Local Government Lawyer Insight February 2018 LocalGovernmentLawyer 4 It is often said that 100% mortgages were a factor in piling up the debt that helped cause the banking crash of 2008. These are though in effect what is fuelling another buying boom, only this time it is local authorities borrowing to buy commercial property. Such purchases have rapidly moved in the past year or so from occasional curiosity to the mainstream of councils’ efforts to increase income by buying properties with good rental streams and which are likely to increase in value. More investment has gone from town halls into property since January 2016 than did in the previous 15 years. Council pension funds have long invested in property as part of their portfolios and councils have often bought land and buildings involved in regeneration schemes. This bout of property purchasing is though neither of these things - it is councils directly investing for purely commercial motives. It has attracted some criticism, with Liberal Democrat leader Sir Vince Cable, the former Business Secretary, saying: “This is not a wise and sensible thing to do” and recalling “local authorities have a long and inglorious history of gambling in financial and property markets,” such as the London Borough of Hammersmith and Fulham’s disastrous 1980s foray into interest rates swaps. Eyebrows might indeed be raised by the sums going into property investments given councils’ habitual pleas of poverty, but for this at least they have a ready Risky business? With pressure mounting on councils to develop alternative streams of income, Mark Smulian asks if the current vogue for commercial property investments by local authorities could end in tears. More investment has gone from town halls into property since January 2016 than did in the previous 15 years.