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How luxury flats avoid affordable housing regulations

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Friday 27 May 2016 11.34pm
All this land that Southwark Council owns, is it occupied? It seems to me that they are scrabbling round looking for spaces to build on. Either that or they can't be arsed to rush because I don't see then spending much of that 'in lieu' money in building new housing stock.
Monday 30 May 2016 2.05am
Sandgrown Dave wrote:
OK, so you see beleaguered developers having no option other than to beg for release from onerous constraints so that they can eke out a fair return on their investment. I see them signing up for projects with the cynical intention from outset of later using financial sophistry to renege. Probably we'll have to agree to differ.

I agree that there is likely an expectation from the developers that the initial project figures are far from set in stone. But undoubtedly, the council is somewhat complicit in these tactics. It's much easier for the council to put forward a scheme with an inflated affordable housing component and to then quietly agree to amendments to get it done. (On that point: Do you really think that Sadiq's 50% affordable housing target has any footing in reality (especially if we want to avoid pushing all affordable housing out of London)? It's a good soundbite to drop for the elections, and a nice request to make to developers, but once the figures are digested I expect that we'll see results that are similar to previous efforts.)

This is largely a matter of risk. While housing developers in SE1 have had a good go of it recently, large scale development and regeneration poses massive risks (see the 90's and 2009). When Southwark gets fixed payments from developers they've locked that amount in and can make plans for how it will be used. A different option for Southwark would be to enter into arrangements that entitle them to a share of any profits over a pre-agreed figure (the City of London uses this all the time for office developments). Councils like certainty for budgeting reasons (and admittedly, developers don't like sharing profits), but this type of arrangement might help align interests. Or a combo of the two approaches - some up front, some profit share?

I still stand by my point about time though. Planning delays, inefficiencies, and frivolous reviews have a significant impact on the return on capital. If the process was streamlined there would be a lot less scope for re-trading the initial arrangements.

Sandgrown Dave wrote:
Well, speaking for myself, I'd rather my money wasn't used in unethical and socially destructive ways and I'd be content to see a slightly smaller return if that was the price to be paid. Sadly, the way that capitalism is currently organised, my opinion isn't sought.

In my experience, senior executives of large developers genuinely care about the communities in the areas where they are developing and have a long-term vision for their properties/companies/funds, so want to create a development that helps build that future. There will never be a plan that everyone will support, but honestly, in my opinion, the only real "sharks" that I've come across are a few of the small developers who take a short-term view and will cut every corner and push every boundary to pull out some quick cash.

You're entitled to your view of course, just what I've experienced over the years.

Sandgrown Dave wrote:
Offhand I can't think of any examples in Southwark of luxury developments and new housing for ordinary folk springing up alongside each other, the latter financed by the former. Can you? Happy to be proved wrong.
sjac - The One Tower Bridge development is the obvious example.

Ah, you got me there. I should have framed my question more carefully. Whilst it's in Southwark, the social housing at One Tower Bridge is City of London, not Southwark Council. Any others?

How about 169 Long Lane? Again, this depends on your definition of "luxury": A private 2-bed at Valentine Place (169 Long Lane is wrapped around the building) sells for 1m+, and a number of the 21 social rented flats about to be delivered at 169 would be worth more than that on the private market. Admittedly, they're "only" on the corner of Weston Street and Long Lane. Does that count?

Sandgrown Dave wrote:
Agreed, for me a major part of SE1's appeal is that there is (despite everything) quite a mixture here. However I honestly don't think there's much danger of the needs of the fairly prosperous being ignored.

Indulge me in this made-up scenario: After amassing significant debt getting her masters from a top university, Jill has "made it" and has a 100k a year job in the City. She's 30 years old and her and her husband (Jack) have just had their second child. Jack makes an "average" salary so they've decided that he'll stay at home to look after the kids. They want to live in SE1 so that she has a chance to see the family despite working 60+ hours a week. After tax she takes home 5,500 a month. 2,500 of that goes to rent (which is a pretty reasonable rent for a 2 bedroom flat at Valentine Place mentioned above). They scrimp by on 1000 a month (remember, she's "rich" by the standards that seem to be applied by the media, so I'd hope you'd agree that that's scrimping) and they save 2000 a month - 24,000 a year. In order to save up the 30% deposit and taxes required to buy their 2-bed flat (along with paying off the student debt), they need to save for at least 15 years. Even then, there's no chance that they'd qualify for the 700k mortgage that would be needed.

