35% Campaign update – Aylesbury estate regeneration to have new council homes

Aylesbury estate regeneration to have new council homes

Jul 12, 2020 12:00 am

Notting Hill Genesis to receive £210m bailout from Southwark -Southwark Council has announced that the First Development Site (FDS) of the Aylesbury estate regeneration will now deliver 581 council homes, increasing the number of social rented homes on the site by 280 units. The figures come from a Cabinet report to be considered on Tuesday 14 July. These will be the first new council homes on the regeneration.

Southwark will be paying for the new council homes, which will consist of 520 general needs, 54 flexi-care and 7 specialist learning homes, while Notting Hill Genesis will build them. This is a new ‘arrangement’ ; previously the homes were to have been built and paid for by Notting Hill Genesis, under the terms of a planning permission granted to Notting Hill Housing Trust, as it then was, in 2015. Southwark will pay £193m in development cost; it will also forego a further £17.8m in lost receipts from NHG, giving a total cost of £210.8m. Two GLA grants, totalling £54.5m, would bring the cost down to £156.31.

 Extract from Tuesday’s Cabinet report approving the decision

The good news

Understandably, Southwark councillors are making the most of the gain in council housing, which is undeniably good news. Local housing campaigners, both on and off the estate can also take credit – reducing the loss of social housing has been a consistent aim and at the centre of many hard-fought battles.

There are a couple of wrinkles though – a proportion of these social rented units will be needed to rehouse leaseholders decanted from later phases. How many remains to be seen – Phase 2 and 3 has 62 leaseholders yet to be bought out and their options include the new shared equity scheme introduced in response to the Secretary of State’s CPO ruling that BAME leaseholders were being wrongly displaced from their communities 2.

Also, the report is silent on whether the new council housing means that there will be a reduction in the net loss of social rented housing in the overall regeneration, or whether it is simply social housing being brought forward from later phases in the regeneration. The outline planning permission granted to NHG, who remain responsible for delivering the rest of the regeneration’s 2,745 units, still allows for a net loss of between 778 and 1,166 social rented units 3.

The not-so-good news

Southwark Council presents the cost of building the new council and other FDS homes as being a reasonable £238.4k per unit. Southwark arrives at this figure by assuming receipt of two GLA grants, reducing development costs from £193m to £138.5m.

But only one GLA grant has been secured and leaving the unsecured grant out of the equation and including the loss of £17.8m from NHG (for the land, and contributions to infrastructure costs) gives a total cost to Southwark of £182m and a less flattering cost per unit of £313k.

Neither of the above calculations, though, take properly into account the major fact that, under the existing delivery arrangements with NHG Southwark was to pay nothing for the housing, including the 240 social rented units; this was to be met by NHG.

So, while Southwark is now to get 581 council homes, instead of 240 social rented homes, this net gain requires an outlay of £193m gross – equivalent to £690k for each of the extra 280 units 4.

NHG takes all the private housing

NHG also get to keep part of the FDS land, so-called Package C, on which to build 261 homes for themselves, most of which, 170 units, will be private homes. These units comprise all the private housing on the FDS. There will also be 57 shared ownership, and 34 social rent 5.

NHG will also continue to build the homes on Plot 18, most of which are again private – 99 private homes, 6 shared ownership and 17 social rent. (This is despite the fact that it is no longer paying £6m towards Plot 18’s community infrastructure) 6.

This is all in stark contrast to the what NHG was supposed to deliver across the whole FDS under the Development Partnership Agreement (DPA) between Southwark and NHG, signed in 2014. Under the DPA, NHG was obliged to provide at least 50% affordable housing, 75% of which social rent – now this requirement has been abandoned 7.

An explanation?

NHG therefore appear to be walking away unscathed from their FDS obligations and while Southwark are getting many welcome council homes, they are having to dig deep financially to pay for them. The Cabinet report notes a knock-on effect for future housing investment 8.

An explanation for all this lies with the Development Partnership Agreement, which gives NHG an effective ‘viability veto’ on the progress of the regeneration. A DPA clause allows NHG to decide whether or not a particular plot or phase can proceed, depending on its viability. This viability test includes a 21% ‘priority return’ of revenue to NHG and is determined by their own assessment.

NHG’s circumstances have also changed for the worse since it signed the DPA in 2014. It has been forced to ‘significantly scale back’ its development pipeline, after a Regulator of Social Housing report last August concluded NHG, with more than 400 unsold private market homes sitting on its books, “faces a range of risks and exposure to sales” .

