On 2nd June, we attempted to present this in the short time given. Here is the Full Text version.
Affordable Housing
Affordable housing and the Old Post Office
There is a pressing need for more affordable housing in Kingston. As St George’s own affordable housing statement points out, average house prices are more than 11 times the average salary of Kingston residents making it virtually impossible for the majority to consider buying a home. Reflecting this need, as you know, the council’s policy position under DM15 is that 50% of housing on developments of 10 units or more should be affordable.
St Georges offering 15, less than 1/3 of council’s requirement!
The Kingston Affordable Housing SPD explicitly states in Paragraph 5.22 that "The cost of meeting the requirements of DM15 and this SPD, along with other planning obligations, should be taken into account when acquiring an option or purchasing a development site.” The developer must have been aware of the development requirements of this site, including the two listed buildings and affordable housing requirement, when they made their offer for the land. It is therefore totally unacceptable to then submit a proposal that not only fails to meet the terms of the development brief for the site [I’ll leave others to comment on this] but does so in a way that so flagrantly fails to address the established policy on affordable housing. This development prioritises maximising profits and the provision of homes that are not affordable to local residents and may well be snapped up by speculators purely as investments and not as homes.
At the heart of this process is the infamous financial viability assessment. These studies provide a view on the amount of expected development income that could be available to support affordable housing and other considerations, after development costs, profits (at circa 20%) and land acquisition have been taken into account.
Since the introduction of viability assessments, it is well known that levels of affordable housing provision have dropped significantly, even with the continuous growth property values. Just look at this trend reflected at the share price performance of property developers!
The financial viability assessment contains a series of complex calculations and assumptions and the one prepared for the Old Post Office development is a mystery to me as it has not been published. So in the absence of anything specific to go in I did some research into the independent reviews of viability assessments. I found numerous examples where local authorities have successfully challenged developer’s assessments. Where councils were prepared to fight their corner, they achieved substantially higher provision than that originally offered.
In a recent example - on Blackfriars Rd in Southwark an initial proposal of 26% affordable housing was revised upwards to 35%, in another at Sugar Quay the viability assessment was found to have undervalued sales prices and overstated the value of an alternatives use for the site so that the affordable housing contribution offered was £7.5M lower than that which could be afforded. Other example, includes a development in Barnet where the 0% provision offered by the developer was independently assessed and a 33% provision deemed viable, with a 20% allowance for profit.
it is clear to me that those council’s that are prepared to really challenge a developer’s viability assessment can secure a much better result for the communities they represent. I would urge you all to ensure you are totally comfortable that this area has been examined in sufficient detail and that whatever independent review you commission is sufficiently robust.
However, there is, perhaps, a more serious issue that I believe must be considered and that is that the very nature of the proposed development at TOPO is, in part, responsible for the woefully inadequate level of affordable housing.
This is because the construction costs of high rise towers are much more expensive per home than lower/mid rise development. Colleagues with many years’ experience in residential development tell me that costs are 7-15% higher per m2 when height increases from 8 to 20 storeys. Of course the additional number of units in a tower provides much more total income to the developer with their fixed profit margin. But the additional costs mean that each home is less profitable than a low rise equivalent. This means that there is less money available to fund affordable housing!
When I spoke to my colleague about this development they were amazed that a tower was proposed for Kingston, in their view the viability of the additional costs of a tower at sales prices in the area would mean that it could only proceed if the design quality was compromised and other costs reduced, such as the affordable housing contribution. He told me about a development in Kilburn that is delivering 40% affordable housing and outstanding design quality because the development height and density was contained by the planning brief.
We are therefore left in a position where the very features that make the development so unattractive to residents and which contravene established development briefs are also the factors that are impacting the supply of affordable housing.
Unfortunately this is not something that would be picked up in an independent review of the financial viability assessment because the review will only consider the viability of the development as proposed. But, you the planning committee, can consider whether there might be a better way to develop the site, one which would provide more affordable homes and create a high quality environment that provides homes needed by Kingston rather than providing homes that cannot be widely afforded and that maximise profits for a few.
A quote from a Conservative councillor in Waltham Forest on the ConservativeHome website, describes his experience of this situation:
"Given that anywhere in London where you propose a ten-storey development, outside the very dense core areas, you will face significant objection from residents it is not surprising to find developers pushing this even further – on the basis as they might as well shoot for the stars in the hope of getting to the moon!
All along though, what gets squeezed are local residents, who don’t like high-rise development, and the provision of affordable housing because high-rise, high-cost development may favour landowners and developers, but it certainly does not help provide affordable homes.”
Another brief quote, this time from the Prince’s Foundation report into Housing London:
"London has seen something of a return to high-rise development in the past decade - but rather than in the form of estates with provisions for social housing, London’s new high-rises are glittering towers of exclusivity and luxury living - out of the reach of the average Londoners, and unsuitable to the needs of many households. New development in London risks perpetuating ghettoisation, carving out more and more areas of the city which cater only to higher income residents.”
A final point, I am not against development and definitely not against profit, but it is interesting that the proposers of this scheme declared gross profits of over 30% in 2014 whilst paying their Chief Executive over £5M. They are able to make a pretty healthy return out of their business, but how much of this is a result of schemes where they make additional profits by overdeveloping the site and consequently under providing affordable housing. I urge the council to think very carefully about whether this development offers the best outcome for what is one of the key strategic sites in the borough and also to consider whether it sets a poor precedent that Kingston is a place to make hay at the expense of balanced development.
