This is a guess post by Independent councillor Shahed Ali
I attended John Biggs’s first Mayoral Assembly held at Swanlea School on January 21 2016. Although a step in the right direction, it soon became obvious to me it was nothing more than a ‘talking shop’ which would achieve nothing more to deliver our greatest need – building affordable rented housing.
The Whitechapel Vision aspires to deliver 3,500 new homes over several sites identified for private development. Our local plan, which clearly dictates our planning policies, requires developers to provide a minimum of 35% affordable housing on-site, or 50% affordable housing off-site. Of this, a ratio split of 70/30 must be affordable rent/intermediate housing.
The latest developer to submit plans for development is ‘Sainsbury’s Whitechapel Square’. This proposes a mixed development including residential housing to provide 608 new homes including a now revised towering 28 storey building, originally pitched at 33 storeys in height.
However, if approved, it will only delivery 60 affordable rented homes [Note: Sainsbury’s has sent me the following comment: We are proposing to bring forward 89 social rent units, not 60 affordable rent units as Cllr Ali states. As I’m sure you’re aware, socially rented units are rented out at a cheaper level than affordable rent units.] So if we apply the same calculation to the total new homes Whitechapel Vision seeks to deliver, residents will get only 345 affordable rented homes of the total of 3500 new homes. If our local plan housing target of 35% was to be met, residents could get 1225 new affordable homes, of which 856 could be affordable rent.
Mayor John Biggs response to concerned residents’ questions about the Sainsbury’s site was: “Our hands are tied by planning policy, but we try our best to get a better deal. For example we managed to negotiate a reduction in height of the tower block from 33 storeys, down to 28 storeys.”
This is my view is a weak and defeatist response. For me, it raises serious questions as to the entire planning process and Tower Hamlets Labour group’s inability to challenge and get a much better deal for our community.
The question from John Biggs should be: “Is a viable development able to be built on this site?” And not: “Is this specific scheme viable?”
Anything can be made to look unviable, but it does not mean viable alternatives are not possible. Developers come with the attitude of: “How much could we get out of this site? How much profit are we losing as a result of following planning policies?”
So they start with packing as much as possible on to any given site and work back from there, instead of starting off with the local plan in the first place! Developers can still make a perfectly respectable profit by following the plan – because the plans themselves are viability tested.
I believe if developers feel they cannot do it according to our local plan, then they should not buy the land in the first place. Let someone else develop the site who will respect and follow the rules.So how do developers get away with it? Developers claim their schemes are not commercially viable, and must submit a financial viability assessment explaining why the figures do not stack up. In simple terms, this assessment takes the total costs of a project, and subtracts them from the total projected revenue from sales, based on current property values.
What’s left over is called the “residual land value”. The value of the site once development has completed, must be high enough to represent a decent return to the landowner. It is therefore in the developer’s interest to maximise its projected costs and minimise the projected sales values to make its plans appear less profitable.
With figures that generate a residual value not much higher than the building’s current value, the developer can wave “evidence” before the council that the project cannot be delivered if it has to meet our affordable housing targets.
A crucial failure of Tower Hamlets council is that developers’ viability assessments are hidden even from councillors and protected from public scrutiny on the grounds of “commercial confidentiality”.
Developers argue revealing the figures would compromise sensitive trade secrets. But I believe these reports do not tend to be scrutinised effectively by our planning officers either, and the confidentiality argument makes no sense because build costs are well-established in the public domain via the BCIS database, the industry standard tool everyone relies on.
Sales values are easily obtainable yet developers and local councils spend huge resources fighting to keep the figures in these viability assessments secret. I have requested viability assessment reports from the council myself, and it makes me wonder exactly what they are trying to hide?
Consultants know how to fiddle the figures in their client’s interest and planning departments are simply not resourced to scrutinise against the likes of specialist consultants such as BNP Paribas who have dedicated full-time teams working upon specific developments.
Many consultants are now paid bonuses for successfully reducing the number of affordable housing units on a scheme.