Southwark, on the other hand, has invested heavily, both financially and politically, in delivering the Aylesbury regeneration. It has been decanting homes for nearly 10 years and now 500 or so stand empty, or are being used for temporary accommodation. The first FDS homes were supposed to have been completed this summer (a two-year delay on the original timetable), but much of the site is still rubble. Phase 2 is still not fully empty and no planning application has been submitted. Further delays can be expected for any compulsory purchase order and a demolition notice.

It is therefore not difficult to see why Southwark might have felt compelled to make concessions to NHG, by taking over the delivery and meeting the cost of nearly all the affordable housing, while leaving all the revenue-generating free-market homes to NHG.

NHG holds Southwark over a barrel – again

Southwark has been forced to make such concessions twice before. In September 2016, Southwark agreed to underwrite or advance £22.1 million to NHG, for the FDS demolition and design costs, including a payment of £16.8m for demolition, that was to have been paid by NHG. This advance funding was to be recouped by the FDS land receipt, which will now not be paid. The report agreeing this also noted that Southwark was due to spend £52.5m on the Aylesbury regeneration by 2018/19 9.

In 2018, NHG was awarded £30m of GLA grant funding for the first phase of the scheme. The Development Partnership Agreement set out that any grant funding awarded to the scheme should go to Southwark, such that it receives some kind of remuneration for the sale of its land (see para 4.1, page 111). But NHG forced Southwark to agree to a variation allowing it to pocket the entire £30m 10.

What next?

Gaining 581 council homes is a boon for everyone in Southwark who depends upon social housing. Delivering these in the FDS phase also has the advantage that existing residents from later phases have a better chance of remaining on the Aylesbury.

But rescuing the Aylesbury regeneration is costing Southwark dearly. Southwark is plugging holes left by NHG’s failure to deliver. Southwark is paying not just for council housing on its own account, but also for social rented housing that NHG should have paid for, and Southwark is doing this with money that could otherwise be spent on building more council housing elsewhere. Meantime NHG retains choice pieces of land, in the middle of the Aylesbury, to build nearly 270 private homes. No figures are given in Tuesday’s cabinet report of how much NHG stand to make from this.

This is also not the first time Southwark have come to NHG’s rescue. Southwark has also spent £101m keeping the estate habitable, while the regeneration stalls under NHG’s stewardship 11.

At least four of the DPA milestones haven’t been met:

….and Southwark has the right to terminate the DPA if Notting Hill doesn’t meet milestones:

There is also a clause that allows the Council to terminate 3 years after it was first found that a plot wasn’t viable:

It would be a serious matter for Southwark to consider such a step, but given its past performance and its present circumstances it would be no surprise if NHG do not return, asking for more concessions and for more money. If this does happen, Southwark should take stock of the situation and consider whether this is the best use of its money.

Footnotes:

35% Campaign update – Old Kent Rd scheme faces loss of affordable housing

Old Kent Rd scheme faces loss of affordable housing

May 01, 2020 12:00 am

Berkeley Homes threatens to reduce affordable housing at Malt St –Berkeley Homes is the first developer in Southwark to threaten to reduce the affordable housing in one of its schemes, since the onset of the Coronavirus crisis. Berkeley secured planning permission for the Malt St development, just off the Old Kent Rd, in June 2019, with a promise to build 40% affordable housing. Since then it has joined-up with Peabody, who had a smaller, neighbouring development on Nyes Wharf. Together the two sites will provide 1,569 new homes, with 40% affordable housing (359 at social rent and 222 shared-ownership), delivered by Peabody.

Now a planning committee briefing reveals that this affordable housing is at ‘risk’ because Berkeley intends to mount an appeal that will reopen the question of the viability of the scheme. To prevent this happening, the briefing recommends approval of an unprecedented clause in Southwark’s s106 planning agreement with Berkeley, that could see all the affordable housing lost, should development partner, [Peabody] hit financial trouble.

The Southwark Law Centre has written to the planning committee, objecting to the proposed clause and requesting a deferral, to allow the serious issues it raises to be properly addressed.

Why a Mortgagee in Possession (MIP) clause matters

The planning committee is being asked to approve a so-called Mortgagee in Possession (MIP) clause. Simply put, if a borrower cannot pay their mortgage, then the lender can take legal possession of the property and sell it – they become the ‘mortgagee in possession’ and up until now this has evidently been covered with a clause that keeps the affordable housing affordable ‘in perpetuity’ .

The MIP clause proposed for Malt St is different – it will not secure the affordable housing ‘in perpetuity’ , should Peabody fail. Instead, Southwark or another affordable housing provider would be given the option to take on the affordable housing, but if they do not, the affordable housing can then be sold onto the open market. If Southwark does buy the affordable housing, they would also have to pay anything outstanding ‘under the terms of the relevant security documents, including all accrued principal monies, interest and costs and expenses’ 1.

