In a bid to mitigate financial hurdles, Newham Council is deliberating the sale of its property portfolio, NewShare, which presently holds an equity balance of circa £40 million. Initially introduced in 2013, NewShare, a shared equity loan scheme, aimed at facilitating affordable home ownership for residents. The scheme commenced with 305 properties, but now encompasses 174.

A pressing budget shortfall of £14.2 million forecasted for the fiscal year 2023/24 has prompted this consideration. The upcoming report, slated for presentation to Newham’s Cabinet on 9 November, underscores that NewShare, now described as a “small equity loan portfolio”, isn’t positioned to address the escalating housing crisis in the borough.

The report elucidates that the scheme’s small scale renders it inefficient, lacking the expansive operational capacity akin to a bank or building society. This comes in the backdrop of a newly launched housing delivery strategy by Newham Council, primarily targeting an augmentation in the supply of social rented and other affordable housing types.

NewShare’s income has seen a steady decline as residents acquire their remaining equity stakes, leading to the recommendation of disposing of the portfolio. The estimated value of the NewShare portfolio oscillates between £30 million and £40 million. The capital accrued from this disposal is earmarked for offsetting debt servicing costs, hence creating a net saving which would be channelled towards safeguarding council services.

This move could potentially alleviate the council’s budgetary pressure by trading a future income stream for an immediate capital receipt, consequently generating short-term savings. The report projects a savings of around £2.8 million per annum for the council, predicated on prevailing interest rates.

This consideration by Newham Council mirrors a broader trend, as evidenced by the recent disposition announcement of a £200 million commercial investment portfolio by Somerset Council, grappling with a £100 million budget gap.

The envisaged sale comes amidst a backdrop of substantial financial challenges faced by local authorities, attributed to national and international economic conditions, alongside perceived governmental inadequacies in addressing the exigencies confronting local governance and communities. The decision to sell is seen as a pragmatic approach to navigating the financial intricacies while striving to uphold service delivery to the populace.