London's 'affordable' homes scheme is in chaos: but some builders are keeping their promises to house young Londoners

Full of good intentions (most of the time) but so often fraught with problems, it is time to sort out the affordable homes mess.
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Ruth Bloomfield11 July 2017

The ink is just drying on planning permission for yet another new apartment scheme on the banks of the Thames.

With its steel and glass design, the crescent-shaped building will not look dramatically different when it is completed by 2020 to the dozens of gleaming new blocks that already line the river.

But this project by Singapore-based Frasers Property UK has one important difference. At a time when firms regularly slash the proportion of affordable homes in their schemes, saying they can no longer fund them, the developers of this new building will be offering 93 flats out of the total 172 at first-time buyer-friendly prices.

One-bedroom homes and some two-bedroom flats at 9 Riverside, at the junction of the Thames and the River Wandle, half a mile from Wandsworth Town station, will be aimed at buyers with household incomes of less than £46,000. Full prices for homes in the same building start at £720,000 for a two-bedroom flat.

The project was granted planning consent by Wandsworth council, which — to the “fury” of London Mayor Sadiq Khan — recently allowed Battersea Power Station developers to slash the number of affordable homes there by 250. Nine per cent of the homes on the Battersea site will now be affordable.

Prices have fallen and construction costs risen since Frasers first struck its deal on affordable housing but Simon Lear, chief executive of developments, says they will maintain the number of affordable homes on offer, honouring their responsibilities to the local community. The affordable flats will also be larger than originally agreed, to comply with latest space requirements.

Frasers has balanced the books by increasing the size of 9 Riverside. It will have the originally agreed 93 affordable homes, which will be allocated by a housing association in a deal which will not profit Frasers, alongside 79 private flats.

Just nine per cent of homes at Battersea Power Station will now be affordable
Getty Images

These two very different examples of how firms are handling their commitments illustrate the chaos which currently reigns in London when it comes to providing affordable homes on private developments.

HOW DID WE GET INTO THIS MESS?

In 1995, with prices soaring and the capital’s housing crisis deepening, the Government made the inclusion of affordable homes on private developments compulsory. Most London councils expect about a third of homes to be built for squeezed Londoners who already live or work in their area.

Unsurprisingly, developers did not immediately welcome the new rules.

Part of their discomfort was financial; as Dominic Grace, head of London residential development at Savills points out, developers are businesses not charities, and affordable homes eat into their profits. They also feared rich buyers in search of trophy homes would shy away from living cheek-by-jowl with this new form of social housing.

“Historically, there has been a stigma about affordable housing,” says Charles Holland, head of residential development and investment at estate agents Marsh & Parsons. “There was concern on both sides about integration.”

These concerns led to some creative moves. At One Hyde Park in Knightsbridge, London’s most expensive block of flats, affordable homes were built at a separate block in Pimlico. Other developers started making cash payments to local councils to fund affordable homes elsewhere in the borough, while yet more introduced the hated system of “poor doors” — literally segregating private and affordable owners by giving them separate entrances to the same building.

Flats at 9 RIverside will be aimed at buyers with household incomes of less than £46,000

Ironically, this attitude persisted even as the profile of shared-ownership buyers began to change. A policy initially set up to assist low-earning key workers is now expensive enough to be the province of the young professional. As Holland says: “Affordable is a young, middle-class market.”

Then, in 2011, the Government threw a curve ball. With the recession in full swing and property prices tumbling, it ordered councils to allow developers to renegotiate their affordable housing commitments downwards if they felt their scheme had become financially unviable.

Holland says some firms did find themselves in genuine financial problems as construction costs rose and prices fell, particularly as the cost of building on contaminated land or renovating a tricky historic property can be far higher than on an uncomplicated site. However, he claims some firms have abused the system, apparently pleading poverty in order to up their profit.

“The viability process is not a perfect one, there is ambiguity which can be subject to interpretation,” he says. “It has been up to local authorities to fight sometimes very difficult battles to keep affordable in a scheme.”

WHERE TO FIND 'AFFORDABLE' HOUSING

The good news is that for every scheme with virtually no affordable housing there are plenty of genuinely mixed, genuinely sustainable developments.

About a third of the homes being built at the Queen Elizabeth Olympic Park in Stratford will be affordable.

Some will be sold on a shared-ownership basis, with others rented at subsidised levels — a nod to the fact that it is not only first-time buyers who are being priced out of the city but renters, too.

Two-bedroom flats in Stratford's East Village are being rented for just under £1,500 per month

At East Village, the former athletes’ village, Triathlon Homes is renting two-bedroom flats for just under £1,500 a month to households with incomes of between £48,000 and £90,000 (triathlonhomes.com).

Housing associations, which are becoming increasingly important players in London’s property market, are also successfully merging private and affordable housebuilding, using the former to help fund the latter.

One of the largest of these schemes currently on the market is Excalibur in Catford (excaliburse6.co.uk), a regeneration of the former Excalibur Estate, where about six in 10 of 371 homes will be affordable. The next tranche of one- and two-bedroom flats goes on sale in September, with pricing yet to be confirmed.

Private developers are also taking up the affordable challenge. About a third of the homes in Berkeley Homes’ huge Chelsea Creek scheme will be affordable. Young buyers have part-owned small flats at the site alongside some of the wealthiest buyers in the capital, without any discernible problems, for several years — so any fears that might persist about social friction on mixed developments have proved groundless here.

Chelsea Creek: another phase of smaller flats is due to be launched this year

At present, the only homes for sale at the creek are three-bedroom apartments priced at £2.85 million (berkeleygroup.co.uk). But another phase of smaller flats is expected to be launched this year or next.

With developers finally getting on board with affordable housing, Savills’ Dominic Grace observes that including low-cost homes in a project can actually add to its appeal. “People talk about ‘place making’ all the time,” he says. “We all know that what makes a great place is a mix of people all living together.”

Charles Holland of Marsh & Parsons agrees. “Having a more diverse community makes a development a more vibrant, exciting place to live,” he says.