Is Ethical Disposal A Viable Option For Registered Providers?

Table Of Contents

• Early Days
• Practical Challenges
• Commercial Challenges
• Prioritising the Community
• Accountable Investments
• Alternative Options?

Early days

The concept of ethical disposal is in its infancy for many registered providers (RPs), with the majority of sales still going through auction.

One provider has started considering ethical disposal in earnest – hand-picking properties that meet internally set suitability standards.

Typically, these will be structurally sound homes in rural areas or tight-knit communities with a high threat of investors utilising properties for holiday lets.

These are then marketed to first or second-time buyers who meet internally defined criteria. To date, results have been mixed. One success story however, was for a rural property whose new owners had family in the locality and had been previously struggling to compete in the demanding housing market.

Practical Challenges

Typically, the houses being sold need significant repair and would be too challenging (and expensive) for your average first time buyer.

One RP commented that they had examples of improving properties’ energy performances before sale, but this had no impact of the sale price. Whereas cosmetic improvements, such as a new kitchen and redecoration, had significant positive impact on market value.

RPs debated whether they had a responsibility to invest in some repairs to bring the home up to a better standard – but countered this with the notion that is it was a quick/inexpensive fix, then they wouldn’t be selling the property in the first place.

Commercial Challenges

The primary challenge for RPs considering ethical disposal is balancing financial returns with protecting the community. Many RPs need the ‘cash quick’ and auction/investors are the path of least resistance to boosting coffers for reinvesting into new or existing housing stock. RPs also have to be mindful of regulators, who will insist on evidence that the provider achieved the best price for the property.

Prioritising the Community

While it might not always be possible to sell to a first-time buyer, or local resident, RPs are ensuring they vet there buyers wherever possible – prioritising the needs of the existing community, who may be largely tenants of the provider. For one provider, vetting

buyers has meant they have rejected the highest bidder in favour of a more suitable owner for the community.

RPs also discussed the importance of implementing tenant consultations. And where there are portfolio sales ensuring that service levels remain consistent post-sale.

Some RPs are stipulating in transfer deeds that homes cannot be used for holiday lets or Air BnBs after selling and must be used for long-term rentals.

Accountable Investments

The group also discussed demonstrating ethical disposal in other ways. For example, if a property or portfolio is sold to an investor can they show that the capital gained has been invested for good? Such as, utilising funds to make energy improvements, or replacing cladding for fire safety.

A board’s priority will always be tenants, but ethical use of the capital receipts could square that circle.

Alternative Options?

Some RPs are exploring alternatives such as flipping tenure, where properties are temporarily rented out privately before a potential sale. This approach could maximize short-term value while retaining control over the asset.

One RP has started to explore shared ownership models that could provide a more controlled approach to property sales, ensuring that properties remain within reach for local residents.