The MIP briefing is at pains to point out that such a situation is very unlikely to arise, because Peabody is in rude financial health; it has an annual turnover of £630m, an annual profit of £160m and assets of £7.6bn, so the possibility that it will fail is remote. The briefing reinforces the point by noting that no major housing association has ever gone into administration and quotes a GLA document that says ‘there is no known cases of a MIP clause being triggered…..’ 2.

Mayor of London opens the door…

This all begs an obvious question – why replace a MIP clause that protects affordable housing, in all circumstances, even unlikely ones, with a clause that does not?

Part of the answer is that this is what the Mayor of London wants. As Southwark’s briefing explains it, the Mayor wants ‘a consistent approach to MIP clauses across the London boroughs and to secure greater access to funding for RPs (registered providers) to increase the delivery of affordable housing’. The report continues; ‘In order to achieve this, the GLA MIP clause would allow, in certain limited and unlikely circumstances, affordable housing to no longer be “in perpetuity”’ . The briefing notes that Southwark’s own MIP clause is different from the Mayor’s, precisely on this point; Southwark does require affordable housing to remain such ‘in perpetuity’ , should a RP go into administration 3.

Peabody takes advantage

Peabody also wants the GLA MIP adopted, because it would allow them to borrow more money for other projects. To quote the briefing ‘Peabody have funds to deliver this scheme, but given the very large scale of the investment they are only willing to make such a commitment on the basis that they are able to secure additional funding in the future against the asset of the completed scheme’ . The report says that while the Malt St scheme is ‘entirely financed by Peabody from its own investment’ Peabody nonetheless wants more private bank finance and needs to make more of its ‘capital assets’ and the banks consider that the affordable housing ‘asset is not sufficiently liquid’. The briefing reiterates ‘Peabody has confirmed that they cannot proceed as the RP [registered provider] partner in this scheme without this clause’ 4.

Berkeley turns the screw

Berkeley backs Peabody, saying that it cannot, or will not, proceed without them. Berkeley goes on to threaten to reduce the affordable housing in the scheme, if the GLA MIP clause is not agreed, by way of an appeal to the government of ‘non-determination’. Berkeley would argue that Southwark had failed to conclude the s106 legal agreement in the required time, and also reopen the question of the viability of the scheme 5. Berkeley has a track record for such manouvers; this 2018 Guardian report shows that Berkeley has reduced its affordable housing obligations using viability reviews in almost all of its London schemes.

Southwark’s briefing tries to make the best of things; as well as emphasising the unlikelihood of any default, it claims that this decision will ‘not therefore set a precedent for other schemes.’ The Mayor has different ideas – he wants to see his MIP clauses used across London and says they will be used for anything he ‘calls-in’, (such as the Biscuit Factory) and that he ‘will promote their use for other schemes that are referable…and non-referable’ ie basically everything 6.

What we think

A Mortgagee in Possession (MIP) s106 clause that has evidently been perfectly adequate up to now is to be changed, compromising the ‘in perpetuity’ principle of affordable housing. The Mayor hopes that this will help meet his strategic 50% affordable housing target, but Peabody and Berkeley are not proposing 50% for the Malt St site. More generally, the Mayor has published no concrete commitment from developers and registered providers to increase affordable housing, in exchange for the Mayor’s more market-friendly MIP.

So, while it would be easy for Southwark’s planning committee to approve the clause in the almost sure knowledge that it will never be triggered and the affordable housing will remain as such, ‘in perpetuity’ , they should nonetheless reject the Mayor’s new MIP clause. It purports to facilitate a general increase in affordable housing, but there is no evidence before the committee that this will actually happen, either in Southwark or elsewhere. On the other hand, though, the Mayor’s MIP will definitely weaken the ‘in perpetuity’ status of affordable housing

This is the thin end of a very long wedge. These clauses have already been used in Islington, Tower Hamlets and Lambeth. They are being actively promoted by the GLA and the Mayor. Once they proliferate the whole principle of affordable housing being for ‘in perpetuity’ will start to be lost and developers and their registered provider partners will use the same kind of ingenuity that they have used with viability assessments to squeeze real affordable housing out of London 7.

The briefing and its recommendation, will be considered by the planning committee meeting on Monday 4 May, the first to be held online.

Footnotes:

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35% Campaign update – The harsh reality of relocation for shopping centre trader

The harsh reality of relocation for shopping centre traders

Apr 23, 2020 12:00 am

Law centre survey shows that nearly half of traders have nowhere to go -The Southwark Law Centre (SLC) has written to Southwark Council, detailing the shortcomings of the relocation of the independent traders from the Elephant & Castle shopping centre, prior to its demolition on 31 July 2020. The letter is supported by Latin Elephant and Up the Elephant, which includes the 35% Campaign.