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There is a pressing need for more affordable housing in Kingston. As St George’s own affordable housing statement points out, average house prices are more than 11 times the average salary of Kingston residents making it virtually impossible for the majority to consider buying a home. Reflecting this need, as you know, the council’s policy position under DM15 is that 50% of housing on developments of 10 units or more should be affordable.
St Georges offering 15, less than 1/3 of council’s requirement!
The Kingston Affordable Housing SPD explicitly states in Paragraph 5.22 that "The cost of meeting the requirements of DM15 and this SPD, along with other planning obligations, should be taken into account when acquiring an option or purchasing a development site.” The developer must have been aware of the development requirements of this site, including the two listed buildings and affordable housing requirement, when they made their offer for the land. It is therefore totally unacceptable to then submit a proposal that not only fails to meet the terms of the development brief for the site [I’ll leave others to comment on this] but does so in a way that so flagrantly fails to address the established policy on affordable housing. This development prioritises maximising profits and the provision of homes that are not affordable to local residents and may well be snapped up by speculators purely as investments and not as homes.
At the heart of this process is the infamous financial viability assessment. These studies provide a view on the amount of expected development income that could be available to support affordable housing and other considerations, after development costs, profits (at circa 20%) and land acquisition have been taken into account.
Since the introduction of viability assessments, it is well known that levels of affordable housing provision have dropped significantly, even with the continuous growth property values. Just look at this trend reflected at the share price performance of property developers!
The financial viability assessment contains a series of complex calculations and assumptions and the one prepared for the Old Post Office development is a mystery to me as it has not been published. So in the absence of anything specific to go in I did some research into the independent reviews of viability assessments. I found numerous examples where local authorities have successfully challenged developer’s assessments. Where councils were prepared to fight their corner, they achieved substantially higher provision than that originally offered.
In a recent example - on Blackfriars Rd in Southwark an initial proposal of 26% affordable housing was revised upwards to 35%, in another at Sugar Quay the viability assessment was found to have undervalued sales prices and overstated the value of an alternatives use for the site so that the affordable housing contribution offered was £7.5M lower than that which could be afforded. Other example, includes a development in Barnet where the 0% provision offered by the developer was independently assessed and a 33% provision deemed viable, with a 20% allowance for profit.
it is clear to me that those council’s that are prepared to really challenge a developer’s viability assessment can secure a much better result for the communities they represent. I would urge you all to ensure you are totally comfortable that this area has been examined in sufficient detail and that whatever independent review you commission is sufficiently robust.
However, there is, perhaps, a more serious issue that I believe must be considered and that is that the very nature of the proposed development at TOPO is, in part, responsible for the woefully inadequate level of affordable housing.
This is because the construction costs of high rise towers are much more expensive per home than lower/mid rise development. Colleagues with many years’ experience in residential development tell me that costs are 7-15% higher per m2 when height increases from 8 to 20 storeys. Of course the additional number of units in a tower provides much more total income to the developer with their fixed profit margin. But the additional costs mean that each home is less profitable than a low rise equivalent. This means that there is less money available to fund affordable housing!
When I spoke to my colleague about this development they were amazed that a tower was proposed for Kingston, in their view the viability of the additional costs of a tower at sales prices in the area would mean that it could only proceed if the design quality was compromised and other costs reduced, such as the affordable housing contribution. He told me about a development in Kilburn that is delivering 40% affordable housing and outstanding design quality because the development height and density was contained by the planning brief.
We are therefore left in a position where the very features that make the development so unattractive to residents and which contravene established development briefs are also the factors that are impacting the supply of affordable housing.
Unfortunately this is not something that would be picked up in an independent review of the financial viability assessment because the review will only consider the viability of the development as proposed. But, you the planning committee, can consider whether there might be a better way to develop the site, one which would provide more affordable homes and create a high quality environment that provides homes needed by Kingston rather than providing homes that cannot be widely afforded and that maximise profits for a few.
A quote from a Conservative councillor in Waltham Forest on the ConservativeHome website, describes his experience of this situation:
"Given that anywhere in London where you propose a ten-storey development, outside the very dense core areas, you will face significant objection from residents it is not surprising to find developers pushing this even further – on the basis as they might as well shoot for the stars in the hope of getting to the moon!
All along though, what gets squeezed are local residents, who don’t like high-rise development, and the provision of affordable housing because high-rise, high-cost development may favour landowners and developers, but it certainly does not help provide affordable homes.”
Another brief quote, this time from the Prince’s Foundation report into Housing London:
"London has seen something of a return to high-rise development in the past decade - but rather than in the form of estates with provisions for social housing, London’s new high-rises are glittering towers of exclusivity and luxury living - out of the reach of the average Londoners, and unsuitable to the needs of many households. New development in London risks perpetuating ghettoisation, carving out more and more areas of the city which cater only to higher income residents.”
A final point, I am not against development and definitely not against profit, but it is interesting that the proposers of this scheme declared gross profits of over 30% in 2014 whilst paying their Chief Executive over £5M. They are able to make a pretty healthy return out of their business, but how much of this is a result of schemes where they make additional profits by overdeveloping the site and consequently under providing affordable housing. I urge the council to think very carefully about whether this development offers the best outcome for what is one of the key strategic sites in the borough and also to consider whether it sets a poor precedent that Kingston is a place to make hay at the expense of balanced development.
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