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What if James Murray is right?

by Andrew Teacher

The only thing more predictable than the downward spiral of the Battersea prime bubble was the swell of discord from London’s property developers over the changing of the guard at City Hall. While housing was at the centre of both Zac Goldsmith’s and Sadiq Khan’s mayoral campaigns, both were largely viewed negatively by the sector.

Goldsmith, known for being anti-Heathrow and critical of tall buildings, changed his stance significantly during a bitter campaign which brought out the worst in political fear-mongering. Khan, somewhat ironically (given his dad isn’t a billionaire) was seen as being more pro-business.

One major sticking point with both Khan and his recently-confirmed planning chief, James Murray, is affordable housing. Specifically, developers are up in arms about having to build more of the stuff because it cuts into profits. All housing projects – even those built by housing associations – demand subsidised housing as a “contribution in kind” to the local area. This sits alongside other levies, but let’s leave those for now.

Historically, the accepted norm has been for about 25-30% of a regular “for sale” scheme to be “affordable” (in the technical sense, that is: so-called affordable rents can now be as much as 80% of the market rate, thanks to Boris shifting the goalposts to up the numbers). However, major rows involving large developments which were getting off with far lower proportions have swelled public anger, media interest and political action.

At the centre of the media storm last year were viability assessments used by developers to “prove” that high affordable housing demands made their projects financially unviable. Some major companies are well known in the industry for fudging these. The upshot is that everyone gets a bad name with trust rusting away between the establishment and the investment community.

Ire has focused on Murray because, as cabinet member for housing in Islington, he took a particularly hard line over affordable housing demands. Islington is one of Britain’s most extremely diverse boroughs in terms of the spread between posh and poor households. Typically, wealthier households are the very type most likely to oppose schemes that bring down the tone of the neighbourhood, as so often happens under Britain’s localism approach to urban planning.

Any local politician will always take a local view, with one eye on the most needy and one eye on re-election. My personal view is that Boris backing Brexit in a shameless attempt to score support for the Tory leadership is far, far worse.

The property sector is rare in that it creates a financial commodity that, unlike any other asset, has tangible social, physical and political value. The public cares about oil prices when it affects their heating or petrol cost and currency when they get to the Post Office en route to their summer hols. But ask the average man in the street what a 10-year Treasury will dish out and few will know or care.

It’s startling therefore, that while some major companies emblazon their social responsibility credentials on billboards, few people have pondered whether James Murray may actually be right in wanting more affordable housing built.

Indeed, there are real questions around viability. And with build to rent, the affordable housing question needs to be considered in a new and different way. The use of discount market rented homes is favoured by developers and councils of all colours. But with many of the big guns posting continued mega-profits, companies need to be smarter in how they engage their public affairs.

They have a commercial imperative to do, and not simply because of City Hall’s power to refuse their development. Without London’s heady mix of people from all backgrounds, the very essence of what regeneration enhances will be lost. Whether its Denmark Street’s music shops, Stockwell’s tapas bars or that Italian restaurant in Camden’s Parkway that’s now a posh fish and chip restaurant; communities and the people who make them function cannot be paved over for profit.

There has to be more collective responsibility here. Typically developments built for sale do not involve any long term interest in the schemes, unless, as is the case around trend parts of west London or in some charity estates around the capital, there is a single owner.

If the numbers don’t work though, then how can things change? Firstly, the profits of some companies would suggest more can be done. This doesn’t mean taking a ridiculous stance in stamping out the profits of FTSE 100 firms. Of course not. But equally, allowing a listed company to build just 9% affordable housing on a major scheme is equally ridiculous.

A lot of our work as a company involves helping big and small businesses speak with the business and national media, local communities and politicians of all shapes and sizes. We’re politically neutral and what we find universally is that honest, early engagement can always make things better.

A likely next step is for the viability assessments which gained much notoriety last year to be made “open book”. This will cause problems for some but will at least quell some of the disquiet from others. Another consideration likely to be considered by the new administration will be space standards.

Thus far, Khan and Murray have portrayed a clear desire to be pragmatic and have showed they realise the reality of the situation. Within days of taking office, Khan had declared that Boris had left the “cupboard bare” on housing. We should not find new ways to fudge the numbers but we should be honest and realistic about what we can build and at what cost.

Innovations around design and modular building will soon enable smaller flats to be constructed quicker and cheaper too at some point, if not immediately. Many in need of subsidised housing would surely be happy to accept somewhere smaller understanding the higher value of living in Islington rather than Ipswich. Everyone – whether on a salary or benefits - would like to afford a three-bed with a garage in zone 2. But many of us would like to park a Mazaratti in that garage too. You don’t see many of those being dished out.

Rather than moaning, the property industry should do what it does best: come up with solutions and innovations that can make things workable.

Clearly, never in a million years will developments handle 50 per cent affordable housing in London as they are now. But thinking more cleverly about design is one way to hike up the volume of cheaper units. Hotel brands like Yotel used aircraft design to create an affordable luxury offer for travellers.

What’s clear is that any solutions will need to be done in partnership – unless the government has a massive about-face and designs to pump billions of pounds of taxpayer cash into building homes. Relying on the private sector to deliver policy, as we’ve done for decades in housing, means developers must be given a clear say over how policy is shaped. But they should use this voice responsibly.


For background, check out this Radio 4 documentary on unaffordable housing. For any advice please get in contact with us directly andrew@blackstockpr.com

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