Housing association ‘busy building property empire at expense of poor’

Glasgow Housing Association (GHA) has been criticised for muscling in on the private homes market, after it emerged the charity had agreed a £14 million deal to buy 150 flats to rent to professionals in Glasgow and Edinburgh.

Stephen O’Neill, managing director of Glasgow-based Newton Property Management, claimed the housing association – one of the UK’s biggest social landlords – was moving away from its main purpose of providing low-cost housing for the poor and instead renting high-end flats to “yuppies”.

The 150 flats, the majority of which are in the desirable West End of Glasgow, are 98 per cent let and will not be available to GHA’s estimated 39,000-strong waiting list of people looking for low-rent homes.

The flats, sold by the Glasgow developer Park Lane, will be transferred to GHA’s commercial arm, Lowther Homes, which charges “market rents” starting at about £500 per calendar month, rising to “full-rent” prices of £1,200 per month.

Mr O’Neill said: “Why are they buying 150 flats from Park Lane that are for young yuppies and in good West End locations?

“They aren’t serving their waiting list by buying 150 occupied flats.”

A further seven flats being acquired by GHA are in Leith.

Mr O’Neill said GHA had been “gifted” 80,000 properties from Glasgow City Council in 2003. As a result, the association, which now manages 45,000 homes, has been able to borrow £700m from lenders. In addition, GHA received more than £50m from the Scottish Government in grants last year.

Mr O’Neill, whose firm currently manages the properties, admits he is furious the deal will mean his company losing revenue of about £100,000 a year.

“It is my beef,” he said. “I am losing 150 properties. In this climate, I don’t want to be losing a significant amount of income to a housing association.”

GHA insists it must diversify into the commercial market in order make ends meet, as government funding for social benefits is set to be slashed.

Sources close to GHA said one of the major drivers for its move into the high-end private rented sector had been because rental incomes in social housing across the UK would come under “severe pressure due to welfare benefit reform”.

The GHA launched its commercial arm in March when it acquired 21 flats from the Ministry of Defence in Glasgow’s Lowther Terrace for £2.25m. It confirmed the scheme was almost fully let, at rents over £1,000 per month.

A spokeswoman for the Scottish Federation of Housing Associations said: “Housing associations are social businesses and there is less grant available now – that is just a fact.”

She added it was “not the case at all” that housing associations had market advantage over their private-sector rivals, despite getting as much as a third of their funding from the Scottish Government and most of their income through social rents.

“Housing associations can apply for grants but they are not-for-profit businesses. Any surpluses they make are ploughed back into the provision of extra housing and community ventures,” she said.

Alex McGuire, GHA’s executive director of development and regeneration, said the association’s move into the private-rented sector had been funded by its own borrowing and not by government subsidies.

He said: “Lowther Homes has been set up as a wholly owned subsidiary of GHA and operates on a commercial basis, separate from our core business of social housing.

“Social housing is and will continue to be our core business.

“Lowther Homes is part of our strategy to diversify income streams so that we can keep rents low and do more for our tenants in these difficult economic times.

“There is also a strong demand for high-quality private rented homes in the city and we believe our new subsidiary has the potential to provide more full-market and mid-market rental options for people and to drive up standards in the private letting sector.”