Call for inquiry in to Westminster Right to Buy sales

Westminster Labour Councillors have called on the City Council to mount an urgent investigation in to a Sunday Times report that uncovered that

“A PROPERTY investor has been caught boasting how he hopes to make so much money by snapping up cut-price council houses under the coalition’s right-to-buy scheme that he will “never have to work again. Nicholas Carlino, a director of London Investment Property Group (LIPG), told an undercover reporter how easy profits are available because councils are massively undervaluing the properties, which he can buy from tenants and resell for much higher prices.”

Labour Councillors say that the activities of this company might be connected to the fact that almost 20% of RTB sales in Westminster since 2012 have been to people in receipt of Housing Benefit.

The article identified First Avenue in Queen’s Park, Westminster as one of the areas being targeted by the company.

Queen’s Park Councillor Paul Dimoldenberg, Leader of the Labour Group, has written to the Council’s Chief Executive, Charlie Parker demanding an inquiry.

“I was concerned to see this story in yesterday’s Sunday Times and wondered whether the increase in the number of HB recipients making RTB applications is in some way connected to the activities of these two characters?

I believe that the Council has a responsibility and duty to investigate further those on Housing Benefit making RTB applications. I am particularly concerned to see that properties in Queen’s Park are being targeted. It is completely unacceptable for the Council to shrug its shoulders and say that the RTB legislation does not require the Council to make detailed enquiries about where the money comes from to exercise the RTB.

Can I also remind you of the Question I asked at the last Council meeting to which I got a very ambivalent response from Councillor Astaire;

To the Cabinet member for Housing

Can he explain why almost 20% of RTB sales since 2012 have been to people in receipt of Housing Benefit?

Can he explain how people on HB can (a) afford to buy property worth hundreds of thousands of pounds (b) can afford to put down a substantial deposit running into tens of thousands of pounds and (c) afford the monthly mortgage payments?

Is he not concerned that there might be huge fraud taking place right under his nose and why is he not taking urgent action to stop the loss of council property and millions of pounds of public money?

Please can you give this urgent attention.”

Sell us your council house and we’ll split the profit

Nicholas Hellen, Kate Mansey and Robin Henry Published: 17 August 2014

Nicholas Carlino and William Johnson offered money to council tenants to sell their homes

A PROPERTY investor has been caught boasting how he hopes to make so much money by snapping up cut-price council houses under the coalition’s right-to-buy scheme that he will “never have to work again”.

Nicholas Carlino, a director of London Investment Property Group (LIPG), told an undercover reporter how easy profits are available because councils are massively undervaluing the properties, which he can buy from tenants and resell for much higher prices.

“It’s a joke, isn’t it?” said Carlino, whose firm has leafleted 60,000 council house tenants with the offer of six-figure financial rewards for working with him. He explained that councils are losing public money.

An investigation by The Sunday Times into the scheme, which is entirely legal, has sparked condemnation of the right-to-buy policy.

Critics say the legislation was badly drawn up and accuse councils of failing to ensure that properties go to deserving buyers rather than opportunistic developers.

Chris Williamson, a Labour MP and member of the communities and local government select committee, said: “This is profiting at taxpayers’ expense. The big players are able to use their financial muscle to scoop up a large number of dwellings and either sell them on or rent them out at inflated prices.”

The leaflet distributed by LIPG, designed to resemble the front page of a tabloid newspaper, carries the headline: “Right to buy tenant moves & scoops £100,000”. It says: “A lot of tenants are unaware that if they have a right to buy offer or they use their right to apply, then they could gain anything from £20,000 to £100,000.”

It cites case studies including a “Mr Jacobs” who “had been yearning to return to Jamaica but it was merely a dream until he received £100,000 which made his dreams come true”.

A reporter posed as a council tenant living in a two-bedroom terraced house in First Avenue in west London, one of the streets leafleted and where a former local authority house recently sold for £925,000. The reporter met Carlino last week to discuss the possibility of signing up with LIPG.

Carlino said councils “always undervalue properties”, adding: “If they value the property at £550 [thousand] and it’s worth £650 [thousand] to me on the open market, that’s where I can give you money.”

He said he would give the £550,000 to the council and on the same day “my solicitor would give you whatever [sum] we agree . . . and the property would come into my name or I may even sell it on”.

Carlino said LIPG would cover legal bills and stamp duty and emphasised that even if the tenant received a right-to-buy discount, which can be up to £102,000, it would be irrelevant because the firm would have to pay it back to the council. Asked if the scheme was basically exploiting a “legal loophole”, he replied: “Exactly and that’s why if Labour get in they’ll probably close it because a) they’ll reduce discounts and b) they like social housing and they don’t want to sell them . . . If I get 500 or 1,000 of these [properties] in my cabinet, I’ll never have to work again.”

London Investment Property Group has leafleted 60,000 council house tenants

Carlino, who claimed LIPG had completed 19 such deals and was looking to buy a further 132 properties, said councils did not object to the scheme. “They want the money in as much as anyone. The council gets a lump sum, you get a lump sum and I get a property. Everyone’s quite happy,” he said.

