• Site rethink for affordable homes

Finding development land at the right price, is the overwhelming hurdle to developing more affordable homes in London. That was the unanimous view of housing sector experts called to provide advice to the Housing Committe of the London Assembly in January.
A range of alternative models are available to provide housing at a range of rents, and in a variety of tenures, it was asserted, so long as sites are made available at sensible prices. Leasing land, or agreeing a sale of sites only with a prescribed planning use, were among suggestions to free up projects that are too often merely sold to the highest bidder.
Shamez Alibhai, a partner with investor Cheyne Capital, said his brief was to “to invest in property that helps disadvantaged groups in the UK. Clearly one of the biggest areas of disadvantage is the affordability of housing, and we have a model where our investors like the idea of investing in housing because it’s a stable asset class, they get to see transparency, but very importantly, our investors want to have a socially reponsible mandate. So they are interested in patient capital, long term capital and the long term stability that communities need with respect to housing.”
He said one challenge had been getting buy-in to his mission: “There was initially a little reluctance among public sector bodies to understand why would a private sector operator want to be socially responsible – whether this was just a wolf in sheep’s clothing.” But that has not been his major issue.
“What has been a great challenge is the use value of land. We have a model where we do not want to rely on government grant or minimum government grant if possible, and that means that the land we buy has to reflect the use of the properties. And there has been a little bit of a tension in some of the discussions we have had with public sector bodies who have been looking to maximise capital receipts of land, but also want to maximise affordable housing outcome – but I think that’s been a natural tension.”
Gareth Crawford, head of development, London and the South for Home Group, agreed. “It’s a land value issue. Local authorities are knocked down too often from their policies by developers, and therefore we lose affordable housing. There’s another issue, we need to get hold of what affordable housing is. The GLA has this twin view, one product for people on benefits, one for people in lower paid employment. Lots of local authorities in London have a different view of what affordability is. And there isn’t a connect between the two. And I am sure central government has a different view.”
Jonathan Gooding, CEO of Dolphin Living, suggested that public bodies need to think about returning to the idea of long term leases for their sites. “If we take a simplistic approach to best value meaning the biggest cash payment that can be made on day one, then the housebuilders are like the grey squirrel, they will destroy all other species that go before them, and once land is developed for private sector housing and sold either freehold or on very long leases, it is lost in perpetuity. The smart thing the London landed estates did 100, 150 years ago, was to get capital receipts in, but do it on a leasehold basis so that they had the reversions – they were thinking on a much more long term basis.”
Alibhai said the focus on value needed to be much more holistic. “What does value for money mean? Is it maximising your land receipt? In that case, sell it to Berkeley Homes, because they’ll build £2,000 per sq m flats and penthouses – but that’s not very useful to a lot of people who live in London. I think value for money needs to be reinterpreted to say, value for use. And you can do that very simply. What we did was we went to Knight Frank, and we said, value the land given its use value. And that allows you, as a council, as a public sector body, to ensure that the land is being fairly priced, for its use. You then protect the mission of that land, by locking in, on the title, how that land is to be used in perpetuity. And the only people who can change that, is the council. Is it possible to do in London? Absolutely.”
Barbara Brownlee, director of housing and regeneration at Westminster, said some public bodies were worse than others. “There are other public bodies that own a lot of land in London, and a particular one that everyone in some ways is dealing with, is the NHS, who have moved almost from one end of how they value their land, almost violently to the other end of the spectrum, which is about absolutely making the most money possible out of that land. And I think there needs to be a mature debate, which will take some time, with that organisation, about shifting somewhere back to the middle, and looking at their land with a bit of a broader eye.”
Committee member Andrew Boff wondered if authorities had lost control of their own policies. “It seems to me that an awful lot of London local authorities are pretty spineless when it comes to their own planning regulations and can be bought off by a developer waving a cheque book. Do you think there’s grounds here for planning being much more prescriptive, and taking a much stronger line on their own plans? Time and time and time again you hear about planning developments which go against the local authority’s own plan.”
“You make a very good point, but it’s not that simple,” responded Brownlee. But she said it is symptomatic of a situation where developers ultimately overpay. “I do think people are paying extortionate amounts for land, and they are not going to build it out, they are then going to get an even higher planning permission and sell it again. And there’s a lot of development in cetnral London where no one ever intends to build the land out. And that is definitely something that is going on in Westminster, which makes it really difficult to make your planning policies comply.”
Crawford saw speculation as the issue, too. “If a developer goes to a local authority and says here’s my viability study, we can’t now deliver your policy of affordable housing numbers, what they’re essentially saying is, we paid too much for the land. Well I would have thought that’s their problem.”

LPA Perspective: The housing committee hearing assembled a dynamic mix of home providers, all with a slightly different path to tread, and all convinced they can provide homes at sensible costs – so long as they can get the land at the right price.
Their solutions seem to make sense. If those disposing of sites can wake up and actually work out the value of their sites, then they will agree to long term leases, or to restrictive covenants – which can be made to work through existing mechanisms such as section 106 agreements.
Too often, it seems, a public body will try to sell off a site to a private developer, to achieve maximum return, only to find they have pushed up the price to a point where the buyer then pleads it cannot afford to deliver the required affordable housing contribution. In every case like this, the public purse is winning on one hand, then losing on the other. A more holistic consideration of what a piece of land ought to deliver, ought to give a better ultimate outcome. Less capital receipts, sure, but how about keeping the freehold of a site, or ensuring decent rental housing gets built?
It is to be hoped that the new mayor, whoever it is, gets to appreciate the committee’s’ feedback. There are plenty of innovative home providers ready to get working on London’s housing problem, just so long as those in control of public sites, and planning permissions, get their heads round the opportunities.

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