That kind of scenario is pretty common; and the result? These families are forced out of SE1 in substantial numbers, because it's just not a feasible lifestyle. So yes, i do think that the needs of the "fairly prosperous" are ignored.
Wednesday 1 June 2016 5.54pm
What would be the rent on the two bed next door in the social housing building?
Wednesday 1 June 2016 9.37pm
MiltonF wrote:
What would be the rent on the two bed next door in the social housing building?

Rent cap for a 2-bed social housing flat is 146 pw or 633 per month.
Wednesday 1 June 2016 11.20pm
Karen I wrote:
All this land that Southwark Council owns, is it occupied? It seems to me that they are scrabbling round looking for spaces to build on. Either that or they can't be arsed to rush because I don't see then spending much of that 'in lieu' money in building new housing stock.

I'd expect that most of it is occupied by something, but whether or not that something is productive or habitable is another question (the answer to which i have no idea). The borough of Southwark covers 28.85 sq km, so let's guess that Southwark council owns 14 sq km. Seems like in all that space there must be a number of spots that would be ideal for development, but every site will face some kind of opposition (everything does). Maybe also a lack of resources?

Additionally, Southwark council don't appear to be very good at managing costs. It's been reported that development costs for the recent 113 social housing units that have been built by the council (which includes the flats at 169 Long Lane mentioned above) cost 43.3m, or 383k per flat. That of course excludes land cost/value (which Southwark already owns) and is significantly more than the costs incurred by developers to build "luxury" flats. That's probably down to a lack of experience as well (hopefully not something more sinister...) but shows that they need to shore up their team or just hire private developers to build the units for them. Or - wild idea - just sell them and buy twice as many local older units in the private market (such as the many ex-council units that were acquired through right to buy).
Thursday 2 June 2016 8.51am
sjac wrote:
Or - wild idea - just sell them and buy twice as many local older units in the private market (such as the many ex-council units that were acquired through right to buy).

I think that has a lot of merit.
Thursday 2 June 2016 5.27pm
So in the new social flats next door to the Valentine for a two bed the price difference is 1,867 per month. Knock of say another 25% as they won't be as big or as nice inside, that still gives you a discount of 1,400 per month, which is 16.8K after tax income, which is not ever means tested and the lease is for life. Nice work if you can get it.
Friday 3 June 2016 12.22am
MiltonF wrote:
So in the new social flats next door to the Valentine for a two bed the price difference is 1,867 per month. Knock of say another 25% as they won't be as big or as nice inside, that still gives you a discount of 1,400 per month, which is 16.8K after tax income, which is not ever means tested and the lease is for life. Nice work if you can get it.

The finish may not be as nice, but you might be wrong on the size. There's a 2 bed flat in the private Valentine development listed at 721 sq ft, whereas the minimum size for a 2 bed council flat is 850 sq ft, so we're potentially looking at 20% in the opposite way. So yes, securing one of those tenancies is kind of like winning the lottery...

As I'd mentioned above (and as Gavin recognised), I don't understand the perceived obligation on the council to build new social rented flats. We need the development of a massive amount of new flats/houses to meet the increasing demand that comes with a growing population, and we also need a substantial increase in the number of homes that are available to those on lower incomes, but these affordable homes don't have to be the ones that are newly developed!

I personally don't agree with the expansion of right to buy (or even right to buy in the first place), as it just seems to be an idealogical push to reduce social rented stock. That said, I expect that my political learnings are further to the right than for many on this site, and I fully support the elimination of lifetime tenancies (particularly for high-value, inner London flats) and some type of means testing. I want to see local housing that is affordable for key workers and those who have a necessary tie to the area, while we also make room for the middle classes. (The truly wealthy will be fine I'm sure, let's just not drive them out completely as they do contribute far more than is often recognised.) The pendulum never seems to find a happy medium between left and right - anyone miss the happy days of the coalition? ;-)
Friday 3 June 2016 11.37am
Which part of Battersea are the luxury flats and massive Waitrose situated. I havent spotted from train journeys

Cotswolds 12
Friday 3 June 2016 1.18pm
sjac wrote:
but these affordable homes don't have to be the ones that are newly developed!

Good point! I whole-heartedly agree. And I liked the coalition.

Paramount wrote:
Which part of Battersea are the luxury flats and massive Waitrose situated. I havent spotted from train journeys

Waitrose is on Battersea Park Road very close to the New Covent Garden Market. Nine Elms more than Battersea I would have said, but doubt the estate agents would agree. There are hundreds of flats springing up along that stretch and around the power station.
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