Yesterday, the chair of the GLA Planning Committee, Nicky Gavron, wrote to Mayor Boris Johnson to ask him to set out a new policy on how developers negotiate with planning authorities over building affordable housing. The full text of the letter is here.
The move comes after a short inquiry into the issue. The Committee held an evidence session last November which I spoke at [transcript available here].
Currently, developers are able to get out of their obligation to build affordable housing if they can show that their development is ‘financially unviable’. Being unviable means that the developer will not hit its profit target.
Many might think it perverse that a developer’s profit comes before everything else. After all, if a building is not profitable perhaps there may be a good reason for that. Perhaps it is the wrong building in the wrong place? But that is rarely a question considered by the planning system. Instead, developers are subsidised for their ‘unprofitable’ schemes by local authorities giving up on affordable housing.
There are many issues with this process and many of them are sure to be explored in this column. It is a practice that has destroyed tens of thousands of affordable homes across London over the last decade, and is largely responsible for encouraging the kind of out of control, unsustainable, high rise, high cost development popular with developers in Central London. It was described by John Wacher, a council officer from Islington, as “crowding out the possibility of securing sustainable development”.
However, one of the biggest problems is that the whole process is almost always entirely secret. So secret in fact that even the people make planning decisions, councillors, are not allowed to view any details, or challenge the claims of developers. Instead, developers send a document detailing their claims to council officers. After having these claims by another set of surveyors, the officers negotiate a deal on behalf of the council. Almost always that means the council giving up on affordable housing.
In the end, the fate of our city is left entirely in the hands of surveyors, who are unaccountable and frequently show themselves to have little regard for the public interest.
At the Shell Centre, surveyors acting for the developer, Knight Frank and Savills, produced two sets of valuations on the housing that was to be built. A lower valuation was used to demonstrate that their proposed development was ‘unviable’ and persuade the council to reduce their obligation to build affordable homes. A higher (and far more realistic) valuation was provided to investors. This showed much healthier profits. Of course the existence of the investor presentation was never disclosed to the council. The only reason why this is now known about is that the investor presentation was leaked to objectors to the scheme. However, both a planning inspector and a judge found this practice acceptable.
Building luxury housing on London’s South Bank with views of Parliament and the London Eye was apparently “financially unviable” according to surveyors acting for Shell, Europe’s largest company.
Shell was not an isolated case. Sources I have spoken to in the development industry have told me that double accounting has now become standard practice. In some cases surveyors acting for the developer are given a bonus based on how much affordable housing they can remove from a scheme.
The whole practice is an economic scandal which has many similarities to the tax avoidance so widespread in the world of multinational corporations, but so far has received much less scrutiny.
Until perhaps now.
When will we see the light?
The GLA planning committee has requested that the Mayor formulate a policy and standards on how viability assessments are conducted.
Part of this new policy, according to the letter sent to the Mayor, should be an end to the kind of secret deals cooked up in the backrooms of city hall between officers and developers.
Of course, the planning committee’s letter has no legal effect. The Mayor is not obliged to implement the changes requested by the committee.
But change seems inevitable. One of the organisations giving evidence to the committee was Islington Council, who already make viability assessments public as a routine.
Other councils, like Southwark and Greenwich, who have in the past spent hundreds of thousands of pounds of public money on legal fees trying to stop these deals coming out into the open, are now considering opening the books too after being slapped down by the courts (another madness of the system is that the public can apply to have a court order disclosure of the deal years after the decision was taken).
One of the things noted by the committee in their letter is that we currently do not know the extent of these secret deals. There have been some high profile schemes, such as Shell, the Heygate and the Greenwich Peninsula where hundreds of affordable homes have been negotiated away to boost developers profits with luxury, unaffordable housing. However, across London and indeed the country we do not know just how much profit developers are getting out of this system.
Perhaps now, a new policy will give us some better understanding of what is happening to our city, and why.
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