Two things that have happened in the past week have caused me to believe that now is the time for Liverpool Council to apologise to the thousands of people who have lost money in failed property investments in our city.
Firstly, a suggestion has been made by Downtown in Liverpool that we should start once again to encourage fractional investments. I have no reflection on the companies that are now seeking to use this route but the city as a whole needs to cleanse itself from this sort of finance and encourage developers who will seek more traditional methods of funding.
If a bank or insurance company or similar do not have enough confidence to invest in a development with all their sophisticated methods of measuring financial yield why should anyone else invest?
Secondly, the Echo has printed a really sad story of just some of the people who have lost all or a good part of their savings in our city. I am familiar with far too many of these stories. For some I have to say they should have known better. Using the developer’s solicitor, not checking resale prices and not getting their own survey is unforgiveable to some people as one GP who ‘purchased’ two properties admitted.
However, many of the purchasers came from outside the UK and especially from Hong Kong and the Chinese Republic. They relied on a very high reputation for the UK for strong legal systems, fairness and honesty. They come from a system where if the Mayor and Council say something – it happens. Unfortunately, they have learned that standards have slipped in the UK.
Why should the Council apologise when it can be argued that in most cases, they were only the planning authority? That is true in a very legalistic sense. Only in one case, that of the two failed operations at China Town, did the Council have more than a planning stake in the development. I think there are four reasons:
- The Council failed to enforce high standards and proper development and building controls through the planning process. They allowed commercial land to be used for housing. They exercised no control over the post planning process. For example, in the Fox Street development they were unaware that the developer had neither paid a substantial planning gain fee to the Council nor build a 120-space underground car park. A little myopic perhaps!?
- The council failed to bring into the city high quality developers but dealt exclusively with those who needed to use sub-prime financing methodologies. After a while the big companies refused to be associated with the city and just stayed away.
- The Council wittingly or unwittingly assisted with the sale of these developments especially in the Far East. Senior Council Members were present at sales drives. The Council and mayoral logo was heavily used on promotional literature and signage.
- It was obvious from about 2015 onwards that fractional investment was causing huge problems, but the Council took no actions to try and deal with the issues. Probably another 15 developments went through our systems after that all of which seem to have stalled.
So, as far as the investors are concerned, they are either seeing their money go altogether or are having to become developers themselves by acquiring unfinished assets to try and finish them off. Of the 39 stalled sites 7 are now back on with development. But the only way that the developments can proceed is to scrape off the investment value of the original investor and give them a pay back of their capital of between 6% (the unlucky ones) and 80% (the lucky ones). That of course does not allow for the loss of value of the money or the loss of the promised returns.
So, what of the other 32 sites? I suspect that the 7 where the private sector has been active in restarting will be the only ones with perhaps a couple more. Dealing with the remaining (say) 30 developments will mean that the Council and partners will need to spend a fortune on remediating the site for another development. This would, of course, have the effect of scraping off all the money put in by investors.
In the meantime, sites like Eldon Grove continue to devalue in monetary terms and also devalue and blight the surrounding communities.
Now is the time for the Council to be bold, honest and apologise:
Those who both managerially and politically caused the problems have now gone. There is no face to be saved by those in the Council at the time.
We would send a strong message to the UK and the developers that we now understand what went wrong and are putting in place actions to ensure that these problems cannot arise again.
We would help the healing process for those that have lost anywhere between £250 million and £500 million. An apology won’t bring the money back, but it will help people to stop feeling, as so many do, that they were absolutely stupid to invest in Liverpool.
As for the rest we can only hope that the tortuous police enquiries will eventually come to a head. If charges are to be made and court action taken it is important for all concerned, including those who have currently been arrested for justice to be done and done rapidly.
I suspect that the Council won’t be bold and honest enough to apologise so I will on their behalf. Neither my Party nor I created these hideous problems, but I apologise to all those who have lost their money because a Council created a ‘Dodge City’ culture. I can only regret that you have suffered alongside your families.
I can only hope that the Council, the Government, the investment industry, the solicitors and the surveyors and estate agents have learned their lesson from Liverpool and that our Country comes out stronger than before.