SLC’s letter supplies Southwark with the details of a survey of traders about the relocation, conducted just before the Coronavirus lockdown. This ‘snapshot’ survey of ten traders shows that 4 had not been offered a relocation space and the remaining six were offered the spaces that were inadequate, mainly because they were too small, but also because they were in poor locations for attracting trade and had no space for storage or for displaying their goods.

The letter also criticises the traders’ appointed business advisor, Tree Shepherd, for a lack of appropriate support, particularly during the lockdown. The relocation fund is described as not fit for purpose and the relocation database of limited value. It regrets that Southwark approved using CPO powers on Delancey’s behalf without any increase to the Delancey relocation fund.

The letter also notes that work on completing Castle Square had stopped and asks how this will impact on the traders’ relocation. This is one of the four relocation sites and due to open in June – but work has stopped as a result of the coronavirus crisis:

The letter acknowledges that Southwark is not able to control the wider economic circumstances, but nonetheless calls on them to give stronger and more effective support to the traders.

Loyalty not repaid

All the trader respondents to SLC survey come from black and ethnic minority backgrounds, the longest serving trader having been at the Elephant for 22 years, while the longest serving trader not offered relocation space has been there 15 years; all ten traders together clock up over 115 years at the shopping centre.

In their survey comments all the respondents say the same thing – that more money is needed, and more space, and if the space cannot be found then compensation should be offered.

Relocation applications rejected

The SLC survey is a relatively small, but its finding that 4 out of 10 traders have no place to go is mirrored by the much larger and earlier research of Latin Elephant/petit elephant. This has tracked the fate of nearly a hundred businesses, since December 2018 and estimated that only 40 would be relocated, a prediction that now appears to be confirmed by Southwark Council in its own assessment of the relocation process. This states that while there have been 64 applications for three of the four main relocation sites, only 36 have been successful, with 28 rejected1. Southwark gives no explanation for this, or says anything about what exactly it expects these 28 businesses to do. The fourth site, Elephant Park, has had one successful application out of 52.

Public support for development falls

Southwark prefers to emphasise the increasing confidence traders are said to have, that they will be able to at least remain trading, by reference to an Equality Impact Assessment (EIA). This is cited as evidence that the so-called mitigation measures are working, despite the 28 rejected relocation applications. The EIA also reveals the embarrassing fact that public support for the shopping centre redevelopment from 67% in 2016 to 42% today, mainly because of concern ‘about what will happen to businesses currently in the shopping centre’. The proposed remedy is to continue the well-meaning, but now hardly appropriate ‘Follow The Herd’ publicity campaign.

Crisis response needed

As we reported in our last blogpost Southwark has approved a welcome £200,000 in support of traders, agreed before the Coronavirus lockdown. Separately, Southwark has also launched a Business Hardship Fund of £2m, aimed at all the borough’s 10,000 microbusinesses.

But otherwise Southwark’s latest report on the progress of the shopping centre redevelopment takes no account of the entirely new, desperate circumstances of the Coronavirus pandemic. This could be excused as it is dated 24 March, the first day of the lockdown, but was not considered until 7 April, two weeks after lockdown, without any amendment or addendum, that recognised the new trading situation.

The report also gives no figures for any amount of money actually paid out to traders, from any source.

Support traders, not Delancey

Southwark has done Delancey the huge favour of adopting CPO powers and leasing both the shopping centre and the LCC, to override residents legal rights. While Southwark claim that is at nearly nil cost to itself, it will be of considerable financial benefit to Delancey, who would not otherwise have been able to secure the necessary funding for their redevelopment scheme3.

Southwark did this without insisting that Delancey improve its own support for traders. The relocation fund remains the meagre £634,700, agreed nearly 2 years ago, at planning committee. Delancey also still insist on closing the centre on the 31 July, with some minor concessions and despite the SE1 survey that showed 72% of local people want the centre kept open.

Over the past 3 years and more the shopping centre traders have been fighting a hugely unequal battle to keep their businesses going, while the centre has been rundown and trade blighted. Now is the time for Southwark to start giving the level of support it has been giving Delancey. It must get cash to traders for their immediate survival. It must tell Delancey it will not be using its CPO powers on its behalf, until all the traders are either relocated or suitably compensated and that there must be no centre closure until this is done.

You can support us in our fight for fairness for traders, by sharing these hashtags;

#supporttradersnotdelancey #supportelephantnotdelancey #ElephantJR.