William Johnson, managing director of LIPG, later said the firm had yet to complete any deals and insisted there was “no grey area” in the way it bought the properties and therefore was not exploiting a loophole.

Carlino told the undercover reporter that LIPG complies with all “buy back” rules.

“We have to write to the council and say, ‘Look, I’m going to sell this property on the open market. Do you wish to buy it?’,” he said.

“And they always write back and say, ‘Thank you very much for the opportunity but on this occasion we won’t’.”

The businessmen said they require tenants selling to LIPG to prove they have firm plans to move elsewhere so are not a burden to the council. “I won’t deal with . . . single mothers who want a few quid now and will be knocking on the council’s door in two years’ time,” said Carlino.

The property investor said councils are massively undervaluing their houses (Getty)

Daniel Astaire, Westminster city council cabinet member for housing and regeneration, said: “If we have reason to believe attempts are being made to exploit the system . . . we will take thorough steps to thwart them.”

The council conceded that “given the state of the property market in London there is likely to be a significant discrepancy between value at valuation and value at completion” but denied undervaluing properties.

Brandon Lewis, the housing and planning minister, said: “The reinvigorated right-to- buy is both increasing housing supply and reducing waiting lists, as every additional home sold is now being replaced with a new affordable home for a new social tenant.

“Critics of right-to-buy are enemies of home ownership and fail to appreciate the wider benefits of helping people to move on and up the housing ladder.”

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This entry was posted in Affordable Housing, Housing, Housing Benefit, Labour Councillors, Queen's Park, Right to Buy, Social Housing and tagged , , , , , . Bookmark the permalink.

11 Responses to Call for inquiry in to Westminster Right to Buy sales

  1. John says:

    Queens Park Labour councillor Mr Paul Dimoldenberg poor old chap just doesn’t get it!

    1. Property developers are helping get private monies into the public purse
    2. A council tenant can move on and get off benefits (less financial burden on the state), these property developers are doing the council a favour!
    3. Every right to buy assisted or not assisted by a third party creates one affordable house plus monies into the council’s pockets.
    4. Right to Buy is creating opportunity for council tenants to move on and let’s face it what’s wrong with a tenant wanting to return to his home country with money or buy a private property in Kent through an assisted deal. Everybody is winning here!!!
    5. The Sunday Times article – What a no story! ‘Businessman does something legal’

    Mr Dimoldenberg needs to get into the 20 century it’s 2014 not 1980 and the right to buy in London has moved on!!!

    Dr John Edwards

  2. John

    I had not realised these guys were so public spirited. They obviously deserve a knighthood – or more. How much more public subsidy do they need in RTB discounts and the undervaluing of public assets? Yes, Right to Buy in London has certainly moved on!

    Paul

  3. A Marris says:

    Thank God for entrepreneurs! These guys are helping us all…

    Factual problems –
    1. A housing shortage in central London, with ever increasing prices
    2. Councils trying to encourage council tenants to buy their homes
    3. Council tenants have no money, so R2B prices are low
    4. Council has no money to build affordable property

    Their solution –
    1. Two entrepreneurs help those council tenants who want to move from their homes and give them cash for doing so, thereby giving these people life changing funds, often to move back to native countries thereby reducing council benefits payments
    2. Helps first time buyers by increases housing supply
    3. Reduces burdens on councils taking the maintenance of these homes into the private sector
    4. Stimulates the R2B market and creates taxable wealth
    5. Entirely legal

    My verdict –
    1. This whole business model only works because they are arbitraging the stagnant oversupplied (therefore cheap) R2B council market and the very active highly in demand (therefore overpriced) private market.
    2. It is arguable that the R2B prices are based on low valuations, but based on comparables in the R2B sector they are reasonable. If they are too low compared to their open market valuations, then that is the council’s fault and they should sue their valuers.
    3. A brilliant idea, which helps the tenants, the councils and themselves – pure genius! I wish I had thought of it.

    The joke –
    1. The articles talk of a fraud investigation – another pointless waste of money if it is entirely legal!
    2. The council wants to try and change the wording to prevent this type of business venture – go for it! They are incompetent at best and will no doubt create another business opportunity by doing so.
    3. People have to get over the fact that it is entrepreneurs and not civil servants that create value and taxable revenues in our economy – we should celebrate their resourcefulness and join in.

    • These guys should be running the Government. They are so clever. Why has nobody else ever thought of this as the answer to current housing crisis?

      I don’t think a knighthood is good enough for them. They should bring back hereditary peerages and make them both Dukes.

      • A Marris says:

        I am making considered comments on this article as a Westminster Resident and tax payer. You are not answering my points, but choose to answer with sarcastic comments which is very disappointing. If you are seriously a councillor, then please behave like one. If you have nothing to say, then don’t say it, if you do, then lets hear it…. Your future electorate will judge, as I am now, on the quality and maturity of your answers!

