Accelerating the delivery of Affordable Homes in London through small and medium sized publicly owned sites October 2015
London needs a sustainable, flexible housing market that delivers quality, open market and affordable homes in places people want to live. The private house builders have seldom built more than 12,000 homes a year while the public sector hasn t been able to deliver more than 8,600 homes per year, in the last ten years. We all agree that we need new sources of land and delivery bodies to address the shortfall. Background Roundtable Lunch On Thursday 15 October Pinsent Masons held a roundtable lunch discussion where some of the key issues involved in accelerating the delivery of affordable homes were addressed and debated: Simplifying the disposal of public land for best consideration to achieve housing targets Getting the right valuation to help work through the challenges of best consideration The ability for smaller and medium sized sites to deliver against London s housing targets faster than large sites The challenges facing a developer trying to bring public land through the system The challenges facing local authority property services, legal and finance teams evaluating and processing best consideration assessments and land disposals The role of the London Land Commission in increasing land visibility and publicly available data on potential land release. We were delighted to be joined by Chair David Lunts, Executive Director of Housing and Land, GLA and guest speakers Neil Parlett, Director, Lambert Smith Hampton; Nick Cuff, Land Director, Pocket and Tunde Ogbe, Head of Valuations, London Borough of Wandsworth. Regulation Richard Rogers, who led the Urban Task force, recognised the importance of the smaller infill site. These sites are generally under 0.25 hectares and taken together have the capability to deliver 100,000 homes in London. Many of the larger developers may not consider them to be worthwhile because the extensive resources required to deliver development on them are disproportionately high in comparison with larger sites. Smaller developers cannot afford to enter the market for the same reasons. Much needs to be done, but simplifying the regulation around the disposal of such sites held in the hands of public institutions would be a very good place to start. Private developers will happily identify appropriate sites and bring them to the attention of local authority owners, if they have the confidence that they will get a fair valuation and speedy disposal. Key elements in achieving this are a consistent approach to the assessment of best consideration (that is a broader metric than disposal price), the avoidance of State Aid risk and quantifying judicial review or other legal challenge risk in practice. Public Land Release Local Authority property services, legal and financial teams have a great deal to contend with in the area of public land release. This can be legally and procedurally complex, and with limited resources and budget cuts, smaller sites may struggle to gain the attention they deserve. Yet these smaller public sites are an important ingredient in helping to solve London s housing crisis and more needs to be done to help local authorities bring them forward for the development of affordable housing. Key Challenges Discussed Accelerating Delivery of Housing on Smaller Sites There was widespread consensus at the discussion that smaller sites can deliver valuable housing volume in London. However there was a real sense of shared frustration that releasing many of these sites may be a drain on the resources required to find, value and dispose of them. Local authorities have historically budgeted for revenue from land disposals which creates a constant pressure on property service teams to achieve a maximum financial receipt on disposal. With these challenges front of mind, the group was able to divide the areas for improvement into two sections: 1. Improving the way that Local Plans are drawn up so that there is a clear designation or policy presumption that encourages smaller sites to come forward. 2. Improving the process through which smaller sites can be delivered to the market so it is less resource intensive on both local authorities and smaller developers. 1
Pinsent Masons Accelerating the delivery of Affordable Homes in London through small and medium sized publicly owned sites Clear Designation It was clear that each borough had very different approaches to land designation and disposal. Some were simply trying to meet budgetary targets, while others had defined plans for different areas of their borough. Without the knowledge of a local authority s entire land holdings, it is very difficult to provide clear designation. In Pocket s experience, they have often brought public land holdings to the attention of a local authority, which would suggest that there is much to do in this area. The London Land Commission (LLC) does have the capability to bring much to the table in this area, and is looking to be able to report by the end of the year. There was concern that while the LLC would provide a more transparent universe, it would not be a panacea as much land will still slip under its radar as it relies on the provision of up to date and accurate declared information from public bodies, which can prove difficult in practice. Other issues explored included: Alternative delivery structures and joint ventures Local authority arms length development companies and joint venture deals (between the public and private sector) are trying to achieve a way for public assets to contribute for the long term, rather than just the short term capital injection that sales receipts provide. The view was that, as more of these types of schemes are delivered, more boroughs will follow suit because very few have the capability to build themselves, but they all have land to build on. Judicial review If land has been given clear purpose, then it is easier to protect the disposal outcome from a successful legal challenge. The fear of judicial review is a very live issue amongst local authority teams, inevitably resulting in more internal scrutiny. It is this approach that makes smaller sites seem not worth the effort. The group was keen to find ways to help delivery teams to feel more confident in their work, minimising the resource demands of internal scrutiny. If local authorities have followed correct procedure then, it was pointed out, the courts are likely to take a dim view of pure NIMBYism but rather endorse their efforts to provide the right housing for their boroughs needs. 2
Process The discussion focused on how to get to a gold standard process to assist local authorities in the disposal of their assets in such a way as to be resource efficient for them and SME developers. It was broadly agreed: That it was beneficial to bring more SMEs back into the market; however, the absence of a consistent approach to small site disposals can make this difficult in practice. There was great support for the GLA, LLC and London Councils to help take the lead in the articulation of an improved process for the optimisation of smaller sites: it was mentioned that the London Land Commission was looking at coordinating this area. Next Steps Some suggestions that will assist in accelerating housing supply are: For further information please contact: Anne Bowden Partner Property T: +44 (0)113 294 5297 M: +44 (0)7810 556378 E: anne.bowden@pinsentmasons.com Iain Gilbey Partner Property T: +44 (0)121 625 3088 M: +44 (0)7585 996268 E: iain.gilbey@pinsentmasons.com Pinsent Masons to draw together an outline of the legal processes and parameters for the optimization of smaller public sites for sharing with LLC and London Councils. GLA and London Councils to recommend an approach to feed this document into a process framework. GLA and London Councils to work with Pocket and First Base to draw together a framework for the engagement of a smaller developer panel. Pinsent Masons welcomes your thoughts and feedback on the issue of accelerating affordable housing for small and medium developers. 3
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