Footnotes:


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35% Campaign update – Shopping centre CPO – Southwark ploughs on regardless

Shopping centre CPO – Southwark ploughs on regardless

Apr 04, 2020 12:00 am

Southwark exercises CPO powers to clear E&C shopping centre site for Delancey -Southwark Council is set to assume Compulsory Purchase Order (CPO) powers, on behalf of offshore developer Delancey, at its Cabinet meeting this Tues 7 April (postponed from 24 March). While this extraordinary move will strengthen Delancey’s hand in ongoing negotiations with various development stakeholders, such as TfL, and will relieve Delancey of funding risks, the scheme itself remains unchanged, delivering only 116 social rented units and displacing traders wholesale.

The Cabinet meeting is also set to approve a report that will override local residents’ legal rights, for the loss of light caused by the redevelopment. A third report will approve the recently announced £200,000 relocation assistance for traders.

The meeting will be by videoconference, but no livestream is advertised.

As we reported in our last blogpost Southwark intends to lease both the shopping centre and London College of Communications buildings themselves. Subleasing arrangements will return the shopping centre and LCC back to the control of Delancey and University of the Arts London, but as nominal public property, residents legal ‘right-to-light’ options can be overridden. Residents will no longer be able to seek an injunction against the development (while remaining able to claim compensation). Southwark say that there will be no cost to the Council from their leasing arrangements, other than officer time, but the report supplies no figures.

No guarantee that scheme will be built anyway

Southwark’s extraordinary measures illustrate its determined support for Delancey’s redevelopment of the shopping centre, despite the shortfall in social rented housing provided and the mass displacement of traders. Local charity and advocate for all traders Latin Elephant estimates that over half still have nowhere to go.

Southwark’s unwavering support extends as far as neglecting to obtain a guarantee from Delancey that the scheme will go ahead, even with the CPO powers being exercised on their behalf, saying ‘it is not necessary to impose… an obligation to build the Scheme as the measures negotiated for inclusion in the indemnity agreement give the Council comfort that EC is likely to proceed with the Scheme.’ 1

72% say keep the centre open

The proposed measures follow a survey conducted by the SE1 news website that shows 72% of local people want the centre kept open, in the light of the Coronavirus public health crisis. In response Delancey reiterated that they still intend to close the shopping centre on 31 July, while waiving rent and service charges (a long-standing traders’ demand) and promising to making pharmacy and food supplies available, beyond then, if the public health crisis continues.

What we say…

The Up the Elephant Campaign, supported by the 35% Campaign, has consistently opposed Delancey’s shopping centre redevelopment scheme, since its inception, over 3 years ago. We support the ongoing legal challenge to quash Delancey’s planning permission.

Over time various concessions, dragged out of Delancey by campaigners, have made marginal improvements to the redevelopment. Southwark’s pledge of £200,000 for the traders is also welcome; it now urgently needs to be distributed as cash grants to traders. Nonetheless, Delancey’s scheme still remains a bad one. Delancey are displacing an entire community of traders, and destroying a social hub for the many working people from all over the world who have made the Elephant their home. The new development will have a miserly 116 social rented homes, out of nearly a thousand new units (if they ever get delivered).

So, Southwark Council should not be bending over backwards helping Delancey, in any circumstances – certainly not now, when half the traders still have nowhere to go, while Southwark has an obligation to help secure traders accommodation in the new development it never properly exercised. We do not need to add that the traders’ desperate situation has been rendered dire by the Coronavirus crisis.

The UP THE ELEPHANT CAMPAIGN HAS THEREFORE MADE THE FOLLOWING DEMANDS TO SOUTHWARK COUNCIL;

You can support us in our fight for fairness for traders, by sharing these hashtags; #supporttradersnotdelancey #supportelephantnotdelancey #ElephantJR.

Or by lobbying the Councillors approving the decision directly: https://twitter.com/peterjohn6https://twitter.com/rebeccaluryhttps://twitter.com/evenor23https://twitter.com/Jasmine_Alihttps://twitter.com/steviecryanhttps://twitter.com/Livingstone_RJhttps://twitter.com/Victoria_Millshttps://twitter.com/Leo_Pollakhttps://twitter.com/kieronjwilliamshttps://twitter.com/JohnsonSitu.

  1. See para 76 Report: E&C CPO 

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Support Shopping centre Traders not Delancey

Dear Friend

We are in the midst of a public health crisis which has impacted severely on people’s lives and livelihoods, forcing shops and businesses across the UK to close. The position for the Elephant shopping centre traders was already serious, with over half having nowhere to go, come the scheduled centre closure in July – now their situation is acute.