Local councils have lost the plot on this. All the things that are supposed to determine the best use of land – mix of uses, massing, density, social mix – have been trumped by finance. It’s a form of financial modelling that’s hidden from view, entirely determined by the developers themselves.
Southwark and Greenwich councils were recently forced to disclose viability assessments after the determination of local residents’ battle that ended in tribunals awarding landmark decisions in favour of releasing the documents for public scrutiny.
Greenwich council, to its credit, has recently proposed introducing a policy that would require all viability assessments to be open to public scrutiny following calls for transparency.
It is a step in the right direction but simply making the information public so people know why the council is conceding its policy on affordable housing levels is not good enough. The fundamental basis of viability itself has to be challenged effectively. It is not simply an issue of transparency.
Braeburn Estates is a consortium led by Canary Wharf Group and Qatari Diar, developing a scheme known as the Shell Centre. That council’s planning policy aims for 50% affordable housing, but the Shell Centre will provide just 20%. It is the result of another viability assessment that pleads poverty to the council, while trumpeting the scheme as a lucrative opportunity to potential investors in the same breath?
This viability assessment was only disclosed when the project went to public inquiry. To the council, flats were listed with an average sales value of £1,330 per sq ft, while a presentation aimed at investors suggested they would sell at an average of £1,641 per sq ft, representing a disparity of £234m across the scheme!
I was gobsmacked to sit and watch as Tower Hamlets incumbent planning committee gave approval for the huge Wood Wharf site neighbouring the Canary Wharf estate, outline planning consent with a requirement to provide only 25% affordable housing, for a development which will only come to completion in several years’ time, if not at least a decade away?
Surely house prices will have increased significantly, especially with the arrival of Crossrail at Canary Wharf?
These viability assessments conclusively prove that we cannot rely on developers to build affordable housing, and they are standing in the way of other groups who want to build it – the community land trusts, housing associations, co-housing groups – by preventing them from getting access to the land.
Instead the industry is wilfully inflating land values and forcing ill-resourced local council planning officers to recommend permission for schemes that fail to meet our local plan.
I get astonished by either the absolute silence, or silly questions that some of the committee members come up with at planning meetings.
It is obvious some do not bother reading the committee reports, nor has the knowledge or experience of being in a position to make such important decisions which will affect our generations to come.
It is a complete mockery.
These failures are actively contributing to the pace of ‘social cleansing’ being accelerated to the point of no return. As a parent of two young girls, I am seriously worried about their future inability to remain living in Tower Hamlets. However instead of allowing opposition members to actively contribute to these committees, the Labour group pitifully chooses to use its majority to effectively reduce and ‘take-out’ members who challenge such planning applications. I myself have become such a victim.
Coming back to the Sainsbury’s scheme, it seems likely that Barrett’s will be the development partner as they have worked in partnership with Sainsbury’s on other schemes.
The Mayor has set-up what he calls the ‘Housing Policy and Affordability Commission’. Opposition councillors are excluded from this forum. However developers are most welcome, including Barrett’s’ Regional Managing Director, Alastair Baird.
Clearly this is a conflict of interest as I cannot imagine Barrett’s would be pro-active in championing the demonstrated flaws contained within viability assessments?
The Mayor needs to seriously take immediate action and engage the expertise required to comb through the viability assessment figures in detail when developers argue they cannot meet our policy requirement on affordable housing provision.
Viability is completely destroying the ability to build mixed communities, all on the grounds of spurious financial models, a legalised practice of fiddling figures that represents “a wholesale fraud on the public purse”.
It is critical that Tower Hamlets council develop the expertise in-house to tackle it now.
(I am now an excluded member of the Strategic Development Committee. Due to changes to the political composition of group members, the council’s proportionality reduced a committee member. However instead of affording the Independent Group the (good practice) opportunity to choose and decide which committee they would like to reduce a member within, the Labour group leader decided that the SDC committee should lose a IG member, which now gives Labour members an increased two-member majority on the SDC. Never has the SDC had a political group with a 2 member majority on the SDC.)