  4. Mr Marris. How can it make sense to sell off Council property at below market value when there are over 2,000 Westminster families in expensive temporary accommodation all over London and the South East and when current Westminster families living in overcrowded accommodation can expect to wait years for a flat with an extra bedroom?

    Over the 9,000 plus Council homes sold since the early 1980s, 40% are now buy-to-let investments where rents are around £500 a week compared to £160 a week if they were Council flats. More and more of these flats are rented by working people on low incomes who cannot afford the full rent and so rely on Housing Benefit to pay the rent. So that means that YOU and I are paying buy-to-let landlords the extra rent for these former Council properties. It is total and complete economic madness. You could not devise a more ridiculous system if you tried.

    And what about the Government promise to build one new affordable home for every Council flat sold under the RTB? So far Westminster Council has built NONE. And if they did so, they would only be allowed to build flats at ‘affordable’ rents i.e. in excess of social rents.

    Your analysis is so simplistic. I repeat my original question “Why has nobody else ever thought of this as the answer to current housing crisis?”

    • A Marris says:

      Mr Dimondenberg.

      Your question is irrelevant – you cannot assume that if something hasn’t been done before, it shouldn’t be done.

      If the council’s surveyors valued these properties at their current open market valuations, then there would be no arbitrage opportunity available, no profit to share with those selling their council homes and no business opportunity for the likes of Carlino and Johnson. If anyone is to blame it is the council valuers for valuing them too low and for creating an arbitrage opportunity. From this point of view, Carlino and Johnson should be applauded for seeing the opportunity for profit and for going for it. You cannot criticize them for trying to make money, and to dispute this is illogical – it is the way an economy works. The vast majority of businesses exist to arbitrage market inefficiencies and add value as a result – examples of this are absolutely everywhere.

      The next question is whether it is right or wrong. In business, you have to play by the rules. Who wrote the rules? The government did. Are Johnson and Carlino obeying the rules? Tell me – Yes or no??? If not, then take them to court for fraud. If yes, and you don’t like it, then change the rules.

      Now, given the fact that they HAVE gone for it (and that from what I read and understand about R2B, it is apparently completely legal), one could question whether from a social standpoint they are helping or hindering society…. for the reasons I stated above, I think on balance they are helping – they are helping the tenants (that want to deal with them) to achieve their dreams with a nice windfall, helping the council raise much needed funds from an otherwise stagnant RTB property market and providing the private sector with more housing to quell the unprecedented demand for first time buyers, I cannot see any hindrance at all, can you?

      Okay, I grant you, they stand to make some good money from it all if it works, but that is irrelevant unless “sour grapes” counts as a reason against their business idea, isn’t it?

      • Mr Marris. I suggest that this sort of activity has nothing to do with helping people in housing need but aimed entirely at making money out of the state-subsidised sale of public assets. This is not what the Right to Buy was intended to do. I do not support this sort of business activity and I do not believe that the vast majority of the people I represent support it either. That is why I will continue to oppose this and do my best to get the law changed.

        By the way, increasingly, RTB properties do not make their way to first time buyers as you claim, but end up on the buy-to-let maket as investments and let out at rents of £500 a week making it very difficuly for first time buyers to save for the large deposit they need to secure a mortgage. The current housing market is broken and business activities like this just make things harder for so many young people.

  5. A Marris says:

    Fair enough, I have never disputed that – Good luck in changing the law then.

  6. STEPHEN PEEL says:

    IF I BUY MY FLAT FROM THE COUNCIL AS A RIGHT TO BUY AND I ACCEPT THE OFFER FROM MY SECTION 125 FROM THE COUNCIL AND I COMPLETE MY CONTRACT AND SINGED ALL MY PAPER WORK NOW I HAVE BOUGHT MY FLAT AND OWN IT 16 MONTHS LATTER I REVISED A LETTER FROM MY COUNCIL SAY THEY HAVE DONE A ERROR IN THE PRICE 16 MONTHS AGO THEY UNDER VALUE MY FLAT MY FLAT IS A 2 BEDROOM FLAT THEY VALUED AS A ONE BEDROOM FLAT MY PRICE WAS £350,000 AT THE TIME I BOUGHT IT NOW THEY ARE ASKING A £360,000 EXTRA FOR THE OTHER SMALL BEDROOM WHICH IS 9FT X 9FT A SMALL ROOM SO THIS ROOM IS WORTH MORE THEN THE HOLE FLAT THEN SOMETHING WRONG HERE WHAT THE COUNCIL IS ASKING FOR I BOUGHT MY FLAT IN GOOD FAITH IF THEY MADE A ERROR ITS DOWN TO THEM NOT ME I SINGED ALL WHAT THEY WANTED ME TO SINGED SO CAN THEY STILL AK ME FOR ANY MORE MONEY TOWARDS MY FLAT CAN YOU PLEASE LET ME NO THANK YOU

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