A survey conducted by SE1 website forum found that 72% of people wanted the centre to remain open beyond July. In response developer Delancey says that it still intends to go ahead with closure on the 31st July, but pledged that essential food and pharmacy facilities would remain available, if needed.

This is not good enough. All the remaining shopping centre traders need support now if they are to survive.

Southwark Council are due to assume Compulsory Purchase Order powers on behalf of Delancey, at their reconvened Cabinet meeting, this coming Tuesday. With these powers behind them Delancey’s hand in negotiations with remaining leaseholders and stakeholders will be strengthened. Southwark should not be helping Delancey to build a development that puts small traders out of business and does not give us the social housing we desperately need. 

Instead we call on Southwark Council to support the traders. We welcome its recent promise of £200,000 and now call upon them to release this money immediately as cash grants to traders.

We also maintain our demand that the centre is not closed until all the traders have been properly relocated or suitably compensated.

Please share these hash tags;
#supporttradersnotdelancey
#supportelephantnotdelancey

You can also find Up The Elephant on Twitter & Facebook.
You can read more on the 35% Campaign blog.

Regards
Jerry

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35% Campaign update – Council to remove remaining shopping centre traders using CPO powers

Council to remove remaining shopping centre traders using CPO powers

Mar 23, 2020 12:00 am

Council to approve compulsory purchase of shopping centre traders and buy LCC/shopping centre sites -In an extraordinary move Southwark Council is poised to ‘buy’ both the Elephant and Castle shopping centre and the London College of Communication from current owners, developer Delancey and the University of the Arts London (UAL). It is also excercising Compulsory Purchase Order (CPO) powers over the shopping centre site, on behalf of Delancey’s British Virgin Islands registered offshore subsidiary1.

The CPO powers are needed because Delancey has failed to reach agreement with 11 of the remaining shopping centre traders who have secure tenancies and several other so-called third-party ‘interests’ including land owned by Transport for London and arches owned by Network Rail/Arches company. 2

The additional purchase of the shopping centre and LCC land is part of a legal manoeuvre, vesting ownership in a public body, that will override the rights of residents in surrounding homes whose daylight will be affected by the redevelopment of the two sites. A leasing arrangement will allow both sites to return to Delancey and UAL once the CPO process is complete. 3

Southwark say that both measures will ultimately result in no cost being incurred to itself (except for officer time plus a proportion of any public inquiry costs) with Delancey indemnifying all other costs, but no figures are provided in the three publicly available reports detailing the purchase arrangements and the indemnity agreement has not been made public. Decisions on both measures will be made at a video-call Cabinet meeting tomorrow – Tuesday, 24 March.

Will the scheme ever happen?

The main justification for the proposed measures is to ensure the success of the development. Council officers advise that if they are not adopted Delancey may meet delays and will not secure the ‘enormous funding’ the scheme requires and then the site could lie empty for years.

Despite this concern, officers are nonetheless so personally convinced that the development will ‘likely’ go ahead, that they are not requiring a guarantee from Delancey that it will proceed with the scheme after Southwark has cleared the site with its CPO powers. The CPO report says ‘it is not necessary to impose… an obligation to build the Scheme as the measures negotiated for inclusion in the indemnity agreement give the Council comfort that EC is likely to proceed with the Scheme.’ 4

The contrast between Southwark’s favourable treatment of Delancey, (a property developer rooted in offshore shell companies) and the neglectful manner it has treated traders who have made the Elephant their home is also laid bare. Under CPO legislation Southwark is required ‘to exercise its power…in a manner which, so far as practicable, secures that relevant occupiers of that land are provided with a suitable opportunity to obtain accommodation on the land in question.’ 5

This hasn’t happened; such relocation benefits as there are (eg the £634,700 relocation fund, the £200k New Home Bonus Fund) have been won by the traders and local campaigners and owe little to Southwark Council’s efforts. Even with these gains, 60 traders still have no new premises and those who do will be re-housed off-site, with only some (those in Castle Square) having the smallest possibility of ‘accommodation on the land in question’. Just last week the BBC ran a feature on the plight of the remaining traders.

Southwark has always had the power

By Southwark’s own account the scheme may well not go forward unless it exercises CPO powers, because Delancey is unwilling to bear the risk of the uncertainty created by its absence, given its ‘enormous capital investment in the Scheme’ and in addition ‘any prudent funder of the Scheme is also unlikely to fund the Scheme whilst that uncertainty persists’6

Southwark therefore has had a great deal of legitimate leverage. It was clear when Delancey first submitted its planning application for the shopping centre’s redevelopment back in 2016, that there was little intention of retaining resident traders in the new redevelopment. When Delancey described the traders as ‘benefiting from disproportionately low levels of rent’ and unlikely ‘to survive….over the longer term’7 Southwark should have made it clear then that any anticipated use of CPO powers would be dependent on fulfilling the requirement that ‘relevant occupiers’ ie the traders be given the opportunity to stay in the new development.

