London’s public bodies are still focusing on cash returns, rather than the wider public good of delivering appropriate levels of affordable housing. And that tension continues, as more sites are prepared for disposal.
Members of the GLA planning committee heard in February how three major delivery bodies plan their site disposals. All are generally balancing the tension of maximising the return from disposals – which are generally outright land sales – with an eye on their responsibilities to help deliver affordable homes for London, a priority the mayor has set.
Committe chair Nicky Gavron said there was a balance needed, between achieving maximum returns, and achieving London’s wider strategic concerns, particularly housing, carbon and infrastructure provision. The target must be maximum affordable homes, towards targeted numbers, she said, and public bodies had an obligation to show the way: “If we fall short on our public land, what sort of message are we giving out?”
“There is a balance to be struck,” admitted David Lunts, executive director housing and land, at the Greater London Authority. “Part of the purpose of the land portfolio was primarily to make sure that they were built out with a mixture of housing, affordable housing and other forms of tenure, other regeneration outcomes, particularly employment, infrastructure and facilities.”
“But in addition to that, of course, there was a need to generate receipts, because the mayor in 2012 inherited the GLA’s land and also inherited the debts that came with the assembly of the land for the Olympic Games and various other obligations to repay outstanding debts. So we had a twin objective if you like – one was to get these sites built out for regeneration and housing purposes, secondly to generate capital receipts. And we feel that we’ve struck that balance pretty well.”
Andrew Wright, director of strategic development, Barnet Enfield and Haringey Mental Health NHS Trust, noted the NHS is only now getting its act together, and continues to work in silos. Land is owned by individual organisations within the NHS, though some new sub-regional estate boards which are currently being set up. “There is a big issue for the NHS around London, essentially the priorities are decided by individual organisations.”
Wright said the issue was finding capital receipts: “Within the NHS there is no source of capital other from disposal of assets.” He said this led to a project by project approach, as in Tottenham, where the NHS obtained a redevelopment permission prior to selling the site: “The planning approval that we got from Haringey council, we had only 14% [affordable] and the amount of money that we need to build the existing estate was defining affordability. You can’t have a higher proportion of affordable housing for the people of Haringey and a new hospital for the people of Haringey from the same pot of public money. That’s what it boils down to.”
Gavron was also concerned that Transport for London, which has just selected a panel of development partners for a massive new site development programme, is ignoring mayoral demands. Three sites just submitted for planning have only just over 20% affordable housing, she noted: “We’re looking so much to public land, and particularly the mayor’s own land, for affordable housing – because we’re so short of housing, and affordable housing in particular, and this is across a number of tenures of course. Do you think that’s good enough?”
Graeme Craig, commercial development director at TfL defended the projects. There was a need to look at the issue in the round, rather than at receipts on a site by site basis. “London still needs light industrial activity” he noted, as at Parsons Green, where TfL could have pushed for food and beverage or housing to obtain individual best value, rather than retain some business uses. “You cannot reconcile all of these things, at every site, and achieve every objective at every site.” TfL has tough commercial targets, including housing, and employment uses.
Craig said TfL’s development sites had been prioritised on basis of value and deliverability – with no specific view on housing provision. “The thinking was to bring forward the sites that we could, in order to generate a return that would be reinvested into the transport system. TfL absolutely saw itself as a transport organisation, and while we were looking for receipts – ideally ongoing revenues to reinvest in the transport system – we saw ourselves as a transport organisation rather than a property developer.”
Committee members also quizzed their guests about the option to retain an interest in sites long term, perhaps by using leasehold disposals rather than straight sales. Lunts replied: “We’ve taken the view, largely that it made sense to eventually release freeholds, in return for cleaner deals that the development community could see benefit from. We don’t usually release freeholds up front; freeholds are usually released at the end of a development, and typically our schemes are quite long term and so we will usually procure development partners and release land through leasehold disposals and freehold only passes across once development is complete.”
“But I think more recently, we’ve certainly been looking at the option of keeping long term revenue receipts in addition to capital receipts. So the Stephenson Street procurement that I mentioned at West Ham, where a third of the units are oging to be long term built to rent, with a minimum 10 year covenant so that they remain in that use, we’ll be taking a fairly significant proportion of the gross rental roll from that scheme, rather than just taking a capital receipt.”
LPA Perspective: Thankfully, via the NHS regional boards, and the GLA’s activities, there are attempts now to bring more joined up thinking to the reuse of public land. But there remains a massive tension, with the NHS, TfL and others desperate to balance their books by maximising income; while the mayor would, essentially, prefer them to pass out their assets at below market value, to subsidise social housing. Truly joined up government would be able to work out the net overall best value approach; but the current set-up cannot accommodate such thinking.
So it is distinctly ironic that a health authority beats down the planners on affordable housing contributions, with a financial argument that trumps even the most aggressive private developer’s viability argument. Rather than sell off the site for private housing, why not build key worker homes suitable for nurses and other, low paid NHS workers who will staff the new hospital facility? The problem with that approach is, it doesn’t get the local NHS the cash it needs to build its new health facility.
TfL is right not to be cowed at this early stage in its new journey as a property developer. It can, quite rightly, be serving different parts of the London housing market well, while apparently failing to deliver enough affordable homes in the way the mayor defines them. By building flats for private rent above or around railway stations, and renting them at sensible rates, it will meet a massive demand for homes in the capital. By holding onto the freeholds, it does not need to worry about a market return, in the way a private developer might. Surely here is the way that TfL could contribute, substantially, to providing many more affordable homes in the capital – just so long as its new development partners don’t try to wrest open market value out of every site.