Leo Stevens discuss Jonathan Jarvis Partners at Devonshires discuss street acquisitions and optimising the process.

Private registered providers (RPs) continue to play a critical role in assisting local authorities (LAs) to address the UK's urgent housing needs, particularly vulnerable persons such as the homeless and refugees.

A key component of that solution is the acquisition of properties from the private sector, supported by government funds that are available to RPs and LAs (collectively referred to in this article as providers).

The process of acquiring individual, existing properties, at scale, is far from straightforward, requiring providers to navigate a complex landscape of legal, financial, and operational challenges.

Available funding and the return of old housing stock to the fold

One of the most significant sources of funding is grant funding from Homes England and the GLA. This funding has been instrumental in enabling providers to move quickly to secure suitable properties.

These include schemes, structured under the Affordable Housing Programme, to secure a range of short and longer-term housing solutions, offering capital and revenue grants to help secure access to suitable accommodation and the delivery of associated services. Additionally, the Rough Sleeping Accommodation Programme (RSAP) provides funding targeted at housing for those at risk of or experiencing homelessness.

Providers will be keen to ensure that funding under these programmes continue to be made available under the new Government and, assuming it does, they need to ensure they have the requisite processes in place to ensure they can deliver when funding becomes available.

Given the limited availability of new housing, many providers have started to buy back homes that were previously sold under the Right to Buy scheme. These properties, often no longer meeting the demands of the private sector, are being repurposed as temporary accommodation for vulnerable groups, including refugees and the homeless. The funding referred to above is pivotal in facilitating these acquisitions, allowing providers to address immediate housing needs by reintroducing these properties into the social housing sector.

Below are some of the points that providers will want to consider to optimise any opportunities for bulk acquisitions of individual street properties that may arise.

The need for skilled personnel and efficient processes

A key factor in ensuring that a potential acquisition is suitable for purchase is employing experts who understand the specific needs of the social housing sector.

The first step should be to engage with local agents who can identify properties that will meet the requirements. Effective conveyancing goes beyond the basics of property law; it requires a deep understanding of the unique challenges associated with acquiring properties for temporary housing or refugee accommodation.

The importance of having streamlined processes and procedures, tailored specifically to the needs of providers, can’t be understated. This includes everything from standardised contracts and search indemnity insurance policies to comprehensive reports that identify potential issues early in the acquisition process. By employing conveyancers who are familiar with these processes as the specific needs of providers and who are experienced in large scale conveyancing exercises, providers can navigate the complexities of property acquisition more effectively, reducing the risk of costly delays or legal obstacles.

Factors affecting property values

One of the primary considerations for providers when acquiring properties is the impact of various factors on the property's value and its ability, in the case of RPs, to be mortgaged. Properties intended for temporary housing, especially homes for refugees and the homeless, may face unique challenges in this regard.

Structural issues such as damp, non-standard construction types (e.g., large panel construction from the 1960s), cladding and other building safety issues and the presence of invasive species like bamboo and Japanese knotweed can further complicate the valuation and how mortgageable a property is. Providers must conduct thorough surveys and due diligence to ensure that these factors are accounted for before proceeding with a purchase.

Building and survey-related considerations

Building and survey-related matters, particularly concerning energy performance, are critical in the decision-making process for providers. The Government has set increasingly stringent energy performance standards, and properties that do not meet these requirements can become liabilities rather than assets.

Many older street properties are not energy efficient, which affects their value and may impact their suitability for use as long term social housing.

Providers must assess the energy efficiency of prospective acquisitions, considering both potential impact on operating costs and overall property management. Properties with poor energy performance can face reduced marketability and may require higher ongoing maintenance costs, making them more desirable for short-term use rather than becoming an integral part of a provider’s housing stock.

Legal and social impediments to property use

Legal and social restrictions are another significant challenge in the acquiring properties for specified temporary use. Covenants, restrictions on disposal, and consent requirements from management companies or freeholders can pose substantial obstacles.

For example, a restrictive covenant might prevent the property from being used for temporary housing, or a management company might refuse consent for subletting, particularly if the property is intended to house refugees or the homeless. In the current social climate, where protests and local opposition can influence decision-making, providers must be prepared to address these challenges proactively. It is essential for providers to engage in thorough legal due diligence, identifying any potential covenants or restrictions that could impede the intended use of the property. Where possible, early engagement with stakeholders, including management companies and local communities, can help mitigate these risks and facilitate smoother transactions.

HRA or non-HRA?

Finally, for LAs, the question of whether the acquisition should be accounted for in the HRA or in the General Fund should be considered at an early juncture. Either approach is justifiable.

In conclusion, the acquisition of properties by providers is a complex and multifaceted process that requires careful planning, skilled personnel, and a deep understanding of both legal and operational challenges. By doing so RPs will be able to navigate these challenges successfully and provide much-needed temporary accommodation.

Check out: The Temporary Housing Dilemma: a strategic approach.