Councils acquiring property for investment purposes

A new report has highlighted that an increasing number of local authorities are acquiring property for investment purposes to plug their funding gaps.

Bricks – Mortar – Money, published by the Association for Public Service Excellence (APSE) and the Chartered Institute of Public Finance and Accountancy (CIPFA), reveals how local authorities are having to search for new sources of revenue to supplement their income and balance the books.

Local authorities are believed to have spent in excess of £1 billion on property assets in 2016, as part of a strategy to provide income to mitigate central government funding cuts, using revenue to support public services. A small number of councils have claimed that using such income will assist them to become fully independent of national grant funding.

Paul O’Brien, APSE chief executive, said: “Many councils across the UK are now forced to consider new ways of raising the money necessary to continue to offer the public excellent neighbourhood services. This report shows that property investment, if conducted properly, provides councils with the opportunity to raise substantial funds. APSE is not arguing that all councils can use this to meet their budget needs, but it is a further mechanism that councils can deploy to generate much needed funding to plug the gaps created by ongoing austerity. Essentially, what we are seeing is investment for social purpose.”

David Bentley, head of Asset Management at CIPFA, added: “Councils have been investing in property for decades but the renewed efforts to use investments to generate additional income is a growing phenomenon. Whilst we do not endorse any particular approach the document has drawn together some interesting examples of this emerging area from a variety of local authorities. We do advise that local authorities ensure they have the right advice for these kinds of deals within a sensible framework that considers risks and rewards for both themselves and their communities.”