Hundreds of homes built for the Commonwealth Games in Birmingham are being sold off by the council at a projected loss of more than £300m, in a situation branded “nothing short of a scandal”.

The government is facing pressure to intervene to stop the sale of 755 properties on the Perry Barr Estate to a private bidder, as the city battles an acute housing and funding crisis.

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The local authority, the largest in Europe, declared itself effectively bankrupt last year, largely due to a financial black hole caused by an equal-pay bill and a botched implementation of an IT system.

At the same time, there are more than 23,000 households on the waiting list for council accommodation and an average of 447 applications received each week.

The current Perry Barr Estate was designed to accommodate athletes during the Commonwealth Games of 2022 and was heralded as a legacy regeneration project of the competition.

The development was stalled because of the coronavirus pandemic, with the athletes housed in student accommodation instead.

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The programme was refocused to deliver homes ready for occupation, but the 968 apartments have been sitting empty since they were eventually completed in 2023.

A report presented to the council last week said “challenging and volatile” market conditions impeded their ability to sell the homes to the public, naming the impact of the Liz Truss mini-budget in particular.

It said that selling off the homes to a private buyer would be a “significant loss to the public purse”, but this was the best outcome.

Selling the apartments off individually could take more than five years, the report noted, during which time the council would have to maintain the buildings “at significant expense” during unstable market conditions.

‘Nothing short of a scandal’

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Birmingham hosted the Commonwealth Games in 2022

The authority has spent £325m on the development, of which £292m was borrowed.

The report said that after selling off the homes, it is expected that £142m-£152m of debt will remain unpaid, costing £8m-£9m a year over a 40-year period to service – meaning a projected total loss of £320m.

“This will be an additional pressure to the already strained financial position of the council and compensating savings will need to be made elsewhere in the council’s budget,” the report warned.

Any further cuts will be a huge blow to the city, after £300m worth of cuts and a 21% rise in tax over two years was approved earlier this year.

Birmingham City Council said 213 of the newly built homes would be retained for social use and those being sold off would still make “a considerable contribution to the supply of housing in the area”.

But Ayoub Khan, the newly elected independent MP for the area, said the decision “makes no sense”.

He told Sky News: “It’s nothing short of a scandal that the bankrupt Labour-run council are selling these homes at a loss that is estimated to cost the taxpayer £320m. Especially when we have over 10,000 homeless people in temporary accommodation that the council is funding.

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Protests outside Birmingham City Council over £300m cuts.

“We have an opportunity here to lift almost 1,000 households out of homelessness, and the council instead is choosing to sell these homes at a loss. It makes no sense.

“I will be calling on the government to support the council financially to stop the sell off and convert these to social homes when the House returns from recess.”

The government said it was intervening as the commissioners drafted in by the previous Tory administration have ordered the council to report back on why the homes have been left empty for so long.

A Ministry of Housing, Communities and Local Government spokesperson added: “Reversing the decline in the number of council homes is part of our commitment to deliver the biggest increase in social and affordable housing in a generation. We will set out plans at the next fiscal event to give councils the financial stability they need to be able to borrow and invest in both new and existing homes.”

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The council report said the commissioners supported the decision to sell off the properties to an investor, but that lessons needed to be learned.

“A rigorous analysis might well highlight areas of optimism bias and lack of awareness of risk which can guide a better understanding of both current and future proposals”, the report said.

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A council spokesperson emphasised market conditions, saying the pandemic and the mini budget “negatively affected sales valuations of the plots on Perry Barr Residential Scheme – a trend seen nationally”.

The spokesperson added: “After careful consideration of all available options, the proposed sale of plots 6-8 remains the best option.

“The sale will bring forward the supply of much needed housing via a third party, as well as raising funds that will support the council’s budget obligations and remove its ongoing costs and liabilities. Both of which are key to fulfilling the council’s plan to become a financially sustainable, well-run council, that delivers good services to its citizens.”