Council to convert private homes to shared ownership after failing to sell them in ‘slow market conditions’

A council report going before cabinet on 8 June said: “The Jazz Yard scheme has delivered 46 private sale homes, 33 of which have been sold at a sales rate of six homes per month. 

“However, [with] the ending of the Help to Buy incentive, together with recent increases in mortgage costs, demand for private sale homes has significantly reduced. 

“Since the end of Help to Buy, there have been fewer viewings, and no reservations. Furthermore, several buyers have pulled out of purchases.”

According to the report, as a result of the “slow market conditions”, its company is “short of its income target for financial year 2022-23 by £5.4m”, which is the value of the unsold homes at the Jazz Yard. 

It said the income is “critical” to fund Sixty Bricks’ overheads over the next two years, prior to the next phase of development bringing in income.

“In order to be able to pay off its debt, and continue to operate within its working capital limit, Sixty Bricks needs to sell the remaining 13 homes by October 2023. 

“However, given the significant slowdown in the private sales market, particularly for one-bedroom flats, there is a risk the homes will not be sold by this time,” it said. 

According to the report, the Sixty Bricks board and executive conducted a root and branch analysis of the private sales. 

To improve the position, they “changed marketing agent, implemented a plan for improved and increased digital marketing of the homes, and approved a small additional incentive to capture additional sales”. 

“However, within the current market context, with high interest rates and no Help to Buy available (which supported 95% of Sixty Bricks’ private sales prior to the end of the scheme in October 2022), it is anticipated that the units will still only sell at a rate of two per calendar month, meaning insufficient income in to Sixty Bricks to meet working capital requirements and repayment of debt,” the report said.

The report, which seeks approval from cabinet to change the tenure of the remaining homes, said that in the current market “shared ownership homes are performing strongly, as also evidenced for other schemes across the borough”. 

The council is proposing to purchase the private sale homes from Sixty Bricks for £5.4m. It will be funded through £1.62m of shared ownership sales receipts, £2.16m of Right to Buy receipts and £1.62m of Housing Revenue Account borrowing. They will then be resold as shared ownership. 

Ahsan Khan, cabinet member for housing and regeneration, said: “The decision to switch the remaining units from outright sale to shared ownership at Jazz Yard is a result of the exceptional circumstances residents are facing. 

“The loss of Help to Buy and a significant rise in interest rates mean that buyers now need a much larger deposit and must pay significantly higher mortgage costs. 

“This is making it very difficult for most people to afford to purchase their own home. 

“We’re responding to this challenge by increasing the amount of shared ownership homes in our portfolio as part of our commitment to maximising the amount of affordable housing being delivered by the council. 

“Sixty Bricks has already delivered 299 new homes, of which 75% are affordable housing, and is continuing to progress its stage two building programme. 

“Waltham Forest Council is committed to building more affordable homes and giving local people opportunities to remain in the borough close to their friends, families, and support networks.”