The old saying “follow the money”, couldn’t be more apt for Newham Council in its new “red door” venture, but with government cuts crippling their coffers, can you blame them?
Red Door Ventures, a company wholly owned by the London Borough of Newham, is taking tackling the housing crisis into its own hands. It aims to provide private rented housing, and seems to be going from strength to strength after only setting up in 2014.
Two schemes have recently been completed, a Richard Rogers-designed 36 home development and another for six. Seventeen homes in Plaistow are also due for completion early next year.
Like any developer, the land and at what price it can be achieved are crucial. This gives Red Door Ventures an advantage. It has managed to acquire an abundance of development opportunities from the council at knock-down prices.
The business model is set up to acquire local authority land, with money borrowed from the council, which is paid back with interest. Newham has been particularly hard hit by central government funding cuts and it has had to make savings of £117m over the past five years without cutting front-line services, with another £70m needed by 2020. The question is whether the revenue generated from Red Door Ventures will go back into providing affordable housing or front-line services?
The good news for housing, is that Red Door Ventures is proposing a unique revenue-sharing mechanism, to enable future rental growth to be shared with Newham, towards additional affordable housing. Over the next 10 years it aims to build at least 3,000 new homes. Of the current and proposed schemes, 20% of homes appear to be affordable.
For Newham Council to be dealt the cuts to funding, and to have had to make the savings that they have, they must be applauded when they’ve still found the resources to kick-start a house building programme.
Give it 10 years and those 3,000 new homes could provide an annual rent roll close to £50m.
The highly competent team heading up Red Door Ventures could prove the model works and show the way for other local authorities in ownership of huge amounts of under-utilised land to build both private homes for rent, as well as a sizeable chunk of affordable too.
Red Door’s Wave 1 programme
Red Door’s first Wave 1 scheme has been submitted. Along with the three other projects (right) it shows the company’s projects growing in scope.
The East Ham Town Hall Annex scheme landed on planners’ desks earlier this month and proposes 185 new homes, all for the private rental market.
RDV is proposing a unique revenue-sharing mechanism, which will enable Newham Council to build extra affordable housing. In East Ham another 47 affordable homes will be provided off-site.
All four schemes within Wave 1 are sites owned by the London Borough of Newham. However, Red Door says it is not bound to only deliver on local authority land and is exploring other options in future waves.
Red Door schemes underway/completed
The Tanneries, E15, (36 private rental homes)
- Site acquired (October 2014) £930,000
- Vendor Newham Council
- Rents Between £1,500 and £1,650 per calendar month (all 2-beds).
- Yearly rent roll £680,400 (average tw0-bed estimated at £1,575 per calendar month)
Nelson Road, E6, (six private rental homes)
- Site acquired (December 2015) £600,000
- Vendor Newham Council
- Rent £1,200 (1-beds) and £1,400 (2-beds) per calendar month.
- Yearly rent roll £93,600
Libra Road, E13, (17 private rental homes)
- Site acquired (December 2015): £1m
- Vendor Newham Council
- Yearly rent roll £261,600 (based on Nelson Road rental values)
Proposed Red Door schemes
The next phase, known as Wave 1, will provide 545 private market homes across four major sites. With the proceeds, another 138 affordable homes of varying tenancies will be provided, equal to about 20% of the total.
Brickyard
- 103 PRS market homes
- 26 off-site affordable (20.2%)
Town Hall Annex
- 185 PRS market homes
- 47 off-site affordable (20.3%)
London & Valetta
- 180 PRS market homes
- 45 off-site affordable (20%)
Grange Road
- 77 PRS market homes
- 20 off-site affordable (20.6%)