As it is, it looks as if Southwark intends to sacrifice trader’s interests, again, in favour of Delancey, just as it sacrificed those who depend on social rented housing, when it granted Delancey planning permission, without securing the minimum amount required by its own policies.

The coronavirus risk

Southwark’s attempts to indemnify itself against any mishaps in its CPO arrangements with Delancey includes, amongst other things, a requirement that there be a ‘reasonable prospect of the development of that area being delivered in a reasonable time frame’ 8.

Any sensible person, or local authority, must now see that this is unlikely, given the coronavirus crisis and it multi-dimensional impact. Southwark should at the very least defer consideration of exercising CPO powers and the purchase of the shopping centre and the LCC sites, on any terms. At the same time, Southwark should use its resources to maintain and improve support for the traders and insist that Delancey do the same, if it wishes to have the benefit of Southwark’s CPO powers at some time in the future.

Footnotes:

  1. According to Southwark, Delancey is not the developer, but rather the advisor to the so-called ‘Triangle Partnership’, which is a partnership between the Dutch pension fund APG; Qatari Diar and Door SLP (a joint venture involving Delancey’s DV4 offshore property fund). There are further partnerships within this Triangle, detailed in the Report: E&C CPO para 12. Southwark refer to the developer as Elephant & Castle Properties Co. Limited (“EC”) registered offshore in the BVI. We continue to refer to the developer by the commonly known name of ‘Delancey’. 
  2. See paras. 80, 59 Report: E&C CPO 
  3. See paras. 1,2 & 12 Report: E&C Property Rights 
  4. See para 76 Report: E&C CPO 
  5. See para 81 Report: E&C CPO 
  6. See para 57 Report: E&C CPO 
  7. See 8.7 Planning Statement 
  8. See para 74 Report: E&C CPO 

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Elephant Activism Week

Dear Friend

It’s Elephant Activism Week!

We’re calling on all supporters to join us this week for a bout of activism!

1 Doorstep Delancey!  Developer Delancey will be updating the Southwark Empowering Communities North West Area Forum on the Elephant and Castle shopping centre redevelopment this Thursday.

6:30pm-7:15pm Thursday 12 March, Outside Amigo Hall, St George’s Cathedral, Lambeth Road, SE1 7HY (intersection with St George’s Road).
FB Event here

This is a rare opportunity to DOORSTEP DELANCEY! We are demanding that the shopping centre is not closed, until all the traders are properly relocated (many still have nowhere to go) or suitably compensated.

We will be doing a photo opp and leafleting outside Amigo Hall as people go into the meeting, which starts at 7pm. More details are on the Southwark Council and SE1 Community websites.

2 Love the Elephant Film Night: “Why do Elephants keep developing?” 

Join us at 55East for an evening of solidarity to raise funds for the shopping centre Judicial Review Appeal. Emile Scott Burgoyne’s updated documentary, Why Do Elephants Keep Developing? exposes the dodgy deals and offshore billionaire backers behind the Elephant and Castle regeneration. The film showcases our many local heroes; our protests, parties, celebrations, victories and defeats.

6pm-9pm Friday 13 March, 55East, 53-63 East St SE17 2DJ 
Tickets from Eventbrite here (donations)
FB Event here

3 Share and donate! We have raised a fantastic £2,375 in our new Judicial Review Appeal, in just six days! Please help us push on to our £3,000 target by sharing and donating – any amount big or small!

Regards
Jerry

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35% Campaign – Elephant Park – planning committee misled?

Elephant Park – planning committee misled?

Mar 01, 2020 12:00 am

Lendlease fails to declare public funding for affordable housing -Developer Lendlease failed to disclose at Last week’s planning committee meeting that it was in receipt of public funding, which could have increased the amount of affordable housing at Elephant Park (aka the Heygate estate regeneration).

The meeting was called because of the large number of objections to the final phase (H7 MP5) and the lack of additional affordable housing. We explained in our previous blog how Lendlease have met their 25% affordable housing requirement, while increasing the total number of homes, but without increasing the number of affordable homes or proportion of social rent (3%).

One of the objections, from the 35% Campaign, was that “There appears to have been no effort to take advantage of any public funding”. Southwark responded by saying: “There is no obligation on Lendlease to seek public funds.” (para 282, 283 of the officer’s report)

The planning committee followed this up in their cross examination of Lendlease, who were asked directly by Cllr King whether they had considered applying for grant funding:

 See video clip of committee meeting on youtube here.

