Can Haringey’s housing development vehicle provide a case study in joint ventures?
24 Feb 2017
Haringey’s proposal to combine forces with a private developer to regenerate and develop council owned land has gone from local controversy to national talking point. At Shelter we tend not to comment on specific development proposals and instead focus our resources on ensuring that people affected locally can access advice and support. But Haringey’s proposals are large scale and contain some particularly interesting mechanisms.
There are three elements to Haringey’s plans:
- The creation of a housing development vehicle (HDV), a joint venture between the council and a private developer, to build and own homes.
- Using the HDV to redevelop council housing estates, starting with Northumberland park.
- And transferring the council’s commercial property portfolio to the HDV to raise revenue
The housing development vehicle
Haringey is in the process of forming a 50:50 partnership with a private developer (Lendlease has been approved as the preferred partner). The council will put in land and other assets as its own equity stake and the developer will match this with their own funds. Both parties will have a 50% control of the HDV, meaning no party should be able to force the other into a position that they’re not happy with.
It’s a bold approach and council joint ventures don’t have an unblemished history. But we think the council are right to explore it as a tool – although we’re under no illusion that deploying it for the best outcomes and getting the set-up right remains a huge task.
Councils do have the benefit of owning public land, often land that could be used for building much needed affordable homes. To do so they traditionally have two choices: either take on the – often prohibitive – cost and risk of developing the land themselves; or sell it at best value to a private developer and then wrangle with the notorious section 106 process to force the developer to build some affordable homes.
The first approach is sadly often not viable at a large scale. Over recent decades, councils have been hamstrung by tight budgets and borrowing rules set down by central government. Haringey argues this is what prevents going it alone to develop council-owned land now.
The second simply replicates the broken, speculative business model that has delivered dwindling numbers of genuinely affordable homes.
At Shelter we think it’s time to establish a new, more civic minded model for building houses, where building affordable, beautiful homes is at the heart of development. In 2014, our entry to the Wolfson Economics Prize outlined in detail how this could be done through a joint venture to develop a new garden city. And next week we’ll publish a report setting out how we think joint ventures could be used as a valuable tool to deliver new affordable homes.
So we are interested in the HDV model and believe Haringey’s approach could give the council greater scope to develop, as well as refurbish, homes for the benefit of the community.
What does the HDV mean for affordable homes?
Campaigners have not unreasonably asked how many homes the vehicle will create, and with “affordable” now a highly bastardised term, people want assurances that these homes will be genuinely affordable for the long-term. There are also big questions about what happens if it all goes wrong – while the council is sharing the risk in principle they will not be in a position to walk away if it becomes unviable.
The council has conceded that it cannot say for certain how many sites will be transferred, how many homes the vehicle will eventually create and what proportion will be affordable. The council’s housing strategy commits to 40% of new homes being affordable: This is short of what Shelter believes councils should aim for but is an improvement on what development often achieves.
Commitments beyond this are hard to pin down. The council argues that this is because exact numbers will depend on individual sites, which will be developed on a case by case basis. This may be so but people need confidence that the 40% target is more than aspirational – and that any redevelopment will not lead to a net loss of social homes. Crucially, individual business plans will be signed off by the council itself before the land is passed over to the HDV’s ownership. This introduces an important check and balance and is welcome.
The council intends that the HDV will own newly built social rented homes. This has raised concern about the privatisation of council homes. Again, the moribund climate of social housing makes scepticism natural, but transferring ownership to the HDV creates a crucial advantage: the council intends that social rent homes transferred like this should no longer be subject to the right to buy. This may be a loss for individual households who will no longer be able to benefit from generous discounts, but it potentially helps ensure the long-term viability of house-building plans in the borough. The council claim that nothing else will change, including the way homes are allocated and the terms of the tenancies. Committing to this for the duration of the partnership is essential. Assurances are also needed of what will happen to the homes if the HDV runs into difficulty or even folds down the line. Councils are currently in uncharted waters and while that shouldn’t impede innovation, it leads to understandable unease.
Northumberland Park Estate
One of the more controversial aspects of the proposal is the regeneration of Northumberland Park Estate in the east of the borough. This will include the demolition of existing social rented homes, which the council claims are rundown and poorly laid out. Some residents and campaigners are rightly concerned as to what this will mean for the local community. As we have previously said, regeneration is always slow and hard – and requires genuine time devoted to getting the local community on-board. Commenting on individual schemes as a national charity is incredibly difficult so we tend not to take a view on whether grounds have been proven for individual regeneration schemes.
The council has promised every current social tenant a right of return, on similar rents and with the same tenancy rights (minus the right to buy). Leaseholders will also be offered a right of return by moving into a shared equity home on the estate. But the council is not intending to replace the number of social homes like for like and will instead skew development towards larger family homes, and the net increase in homes will be skewed towards other tenures. So ensuring that every tenant who wants to return can do so hinges on the assumption that many households will not want to and will use their enhanced priority on the borough’s waiting list to move to other areas.
The council is explicit that the new homes created on Northumberland Park will be a mix of tenures, including affordable home ownership as well as market sale. This may meet the council’s objective of creating a more mixed community but it does raise the question of how much new supply will help those in the greatest housing need. It is vital therefore that the revenue raised from the sale of market products and shared ownership is reinvested in providing genuinely affordable homes in other parts of the borough as well as replacing social homes lost in Northumberland Park.
The level of scrutiny directed at the HDV is healthy given the scale of the proposals and the council needs to reassure all local residents that the HDV will be used to bring genuine community benefits. These must extend to the households in temporary accommodation who are too often ignored in debates.
There will be plenty of risks and potential pitfalls ahead, and proper scrutiny will be essential, as well as consultation as individual site plans are developed. But in the absence of realistic alternatives, Haringey’s appears a pragmatic way forward. For Haringey, a place with desperate numbers of homeless families and too many people living in poor quality homes, there can be no ‘do nothing’ option.
Haringey have much work to do to finalise details and reassure residents. But we genuinely hope that the joint venture is a success and shows a way that councils who cannot develop alone can build vitally needed genuinely affordable homes.