Troubles at developer could lead to greater scrutiny of other council-owned development companies, say experts
News that council-owned housing company Brick by Brick is canvassing for potential buyers in the wake of a financial crisis at Croydon council is likely to send a “shockwave” through the sector, experts have said.
Chris Brown, chief executive at regeneration developer Igloo, said the troubles afflicting the south London residential developer would see other council-owned development vehicles put under greater scrutiny.
His comments follow the revelation that four-year-old developer Brick by Brick is in talks with at least two interested parties about a buyout, should Croydon decide to sell it. Croydon’s investment in Brick by Brick, which has so far delivered 283 homes, has been cited by auditors as a contributory factor to its financial problems, with Brick by Brick on course to borrow nearly £250m from the council since its inception.
This will send a shockwave through the local authority sector, and undoubtedly lead to greater scrutiny of these types of organisations
Chris Brown, Igloo
Brick by Brick is one of the highest profile of a wave of council-owned residential development vehicles set up in the last five years, with a 2018 study by University College London (UCL) indicating four in five councils now have similar bodies.
Brown said he was “disappointed” at the troubles hitting Brick by Brick given the quality of homes produced by it. He said: “This will send a shockwave through the local authority sector, and undoubtedly lead to greater scrutiny of these types of organisations.”
Colm Lacey, chief executive of Brick by Brick, who revealed the firm was exploring options for a sale in an interview with Housing Today earlier this month, said he hoped the problems would not impact on other council-owned vehicles, but said council finances had been hugely affected by the pandemic. “Local government and central government attitude to a taking on a large amount of debt has changed completely,” he said.
However, Janice Morphet, visiting professor at UCL and author of the 2018 report, said the strain on council finances simply increased the rationale behind setting up vehicles designed to deliver additional income streams.