Lambeth Council is entering the business of becoming a property developer with the proposal to set up Homes for Lambeth – a new Council owned company that will profit out of building new Council houses.

The Cabinet meeting on Monday evening will consider the Cabinet report:

Homes for Lambeth: A Special Purpose Vehicle for Lambeth [pdf].

A Special Purpose Vehicle (SPV) is basically a spin off company that a Council can set up internally. It allows the Council to become aggressive in the free market, and to use Council resources to compete with similar companies.

Lambeth Council wants to risk building and managing council houses under the umbrella of a free market company set up by the Labour administration.

The Cabinet report adds:

“Homes for Lambeth will be a 100% council-owned company to enable the council to access finance and to build the homes we need.”

It doesn’t take a genius to work out that the Council can’t afford to ‘regenerate’ the likes of Cressingham Gardens on its own. It needs a partner. But financial partners often ask for something back in return.

There’s no such thing as a free home, etc.

This is where Homes for Lambeth comes in. Rather than allow a private developer to cash in at Cressingham and the other five estates, Lambeth Council will profit instead under the guise of Homes for Lambeth.

The report speculates that a profit of between 15-20% from housing developments will be returned.

Figures are then provided for the breakdown as to how this will be achieved. The Council claims that 511 new homes will be built using the SPV model by 2018. 301 of these will be ring-fenced to be available at social rents. Our back of a fag packet sums suggest that this leaves 201 homes that won’t be subject to social rents.

This is the financial argument driving estate regeneration. Lambeth Council gets to replace estates that are in need of a little love (debatable), and in return can cash in by building homes to flog on the free market.

The argument that the Council is spinning is that the profit of around 15-20% will then be used to “benefit residents” rather than go to a private developer. It is a model that accepts that the private market is a good thing, except instead of a developer taking the hard cash in, it is Lambeth Council.

The Cabinet report even boasts:

“The Council will effectively act as a property developer.”

Very, very cosy.

You would have thought that the Council would have learnt its lessons after the failure of Lambeth Living – another Council spin off company that was set up to try and attract extra finance to manage council houses in the borough.

Make no mistake – this is all about generating money. The Cabinet report admits as much:

“Support investment and developments which are intended to generate an investment return.”

In tough times when central government is stitching up any Labour run local authority, new ways of keeping the Council afloat are needed. But when you consider that ‘generating an investment return’ is being carried out on the back of breaking up communities, then you have to question what are the priorities of a Labour led Council?

The Cabinet report then sets out a bold new vision about what we can expect from Homes for Lambeth:

“The preferred option provides an effective platform for the Council to implement the principles of the Cooperative Council. Residents will be supported to have an active voice in shaping the delivery of new housing and Homes for Lambeth will commit to maximising the social value it can generate.”

Which will be news to the residents of Cressingham Gardens. Homes for Lambeth will be the means in which the community is broken up, following the refusal of the Labour group to listen to the residents who over-whelming asked for repairs, and not regeneration.

It seems that whenever Lambeth Council is trying to justify free market policies, there is a feeling that simply by referencing the Co-operative Council gets you off the hook. We have seen this with libraries, parks, and now housing.

The idea that Homes for Lambeth is a company 100% owned by Lambeth Council also needs to be questioned. The Cabinet report is open to ideas about future investment:

“The Council will own all the shares in Homes for Lambeth. There will, however, be the potential for Homes for Lambeth to create subsidiary companies. These could be joint ventures in which the equity could be shared with a third party.”

Plus when you put your trust in free market economics then you are always at the prey of a bigger beast stepping in to swallow you up and your profits.

The Cabinet report asks the question:

“Can the Council sell Homes for Lambeth?”

There is a simple answer of:

“Ultimately yes.”

Ouch.

Perhaps the only good thing we can see coming out of Homes for Lambeth involves putting the brakes on Right to Buy:

“If you move to a new home built by Homes for Lambeth, you would not have the Right to Buy under the Lifetime Assured Tenancy.”

Although this does seem to create a them and us situation when it comes to the rights of Council tenants across the borough.

Homes for Lambeth is just another example of how the Co-operative Council is increasingly turning towards the free market to help balance the books. The strategy is risky. Homes for Lambeth will need to deliver a 15-20% return.

The true cost to existing tenants is about to be found out at Cressingham Gardens and the five other estates due to be ‘regenerated.’

Is breaking up communities a price worth paying for having a profitable private company under the control of the Council?