The Biscuit Factory is back

Feb 17, 2020 12:00 am

Sadiq gives the Duke of Westminster a second chance -We blogged back in 2018 about the redevelopment of the former Peek Freans biscuit factory and adjoining Bermondsey college campus site.

Grosvenor Estate, headed by Hugh Grosvenor the 7th Duke of Westminster, London’s largest landowner and the world’s richest man under 30 (worth over £10bn), proposed 1,343 new homes, none of which were to be social rent. The site is next door to two Bermondsey wards with some of the most deprived neighbourhoods in the country and the complete lack of any social housing was too much for both local councillors and Southwark’s planning committee, who early last year rejected the scheme.

However, Mayor Sadiq Khan overrode Southwark’s decision by ‘calling it in’, citing Southwark’s failure to meet its affordable housing targets, and is now set to approve the scheme, after a public hearing at City Hall on the 21st February.

Still no proper social rent

The original scheme has been amended, with an overall increase in the number of homes, by 206 units, including 160 affordable, up to 1,548 units in total. But because the scheme remains Build to Rent (BtR), with none of the homes for sale, there will still be no proper social rented housing. Instead 140 of the 160 affordable units will be ‘social rent equivalent’ (SRE) – a pseudo-social rent on 3-year tenancies, with just a ‘presumption’ of renewal, not the lifetime assured or secure tenancies of proper social rented housing.

Even were we to accept SRE as social rent, the 140 SRE units still amount to less than 10% of the 1,548 total number of homes.

The SRE rents will be Target Rents, which are higher than most Southwark council rents (eg one bed would be £134pw, compared to council rent of £107pw). The SRE service charges are unquantified, with only the assurance that they will be ‘controlled’ (para 249).

Most of the affordable housing, though, is made up of Discounted Market Rent (DMR) – 343 units to be let at much higher rents than SRE, eg £354pw for a one-bed. It is not clear if these rents include service charge, There will be no units let at London Living Rent, the Mayor’s preferred rent level, which would have much reduced the DMR rents (para 250).

(Another) non-viable development.

At the bottom of the poor affordable housing offer is Grosvenor’s rehearsal of the well-worn developer claim that this is a non-viable development. A non-viable development is one where the developer’s own profit target is not met, not one where it makes no money. In this case Grosvenor’s profit target is 12% IRR, and they say they can make barely half that (6.53%) and the affordable housing offer is the best that they can do. GLA and Southwark agrees, but any confidence we can have in these judgements is undermined by huge disparity in the estimates of profits; Grosvenor estimated they would make a £189m loss on the original 2017 planning application, while Southwark said they would make £101m profit. Now Grosvenor claims a profit of £13m on the amended scheme. We don’t know the GLA’s profit estimate, because it hasn’t published its own appraisal, despite the Mayor’s commitment to transparency.

Early and late stage reviews of the scheme are offered and should there be any increase in profitability, extra social rent equivalent or London Living Rent homes will be provided, but only by reducing the DMR rents, not by converting market-rent units, so there will be no increase in the number of affordable units.

Mayor misses 50% affordable housing opportunity

In October 2018 Southwark’s regeneration boss, Cllr Johnson Situ, commented on the original application: “With over 10,000 people on our housing waiting list it is very disappointing to see such a little amount of social or genuinely affordable housing in this application. As it stands, we are still a long way from agreeing a scheme that meets the council’s policies.”

Southwark has followed this up by making a representation on the amended scheme to GLA, reiterating some of the objections that led to the original scheme’s rejection, but Southwark has not argued for the amount of real social rented housing that its own policy requires – 35% of the total amount of housing, 70% of which social rented housing – 30% intermediate. This would give us around 380 social rented homes and 162 DMR homes.

Indeed, it is arguable that the affordable housing requirement should be nearer 50%, given that nearly three-quarters of the Biscuit Factory site is former industrial land. The GLA report recommending approval of the scheme skips lightly over the fact that such land should deliver 50% affordable housing, in line with the Mayor’s ‘strategic’ target (Policy H4, pg 188), by saying ‘the site currently comprises a privately-owned commercial complex, the previous industrial use having ceased over 30 years ago’ (para 232) and so is subject to a 35% requirement instead.

