Local authorities in the UK have been taking advantage of strong land prices to sell off local council estates. This is causing some controversy amongst voters because when the land has gone what assets will the authorities hold? So, is it sensible for local authorities to start selling assets to fund short term budget deficits?
Land prices rising
It is unclear at this moment in time how much land councils up and down the UK actually own but we can safely say it is in the billions of pounds. These local authority land estates have been part of the local fabric for many years and while some have been sold off in the past the vast majority remains under council control. Even though the UK economy is struggling at the moment, primarily due to concerns regarding Brexit, the property market has performed admirably. As property prices continue to move higher many investors are starting to look at land and getting more involved at the relatively early stages of property development.
As you might expect, this has pushed property prices higher right across the country. With budget cuts by central government putting public services under pressure perhaps it is no surprise that councils are selling off parts of their estates?
There have been a number of challenges to local authorities up and down the country who have been looking to sell significant parts of the local estate. As we touched on above, the problem is that once this land has been sold what do they do in the future? As the UK population continues to grow, whether immigration is reduced or not, the value of land will continue to rise in the longer term. So, is it right to start reducing exposure to the land market or should councils bite the bullet and wait for prices to move higher in the future?
There are alternatives to an outright sale of land which will include joint ventures with developers as well as leasing land to investors. This would allow local authorities to maintain at least some form of ownership going forward. When you consider the ever-growing housing problem in the UK perhaps local authorities should be making more use of this land themselves and building affordable/council accommodation.
The truth is that central government and local authorities up and down the UK have been “selling off the family silver” for many years now. Indeed we only need look at the era when Gordon Brown was the Chancellor of the Exchequer and the disastrous decision he took to sell the U.K.’s gold reserves at rock bottom prices. This does beg the question, are politicians and local authorities really the best people to decide when and how property asset should be managed or sold?
In theory we can all see why local authorities are looking to raise additional income at a time when budgets are under pressure and public services the main victim. Whether taking advantage of current land prices by substantially reducing local authority land estates is the way forward and not just a short-term fix for a long-term problem is debatable. What is the alternative – an increase in council taxes or a reduction in public services?