Medway Council snap up £5.6m of property to house the homeless

Something that we came across recently and thought you’d find interesting is how Medway Council are actively purchasing properties for temporary accommodation within the borough.

So far, reports read that 20 properties totalling £5.6m were purchased in January so as to, according to Gillingham South Portfolio Holder for Housing and Property Naushabah Khan, “house families who find they might not have a roof over their heads”.

The total number of properties that the council aims to purchase is 150 and these will be operated by Medway Council at a total cost of £42m (c. £280k per property) as opposed to paying private landlords.

Owning these properties outright will not only serve as a good investment for Medway Council, but also mean they have more control over things such as costs and living standards. It will undoubtedly mean, for some private landlords, that they are likely to need to change strategy.

One shocking statistic is how:

Medway faces increasing rates of homelessness, with 3,828 requests for assistance in 2022/23, an increase of 42% from 2020/21, and this trend is expected to continue.

At the end of October, 468 households were in temporary accommodation compared to 362 at the same time in 2022.

The report says this is in part due pressures caused by the cost of living crisis that is pushing residents into financial hardship.

Medway Council charges £25 – £44 per night for accommodation and this fee largely goes towards private landlords at the moment, however with the council owning the properties the money will be able to be retained (and supposedly kept at a low level).

With Medway rents having risen by around 10% over the past 12 months alone due to increased demand and operating costs, it’s no surprise that the council have begun to look into more effective ways to financially manage the situation.

As well as benefiting from the potential cashflow (which, I would hope, simply goes towards maintenance and administration for the properties), in a ‘normal year’ assuming a 2.5% increase in house prices the council would also benefit from approximately £1.25m in capital appreciation.

Looking through the homelessness situation in Medway, we found this article from 2021 which shows how there is (or at least, was) something of a crisis of people being moved hundreds of miles away. You can view more with this KentOnline video.

With the rise in families and individuals moving out of London to the Medway towns due to the affordability of housing over the past few years, it would not surprise us if the same issue is happening in relation to homelessness too.

With rents increasing, landlords selling up leading to a reduction in rental stock across the country and the cost-of-living crisis leading to ongoing increases in financial hardship we don’t doubt that the increase in homelessness is also caused by a combination of these.

This news leaves us with the question ‘what does this change in strategy mean for landlords?’.

Our thought is that landlords operating a temporary housing model within Medway could find themselves under pressure from the council rehousing tenants in new accommodation. Whilst this will save the council cost, it will mean that these landlords will need to reconsider their model and could lead to homes being sold to the council or converted to private rented accommodation (single let or HMO).

Certainly, operating temporary accommodation can be a lucrative model and, from my experience, often based on rent-to-rent arrangements. There’s a significant risk therefore to individuals operating this model as it could leave them exposed should the council change their strategy.

With Medway council choosing to take this approach, it will be interesting to see if other councils follow suit, therefore for those operating a temporary housing model it would be well worth having a ‘plan b’ should the landscape change; an interesting thought that we will keep a close eye on.

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