After decades of inaction, local authorities across the capital are starting to build again, with 18 boroughs now operating wholly-owned development vehicles. That figure now includes Haringey, which officially terminated its joint venture with Lendlease this week, and at the same time agreed to set up its own development company.
Haringey’s cabinet vetoed the controversial £2bn joint venture deal, which aimed to deliver more than 6,000 homes across the borough. Council land was to be transferred into the venture. Lendlease’s Dan Labbard, head of operations in Europe, America and Asia, spoke at the cabinet meeting where the veto decision was made, to no avail.
Days beforehand, Lendlease wrote to the council suggesting the company would be ready to seek legal action for the “significant investment over the last two-and-a-half years” should the council seek to reverse the decision of its predecessor.
Haringey’s move to hold on to its land and build up its own ability to deliver homes is becoming the norm across the capital. Challenges around skills, funding and capacity, however, persist.
Making a dent
Centre for London research reveals a number of ambitious local authority-led housing programmes. Combined, the 22 councils that are building either through direct delivery, or through wholly-owned development vehicles, aim to deliver 23,600 new homes within the next five years.
This represents a contribution of around 9% towards the London Plan targets.
If every borough were able to deliver 10% of their London Plan target, a total of 37,300 homes could be delivered during the next five years, according to Centre for London. For context, the capital’s councils built just 2,100 homes between 2011 and 2018.
James Murray, deputy mayor for housing and residential development, speaking at Centre for London’s Borough Builders event, which focused on council-led housebuilding in London, said: “Councils have been prevented from building, which has led to a situation where 80% of new homes built in London are affordable to just 8% of Londoners. This is a dramatic mismatch.
“London will not be the great place it is in a few years’ time if we don’t have councils able to step up and build the council homes we need.”
Making that happen appears to be at the top of the agenda for Murray and City Hall.
Constraints to growth
Clare Coghill, leader of Waltham Forest Council, put it bluntly, saying: “We want to do more, but when the government takes £130m from our budget, there is only so much we can do.
“The extra funding from the GLA to build 525 new council homes shows trust, but it is also meaningful. You can’t ask us to do any more unless we get more resources, but we are more than capable.”
Last summer, London mayor Sadiq Khan revealed the benefactors of the first instalment of his £3.15bn housing fund. Most of the cash went to a number of housing associations, which set up strategic partnerships with City Hall. Some of the money made its way to local authorities but Croydon’s Brick by Brick development vehicle received just £5.6m.
Colm Lacey, managing director and chief executive of Brick by Brick, said: “It’s ridiculous that the most successful local authority companies [those building the most amount of homes] are those that have subverted the rules best.”
Lacey added that government could do some simple things to help, regarding right-to-buy receipts, housing revenue accounts and borrowing restrictions.
“Simply put, these put artificial constraints on local authorities’ ability to deliver housing,” Lacey said.
One size doesn’t fit all
It appears there are many different approaches available to local authorities wishing to get back in the housebuilding game. In Haringey, and elsewhere, the joint venture approach, where the local authority puts its land into a development vehicle with the private sector partner matching it with funding and developer expertise, has been met with fierce opposition.
The same approach in Havering, however, appears to have worked, with the council working up a joint venture with Wates to deliver around 3,000 homes across 12 separate estate regeneration schemes.
With local authorities employing differing strategies, it would appear there is no right or wrong way of doing things. Janice Morphet, a professor at University College London, said: “Each council has its own way of doing things. However, those councils that have multiple methods will have a better chance.
She added: “It takes more than two years from setting up a council housing company to start building, more than four years using the joint venture approach and seven years for a PFI.”
Damian Egen, mayor of Lewisham, noted that politics would also have an impact. Different councils would, he said, prefer different approaches and what works in one area may not work in another.
“The inner London boroughs have also developed a different politics to that of the outer London boroughs and there needs to be different approaches,” he said.
Increasing delivery
Now that a lot of these arm’s-length vehicles have been set up, how do they increase delivery?