While Southwark has been reduced to a bystander in the decision making, GLA has indulged in a pick n mix of the bewildering number of affordable housing policies (paras 220-236) and decided that only 140 pseudo-social rent homes need to be built, with 342 DMR at much higher rents – an exact reversal of the proportions of social to intermediate housing, required by Southwark’s policy.

In sum, a Labour Mayor has called in a development that a Labour council has rightly refused because it has no social rented housing, ignored that council’s own affordable housing policies, and applied his own, weaker policies, all to help a developer build something without any proper social rented housing.

Keeping Build to Rent rented

Many of the other BtR provisions are familiar from the proposed BtR development of the Elephant and Castle Shopping Centre. As at the Elephant a legal covenant is needed to ensure that the BtR development remains for rent, not for sale. The covenant for the Biscuit Factory is only for 20 years though, whereas Southwark required thirty years from developer Delancey for the shopping centre; in any event the covenant does not entirely stop a developer selling on, if they are prepared to pay a penalty, known as ‘claw-back’.

Poor doors

Besides being BtR, there is much else not to like about the development. One of Sadiq Khan’s manifesto pledges was that he would ban poor door’s in London’s housing developments. He has held true on this pledge to the extent that separate entrances for private and affordable tenants are indeed a thing of the past and instead we now see entirely separate buildings (see Heygate, Aylesbury and most major schemes approved in last 5 years.)

Grosvenor are following this trend, ‘consolidating’ most of the Biscuit Factory’s affordable housing into separate blocks.

 Extract from Grosvenor’s Affordable Housing Statement

Renewable energy

Despite both the Mayor and Southwark Council having formally declared a ‘climate emergency’, Grosvenor’s scheme fails to comply with the either the Mayor’s or Southwark’s minimum 20% requirement for on-site renewable energy supply.

Policy 5.7 (para 5.42) of the Mayor’s new London Plan requires that ” all major development proposals will seek to reduce carbon dioxide emissions by at least 20 per cent through the use of on-site renewable energy generation” via the use of “renewable energy technologies such as: biomass heating; cooling and electricity; renewable energy from waste; photovoltaics; solar water heating; wind and heat pumps”.

Southwark’s sustainability policies also require this minimum 20% on-site renewable energy generation (see policy 13 of the Core Strategy) and Policy 3.5 of its Sustainability SPD:

Grosvenor’s Energy Assessment proposes just 0.7% renewable energy generation (see para 7.6) using a handful of solar panels and some air conditioning units in the commercial units that can also provide heat.

Grosvenor also falls short of the London Plan’s zero-carbon requirement, opting to make a £1.137m payment in-lieu instead (para 470).

More Build to Rent, less Social Rent

The proposed Biscuit Factory development demonstrates why we do not have enough homes that people can actually afford to live in. It could deliver nearly 50% affordable housing, around 700 units of which nearly 500 would be social rented, if the Mayor abides by Southwark’s adopted policy and the site is treated as former industrial land. Even reduced to 35% affordable housing, applying Southwark’s policy would get around 380 social rented units. Instead it is only delivering 140 pseudo-social rent, plus 20 Discounted Market Rent.

The Biscuit Factory also demonstrates the threat of BtR developments for social rented housing. Build to rent schemes do not provide social rented housing, only a pseudo-social housing and very little of it. The more Build to Rent schemes we have in London the less social rented housing there will be.

The Mayor cited Southwark’s failure to meet housing targets as reason to call-in the application. This is justifiable, but his concern is headline figures, not meeting the priorities of local housing need, which in Southwark is for proper social rented housing (pg 67).

The Mayor’s pre-election manifesto promise was to build ‘genuine affordable housing’, including social rented housing, and he pledged to ‘support councils to…maximise the affordable housing’. The Mayor has also made much of his 50% affordable housing target. If Grosvenor’s proposals for the Biscuit Factor gets the go-ahead he will have failed to live up to all these promises, approved a scheme that has less than 10% genuinely affordable housing (if we were to accept ‘social rent equivalent’ as real social rent) and thwarted Southwark’s attempts to get anything better.

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