In a lengthy reply, Lendlease did not disclose that the Mayor had in fact committed to fund Elephant Park, back in September 2018.

Elephant Park is the very first entry on a list of estate regeneration projects on the Mayor’s website, which have had funding approved since July 2018.

This gives rise to a number of questions:

  1. Why did Lendlease not say that they had received funding when the question was asked?
  2. Why were the committee members not told that Lendlease has received funding in the committee report?
  3. How much money has Lendlease received from the Mayor?
  4. Why has the affordable housing offer not been improved?

We suspect that the answer to this lies in the murky world of viability; Lendlease insisted in 2013 that only 9.4% of the new homes could be viably provided as affordable.

They repeated this at the planning committee meeting last week and would no doubt argue that any money they have received from the Mayor has gone to bridging the gap between what is viable and the 25% being delivered.

Whatever the merits of this argument (and we think it has none) it still leaves open the question of why Lendlease and the officers report did not disclose the grant funding to members.

There is a similarity here to the ongoing dispute about affordable housing in the shopping centre development. Developer Delancey claims that the £11.24m it is also receiving from the Mayor is being used to increase the amount of social rented housing. We showed previously how it was going to Delancey’s bottom line:

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35% Campaign update – Elephant Park – final phase, final windfall for Lendlease

Elephant Park – final phase, final windfall for Lendlease

Feb 21, 2020 12:00 am

Last phase of Heygate regeneration set for approval with increase in number of homes but no increase in affordable. -We blogged last year about the final phase (MP5 H7) of the Heygate regeneration.

Lendlease’s application for 424 new homes (15 social rent) in this final phase is now set to be approved by the Council’s planning committee on Monday.

If approved without a viability review it will seal an increase in the number of new homes beyond that approved by Southwark’s planning committee back in 2013, without any increase in the number of affordable homes. This will result in a total of 2,689 homes (220 more than approved in 2013) of which 92 will be social rent.

 Extract from the 2013 Outline application Committee report

This windfall gives Lendlease the revenue of 220 extra homes that were not included in the original viability assessment of the scheme, which was based on 2,469 units. This allowed Lendlease to build 25% instead of 35% affordable housing and to reduce the required amount of social rented homes to next to nothing. Taking account of the 220 extra homes could have improved both the viability of the whole scheme and the affordable housing offer.

Reviewing viability

We noted in our previous blog that Southwark has neglected to carry out any viability review. Monday’s planning committee report reiterates this, stating: “The council has no mechanism to insist on a viability review” (para 129)

However, this looks to be contradicted by the terms of the Regeneration Agreement between Southwark and Lendlease, which provides a mechanism for the affordable housing mix to be reviewed on an annual basis.

If these annual reviews had been taking place it should have been reflected in higher levels of social rented housing. The fact that the tenure mix hasn’t changed suggests that they haven’t.

Grant Funding

We also noted in our previous blogpost that the 2013 planning committee anticipated that the regeneration could benefit from public funding if it became available.

 Extract from the 2013 Outline application Committee report

This was in line with the Regeneration Agreement, which also obliged the parties to seek grant funding:

Such funding has been available since 2016 when Sadiq Khan announced a £4.6bn funding programme, but despite the 2013 planning committee’s intention and the Regeneration Agreement’s obligation, Lendlease has made no funding application.

Also, despite this clear contractual obligation, Southwark nonetheless states in Monday’s committee report for the final phase“There is no obligation on Lendlease to seek public funds.” (para 283)

Given the clear obligation on Lendlease to seek grant funding, we say that until Lendlease does so Southwark should reject this final phase application.

Southwark should also reject the application unless Lendlease commits to a viability review. There are a number of reasons why this is necessary. Not only was the original viability assessment based on fewer homes than the number actually being built, but also the free-market homes are being sold for twice Lendlease’s viability assessment estimate.

Another significant change to viability since the original assessment has been Lendlease’s recent decision to let, rather than sell homes in the later phases of the scheme.

Monday’s planning committee should also take account of Policy 3.12 of the Mayor’s London Plan, which says that “The maximum reasonable amount of affordable housing should be sought .. having regard to .. individual circumstances including development viability, {and} the availability of public subsidy.

The Elephant Park development lost Southwark 1,200 council homes. This final phase is Southwark Council’s last chance to (partially) redeem itself by insisting Lendlease abides by its obligations, reviews the viability of the scheme and applies for grant funding.

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35% Campaign update – The Biscuit Factory is back

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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