The recent London Real Estate Forum (LREF) welcomed several thousand delegates to discuss the next stages of the capital’s development. No one doubted London’s ambition: the programme was chocker with interesting content about what the city might do in a few years’ time if this or that pot of cash suddenly materialised. There were, though, doubts about London’s realism – and the lack of it pervading the draft new London Plan, the Mayor’s master blueprint for how he wants the city to chance and grow.
As LREF unfolded, hushed whispers about viability and deliverability broke out and filled the corridors outside the main halls. Gone are the days when such events were opportunities for unlocking delivery or levering in new investment. Today, no one is buying land and very few are building new homes. We are running on empty and worse is to come if we don’t soon start to get real.
Yes, the big house builders are still in the room, but many are casting their eyes over other cities, both regionally and internationally, and you have to squint hard to spot a local small or medium-sized builder. London is increasingly funneling what’s left of its dwindling sector into large scale public-private development.
There’s nothing wrong with the public sector stepping up its delivery. Indeed, that is part of the answer. The private sector cannot do it alone and the draft new London Plan seeks to formally place public bodies in the master developer role.
However, public sector housing delivery faces the same challenges as all housing delivery. Materials and energy supply are too expensive and, in any case, people cannot afford to buy the homes that are being built for sale. In the end, it doesn’t matter how they might be funded – if they are going to make a loss, they aren’t going to come forward.
So, what’s going wrong? Much headline coverage of the proposed new plan has focused on its being much shorter than previous versions and setting a lower housing supply target for London than the government has. The latter has sparked some controversy. But, in the end, does it matter if the target is the housing ministry’s 800,000-plus homes or City Hall’s preferred 500,000-plus over ten years?
What actually counts is attracting the investment London needs to see any major increase at all on the current, meagre throughput. Here’s where I get nervous. The document describes over 900 potential development scenarios, but its voluminous annexes show that fewer than a quarter of them stack up financially when considered in the light of the draft plan’s policies. This proportion falls to about 11 per cent if you factor in cost inflation.
Many that are viable rely on delivering student housing development and co-living schemes. There is nothing wrong with those tenures, but sales of new flats and build to rent properties, which should be a significant part of the pipeline, are just not working in the draft.
Moreover, the calculations assume that all the boroughs will commit to long-term big cuts in their Community Infrastructure Levy, so that larger contributions from developers go on housing. But City Hall cannot make boroughs do this – it can only ask them nicely.
The draft is explicit in its ambition to make London go above and beyond national standards in a number of areas including sustainability and reducing carbon. Yet if we already cannot build at a cost that makes sense for Londoners, why are we mandating standards which will make building still more expensive?
As a developer, I welcome the draft plan’s recognition that some Green Belt land within Greater London should be available for building on: it made no sense for City Hall to ignore huge tracts of Green Belt, some of it more grey than green. London’s land supply for new homes has materially reduced over the last decade, but this can be addressed with a coherent Green Belt release programme.
However, the draft plan’s assumptions about Green Belt development don’t marry up to reality. They appear to encourage density levels within 400 metres of stations in outer London Havering and Enfield akin to those found in high-rise inner London Nine Elms and the Isle of Dogs. It is a struggle to imagine who would want to live in such towers in highly suburban, semi-countryside areas. No commercial model makes sense in such a context and let’s not dwell on the local opposition any such schemes would face.
City Hall has made plain that it will want more money from the public purse for housing than has already been pledged. The amount required is never made explicit in the draft new plan, but if its Green Belt grant assumptions are used, then the figure wanted exceeds £28 billion. That is considerably more than the latest social and affordable homes programme settlement of £11.7 billion. Let’s hope the Mayor can convince our new Prime Minister that London deserves it.
Everyone wants London to succeed. It’s a great city and it still has an assortment of first-rate public planners, builders and pro-growth politicians. But many are looking jealously at Manchester, which for now is still getting high density development to work alongside more careful suburban typologies in its middle and outer belts.
The draft new London Plan is a draft for a reason. It provides an opportunity to discuss what London needs and what it can achieve. The next step should be to define what is essential and what would be merely nice-to-have. The only focus should only be on what is vital for delivering new homes for Londoners.
Nick Cuff is managing director of development and advisory business Urban Sketch and edits and writes for the website Prop Views. Photo from GLA.
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