High level of right-to-buy sales is behind huge gap in two sides' stock valuations
Walsall council's transfer of 24,500 homes is under threat because a huge funding gap has been uncovered.

It is the latest in a series of blows to the government's stock transfer drive: Birmingham, Dudley and Merton councils' plans have already been scuppered.

Walsall Housing Group has taken the unusual step of opening its books to the council to show how it calculated that the asking price is too high. The council, which is threatened with government takeover, originally valued the stock at £40m and said that the transfer would bring in £270m for regeneration.

The gap has arisen through much higher right-to-buy sales than forecast, meaning WHG would have less stock and a lower rental income. A stock condition survey and the level of costs have also lowered the offer price.

WHG has not issued specific figures, but its chief executive Kelvin Stacey said his organisation had found "fundamental differences" between its own calculations and the council's.

Stacey said: "We are not negotiating and we haven't done. We have shown the facts as we see them. We are not talking about a gap of tuppence ha'penny.

"We need to work together and get through this."

He said he was determined to fulfil promises made to tenants.

But the organisation has been unable to put out a funding prospectus to lenders without an agreement on the business plan and valuation.

A council spokesman said: "There is a big difference in the figures but it is a commercial transaction and both sides are working hard to reach agreement.

"If no agreement is reached, it would obviously be difficult to progress the transfer."

Walsall Housing Group says it still aims to complete the transfer by the end of the year. But that depends entirely on it reaching agreement with the council.

No negotiations are happening at the moment. The council has called for a "cooling-off period" as it believes those involved are too close to the issue.

A special dispensation will be needed from the Housing Corporation to complete the transfer more than a year after last October's ballot. It is understood to be sympathetic to the idea because of the council's other difficulties, and Walsall councillors have already voiced fears of a possible delay to transfer (HT 11 July, page 8).

A damning Audit Commission report earlier this year recommended the town hall's senior management be replaced by private sector consultants for a period of up to two years.

Other transfer tales this week:

… while Government explores alternatives

Walsall’s troubles will fuel the three-month review of the stock transfer policy by the Office of the Deputy Prime Minister, which is considering more flexible approaches to transfer. ODPM housing director Mike Gahagan is understood to be exploring more flexible approaches to meeting the decent homes target. This could include allowing councils to mix partial transfers with arm’s-length management. This week the Chartered Institute of Housing wrote to Prescott calling for early decisions on how housing funding will be divided up. It wants a quick announcement of the next two rounds of arm’s-length management, plus funding of dowries, breakage costs and debt redemption to boost transfers.

Source

Housing Today