£18m public money spent but no social rented housing

Boris Johnson has just announced that the UK’s largest private rental development will be right at the heart of the Elephant & Castle. The 360 Tower on the old London Park Hotel site will provide 462 new homes, most of which will be for free-market rent. 188 will be ‘affordable’ but mostly shared ownership, and a meagre 29 units - initially social rented - have since been turned into so-called ‘affordable rent’. Needless to say that this is way below the 80 social rented units required by planning policy, and way beyond the means of most people living in Southwark[1]. Today’s Inside Housing article reveals that the minimum salary needed for an ‘affordable rent’ flat in Southwark is £46,790 pa.

Of the 188 ‘affordable’ units 159 will be shared ownership. We have no information about how much they will cost, but Southwark Council’s income threshold for shared ownership is currently around £30,000 per year for a 1-bed flat.

The past…
The site was formerly home to the London Park Hotel, which provided low-cost accommodation including accommodation for asylum seekers. It was bought by Government agency ‘English Partnerships’ for £18m in order to provide affordable housing for key workers. The current development was given planning permission by Southwark Council in 2007. The developers were then First Base, part of the Lend Lease consortium selected as the council’s E&C development partner. The site then passed hands from English Partnerships to the Homes and Communities Agency and finally to the GLA. Along the way First Base dropped out, the overall amount of affordable housing was reduced and then the commitment to provide key-worker housing was dropped in January 2010. In 2008, chair of Southwark’s planning committee James Gurling noted the “‘dreadful irony’ that the Government had spent millions of pounds acquiring the site – part of it from Southwark Council – for housing for people who can’t afford it and now the committee was being asked to back a reduction in the number of such homes. A lot of money has gone round in a big circle and the net losers will be the people who need the help most.”

… and the future

The 360 Tower is now being funded by M3 Capital Partners - a global real-estate investment company originally part of the Australian Macquarie group. The tower will be managed by its subsidiary company Essential Living whose aim it is to “revolutionise the private rental market”. Essential Living has recently become very active in Britain and has 5,000 new homes in its planning pipeline. One of its projects is the controversial Archway Tower, and Essential Living makes no bones about what its aim is: “Archway deserves regeneration and we believe our investment will be the catalyst to further gentrification in this important North London community.”

In a recent submission to a parliamentary inquiry Essential Living asked for:

• The continued sale of public land to the private sector
• Limits to lifetime and fixed-term tenancies for affordable housing
• A relaxation of s106 contributions

Essential Living offers itself as an alternative to buy-to-let landlords who they describe as amateurs, but it admits that the costs of building, maintaining and managing their homes in the new American style setup will be more expensive, and is asking for changes in the way the viability of its developments is assessed within the planning process. Large developments must provide public benefits through s106 contributions; these will be reduced if Essential Living gets its way.

Mayor Johnson thinks that M3 capital partners are the perfect new landlords. He hopes they will start a trend: he said: “This ‘holy grail’ of investment in the riskier pre-development stage is a hugely important milestone but it is just the beginning. I want to entice other institutional investors to come forward and invest in quality homes for Londoners.”

Essential Living?
Essential Living do not appear to have any completed developments where we can see what their rent levels are, but if the so-called ‘affordable rents’ are going to require an income of £46,790 per year, then we can confidently predict that the free-market rents won’t come cheap.

Private rental and ‘affordable rent’ don’t feature anywhere in the policies or plans for the regeneration of Elephant & Castle, but the 360 Tower and One the Elephant show us that both will play a significant role, and that much of the regeneration’s housing will be neither affordable nor owner-occupied. The Elephant & Castle regeneration - Europe’s largest regeneration scheme - is quickly becoming a property-investment bonanza, one moreover that is being funded through the disposal of public land.

[1] Median household income in Walworth (which includes E&C) is £14,300.