns on the scheme now stand at roughly £2.5m over the original estimated cost of £10.5m. Although a sale to the co-op at the full value demanded by GSA would cost substantially less, as the scheme was partly funded by Homes England.
With the scheme still unfinished and its future ownership uncertain, many of the prospective tenants have since been left in limbo. The bakery business has been without premises since February, with staff commuting to Redditch to access another business’ facilities. According to the co-operative, seven prospective residential tenants are currently homelessness, either sofa surfing or staying in short-term rentals such as Airbnbs.
GSA’s spokesperson said that “subject to applicants passing our eligibility checks” it still planned to let the homes Pershore Road to “the households who had been promised a home by the Co-op”.
However, it claimed that “to date, SCD has not shared the details of these households, which means we have been unable to progress their tenancy applications”.
A document seen by Housing Today shows that the co-op and GSA signed a data sharing agreement relating to the prospective tenants near the end of July. According to the co-op, this agreement would have been completed earlier if GSA had responded to repeated requests for meetings to clarify how allocations policies would be applied to the tenants.
“We remain in dialogue with the co-operatively owned businesses and are drawing up leases for the three commercial units at the Pershore Road scheme,” GSA added.
The Stirchley controversy is only the latest addition to GSA’s recent troubles. The housing closed its offsite housing manufacturing business, LoCaL Homes, at the start of the year after failing to find a buyer.
According to a GSA press release from 2023, LoCaL was meant to provide the modular closed panel timber frame system to be used for the upper floors of the Stirchley building.
In May the regulator announced it was investigating GSA to determine whether it had breached its governance and viability standard.
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