We all know there is a housing crisis, and (most of us now) understand we need to increase the building of new homes to address it. However, it is also vitally important – if we are to create a better future – that these new homes are built in sustainable communities and provide homes for all in society – not just those at the top. I would also add there needs to be a fair and equitable approach to the solution with both the public and private sectors playing their part.
That is why, as a local resident in Greenwich, I made a stand against a deal between Greenwich council, the Mayor of London and a housebuilder to substantially reduce the number of new affordable homes to polarise their provision – with no affordable homes on the high value sites and high proportions (up to 60%) of affordable homes on the low value sites.
Back in the summer of 2012 developer Knight Dragon – a company owned by Hong Kong billionaire Henry Cheng Kar-shun- bought a majority share in an existing joint housebuilder venture to build homes next to the O2 Arena on Greenwich Peninsula. Despite being fully aware of an existing contractual obligation (in the form of a section 106 agreement or planning obligation) between the venture and Greenwich council and the Mayor of London, Knight Dragon immediately sought to exit from this legally binding agreement. Specifically, they sought to reduce the amount of affordable housing from the agreed 38% to just 21% of the roughly 10,000 homes and to change its distribution so that no affordable housing be provided on four high value sites on the riverside, meaning the loading of this lower number of affordable housing onto a small number of sites at the southern end of the Peninsula.
I did not buy the developers argument that it was no longer financially viable for them to deliver an agreement that they were legally bound to deliver. I was particularly unconvinced given Knight Dragon bought into the venture with the full knowledge of this commitment which presumably was reflected in the price they paid to join. At the time house prices were well on the increase, rising in London by 12.3% in 2013 and we all know how they have done ever since! We subsequently know that the developers claimed to the council at the time that “There is little indication that 2013 will see any significant further growth in prices…”
Much to the dismay and objection of the local community, at a Greenwich council planning committee the council agreed to the developer’s demands resulting in the loss of around 500 affordable homes. And despite the substantial implications from this decision, this new agreement (or variation) wasn’t subject to any public consultation or scrutiny, merely being shared a couple of weeks in advance of a council planning meeting. The councillors who made the decision were also not provided with any of the details of the financial viability reports when making their decision. We also subsequently learned that the deal would come with £50m in government grant for housing associations to buy the affordable housing from the developers and that the price of the land (which was owned by the Mayor) would also be reduced into the bargain. The council’s decision was subsequently upheld by the Mayor of London.
That’s why I undertook a Freedom of Information Request (FOI) from the council to seek the disclosure of the viability assessment that was used to demonstrate why the previously agreed affordable housing would mean the development was now not profitable. The council initially refused to respond to my request and when instructed to disclose the report by the Information Commissioner (ICO) they disclosed only their own assessment of the developer’s viability report (not the developers report) and did so with critical “redactions” in place. I appealed to the ICO who again found fully in my favour and instructed full disclosure. Unfortunately, at great financial cost to the council taxpayer, the council decided to fight full disclosure and take the case to the Tribunal.
In the course of the trial it became apparent that consultants Marsh & Co. who were employed by Greenwich council to undertake the independent assessment of the developer’s viability assessment (carried out by consultants BNP Paribas) were both jointly undertaking work paid for by the council at the same time providing advice on affordable housing for the borough. In addition, the joint report by Marsh and BNP Paribas recommended that the council should adopt a policy of at least 35% affordable housing on each and every residential development across the borough – and that in some circumstances affordable housing of between 50% to 60% was deliverable. The fact that these consultants were working jointly at the same time when one was undertaking an independent assessment of the other – and the apparent contradiction in their advice to the council on affordable housing generally and specifically on Greenwich Peninsula – raised a number of eye brows at the Tribunal and is specifically noted in the decision notice. It does nothing to provide public confidence in the planning system.
In January 2015 the Tribunal found fully in my favour for full disclosure of both the developer’s viability report and the accompanying councils own independent assessment and these have finally been made public. I have left it to experts to go over the numbers in detail, but I think it is clear to anyone reading the reports that the taxpayer got a very poor deal, that the developer got a spectacularly good deal and that it was well within the ability of the developer to have delivered many more affordable homes and to have delivered a much more mixed sustainable community than what we have been left with.
This case has helped shine a light on the (mis)use of viability reports by developers to reduce their affordable housing contributions. There have been some positive outcomes, such as Greenwich council now requiring the full disclosure of viability reports to the public in the case where affordable housing is being reduced. And there have been positive views made recently by the House of Lords select committee and the London Assembly for public disclosure of viability reports. However, only by ensuring full disclosure by all local planning authorities and a consistent approach to the undertaking of these types of reports will public confidence in the planning system be restored and where the community can have confidence that the amount of affordable housing delivered is fair and equitable and provides good value to the taxpayer.
By Shane Brownie