Lacey said: “We need to bring in new actors in whatever form and introduce new sites. The key benefit of local authority companies is they look at sites in different ways than a commercial developer would. They know their areas much better. Smaller sites can come forward and they can use the land they already own.”
But he warned: “All of these companies need to turn the dial up on capacity very slowly, otherwise they run the risk of overdoing it and failing.”
Some of these local authority companies have already come unstuck before they have got going, with Newham’s Red Door Ventures now under review.
Rokhsana Fiaz, elected in May as mayor of Newham, replacing Robin Wales, who spent 23 years in the role, has meant a shift in approach. The development vehicle’s inability to build affordable housing has been its downfall. It is likely to remain but will place a much bigger emphasis on delivering affordable homes.
Lacey said that Croydon as a borough was delivering just 16% affordable housing a few years ago before Brick by Brick was set up. That has since doubled to 32% with Brick by Brick itself delivering 48%. The mix of affordable also looks set to evolve.
“We’ve focused mostly on low-cost ownership and shared ownership so far, in order to get the company up and running at the pace we’re delivering. The funding now available will drastically change the mix of units we can deliver, and going forward I’d imagine we’ll do a lot more affordable rent-style housing,” Lacey said.
Funding is one thing, it’s another to have the skills and resources to make the most of it. Attracting talent is a must.
One Centre for London recommendation for boosting housebuilding capacity focused on endorsing the Public Practice scheme, a non-profit social enterprise that places planners with local authorities in need of additional expertise, in order to boost capacity.
Finn Williams, chief executive of Public Practice, said: “This new generation of council-led housing demands new types of expertise: commercial nous, community engagement and co-design, agile project management, and proactive placemaking. To make this happen, we place outstanding practitioners with this kind of expertise within local authorities.
“Our first cohort was 13 times oversubscribed. When recruitment opens for the second cohort in October, we’re hoping to have even more interest from surveyors, urbanists, planners and architects interested in working for the public good, and even more councils looking to get back to building the homes the country really needs.”
The possibilities
Speaking at the Borough Builders event, Murray was upbeat, saying the climate had changed considerably in the past couple of years since Sadiq Khan became mayor. He said: “Funding was almost entirely for low-cost ownership. We had a big battle with government to use some of the homes for rent.
“The March spring statement gives us an extra £1.7bn, of which a minimum of two-thirds can be spent on homes for social rent. Lobbying, councils showing the way and a change in political climate have given that impetus.”
“If we can show what we can do with the limited funding and resources available now, imagine what we can do with a lot more. We now have a situation where councils are competing with each other to build council homes. If you’d have described that to me as a councillor in Islington ten years ago, I’m not sure I’d have believed you.”
There may be many hurdles along the way, Haringey’s Lendlease jv the most notorious casualty, but local authorities proactively building homes can only be a good thing for London.
Comment: Paul Wellman, senior analyst, London residential research
Local authorities building again is great news. Back in the late 1960s, 180,000 homes per year were built for council rent by local authorities, equalling the output of the market sector at the time.
The low point came in 2006 when the UK as a whole produced just 180 council homes. Those stark figures have a lot to answer for in today’s housing crisis. Yes, much of what was built in the 1960s and 1970s hasn’t passed the test of time, but now feels different.
As Brick by Brick has shown, after just two years in operation it now has 43 sites with planning consent, with some now coming out of the ground. As progress is made, locals will start to see the difference development vehicles can make.
It is also refreshing to see young leaders in empowered positions, such as Clare Coghill, leader of Waltham Forest Council, and Damien Egan, mayor of Lewisham, who both spoke at the Centre for London event. These people know all too well the problems the housing crisis poses and are looking to do something about it.
It is also no surprise to see some local authorities with no plans for any housebuilding initiatives – Bromley, Kingston and Richmond, to name a few.
Clare Coghill asked: “How do we oblige more leafier places to get building? If they don’t, they should see sanctions against them.”
For local authority arm’s-length development vehicles to succeed, they need to have a clear purpose and vision, as well as the ability to adapt to changing political landscapes, as and when they inevitably come.
To send feedback e-mail paul.wellman@egi.co.uk or tweet @paulwellman eg or @estatesgazette
