Council-owned developer unsure of its ability to make future profit

Sixty Bricks’ finance director Jahangir Mannan said the company faces a daily ‘conundrum’ of how to make money from future developments amid higher construction costs, reports Josh Mellor, Local Democracy Reporter

Sixty Brick’s Jazz Yard site in Walthamstow

Sixty Bricks, Waltham Forest Council’s house building company, is struggling with the “conundrum” of how to make money amid soaring construction costs.

According to the 2022/23 accounts for council-owned developer, the company made a profit of about £3million after building 301 homes in Waltham Forest since it was set up six years ago.

However, as the company’s first phase of house building is nearing an end, it is considering how it will make future profits amidst construction cost increases of up to 35%.

Speaking to the council’s audit committee last week, Sixty Bricks’ finance director Jahangir Mannan said the company faces a daily “conundrum” of how to make money from future developments.

He added: “But what we want to do now is build and hold onto properties for longer, by building build-to-rent or similar products and look at more longer-term funding.”

Although the cost of borrowing to build homes is “extremely high” at the moment, Sixty Bricks is hoping to “maximise” government grants for house building.

However, Mannan said higher building costs are a “new normal” that the council and its company have to accept.

Exactly what the company’s strategy is remains unclear as a July update on its business plan was not published due to commercial confidentiality.

Future business opportunities considered for Sixty Bricks in a draft business plan published last year included becoming a large-scale landlord of affordable and private rent homes, partnering with other developers or buying land outside of Waltham Forest.

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The council’s target for the company is to build up to a quarter of the new houses in the borough over the next ten years, with an ultimate aim of about 5,000 homes – half of which should be classed as “affordable”.

One of Sixty Bricks’ next building projects is likely to be an 83-home “in-fill” development on the Priory Court Estate in Walthamstow, which has funding and planning permission.

It is also considering a “zero carbon” development in Vicarage Road, Leyton.

In a series of interviews this summer, the company’s new chief executive Emma Osmundsen boldly declared that she wants to build the “best council homes in the world”.

She joined Sixty Bricks from Exeter City Living, which its owner Exeter City Council decided to wind down earlier this month with outstanding loans of £10m.

About one-third of the 301 homes Sixty Bricks has already built were sold on the private market, with the rest either rented out as social housing or shared ownership.

In July, the council spent £5.4million on 13 unsold one-bed flats in a Sixty Bricks development known as the Jazz Yard in Brunner Road, Walthamstow.

The council bought the flats – which had been marketed at which had been for about £430,000 each – to help its company meet its October 2023 debt repayment deadline.

The company is funded by loans from Waltham Forest Council, which it has agreed to repay at 6.5-8% per year. In March this year, £17m in loans were outstanding.

Overall, the council has agreed to give Sixty Bricks up to £130m in loans and investment for its next phase of house building.

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