Privatisation – more evidence of the downside – Housing sale and leaseback

“A “disastrous” Ministry of Defence property deal could get worse when rental rates are reviewed in 2021, MPs have said.

The MoD’s sale and leaseback arrangement in 1996 with Annington Property Limited had left the department between £2.2bn and £4.2bn worse off over the first 21 years of the contract.

The Public Accounts Committee said the deal has been “disastrous for taxpayers” but could cost them even more when rent is reviewed from 2021.

PAC chair Meg Hillier said: “Taxpayers have lost billions as a result of this appalling deal and there could be worse to come if the MoD fares poorly in rent negotiations.

“The uncertainty over those negotiations is a further slap in the face for those forces families who, for far too long, have endured poor standards of subsidised accommodation.”

Under the deal, agreed during John Major’s time as prime minister, 55,000 houses were sold by the MoD to Annington before being rented back on 200-year leases.

A report by the National Audit Office in January found that rising housing prices since the deal was agreed had left the government between £2.2bn and £4.2bn worse off than it would have been if it had kept the properties.

The rents Annington charges the MoD for the houses – subject to a 58% downwards adjustment to date – are expected to increase significantly when the current agreement ends in 2021.

In its report, which was published on Friday, the PAC said that the average annual cost to rent, manage and maintain each property is £7,807 and recommended the MoD develop a plan to reduce the number of empty properties.

The committee said that the number of empty properties currently stands at more than 10,000 – roughly the same as 21 years ago – despite a 30% fall in the total number of properties rented back from Annington over that period.

It said it was “scandalous that the department still holds so many empty properties at a time of a national housing shortage, and has made almost no progress in 20 years in reducing the number.”

https://www.publicfinance.co.uk/news/2018/07/accounts-committee-blasts-mod-property-deal