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How to accelerate the release of public sector land to stimulate growth and new housing

November 2012

A report from the Expert Advisory Panel

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Expert Advisory Panel


Expert Advisory Panel – November 2012 3

Contents

The Expert Advisory Panel 4

Chairman’s Statement 5

Foreword 7

Executive Summary 8

1. Report of the Expert Advisory Panel

1.1. Overview 11

1.2. Previous approaches to releasing public sector land 12

1.3. Role of EU procurement on supply 13

1.4. Case Studies: Delivery of Manchester, Sheffield and Olympic Park 14

1.5. Developer Case Studies 16

1.6. Key findings from 18 public sector sites 17

1.7. Constraints to Delivery: Summary 18

1.8. A three step approach 19

2. A New Approach

2.1. Implement a “Plan for Sale” for each site 20 2.2. Early delivery statement and engagement

with Statutory Consultees 21

2.3. Simplified disposal process 23

2.4. Fast track planning 25

2.5. Infrastructure funding 26

3. Conclusion 27

3.1. Benefits to Landowners 29

3.2. Why it works for Developers 29

4. Questions and Answers 30

5. Expert Advisory Panel Recommendations 31

Appendices

Appendix I - Market Conditions 34

Appendix II - Case Studies 41

Contents



4

The Expert Advisory Panel

The Expert Advisory Panel was commissioned by the Government in February 2012 to draw from the experience of Registered Providers, local Government, housebuilders and the development industry to help unlock the delivery of up to 100,000 new homes through the disposal of surplus public sector sites. The members of the panel comprise:

Tony Pidgley, Chairman, Expert Advisory Panel

At the age of 15, he set up his own company in haulage and plant hire. At 21, he sold this and joined Crest Homes. In 1975, he left to form Berkeley Homes Limited. The company floated on the Unlisted Securities Market in 1984 and gained a full listing one year later. Tony is currently Chairman of The Berkeley Group Holdings plc, Berkeley has become one of Britain’s leading businesses, pioneering ways of creating successful, sustainable places.

Keith Exford, Group Chief Executive Affinity Sutton

Keith Exford is the Chief Executive of national affordable housing provider Affinity Sutton. He also chairs the G15 group of London’s largest housing associations.

Bob Lane, OBE, Chairman of the London Thames Gateway Development Corporation, and a Trustee of the Corby City Academy.

Bob was previously Chief Executive of Catalyst Corby and North Northants Development Company and Chief Executive of Speke Garston Development Company. He has been a part-time senior adviser to the international consultancy group AECOM.

David Pretty, CBE BSc(Econ) FRSA

David retired as Group Chief Executive of Barratt Developments PLC in October 2006 after 40 successful years in the housing industry, 27 of them with Barratt. He was named the UK’s Regeneration Champion in the national Regeneration Awards in December 2006 and made a CBE for services to housebuilding in 2007.

He remains active through a number of trustee roles, including the Prince’s Regeneration Trust and Prostate Cancer UK. For many years he has campaigned to highlight the causes of the current housing shortage, the plight of first-time buyers and the need for more social housing. He contributes regularly to trade publications, is an occasional adviser to Government on housing issues and recently co-Chaired an independent review of the planning application process in England.




Chairman’s Statement

It has been a great honour to Chair the Expert Advisory Panel on the disposal of surplus public sector sites.

Increasing the delivery of high quality sustainable new homes of all tenures is essential to the well-being of our nation. The country desperately needs more affordable homes as well as private homes for sale and rent, particularly for our young people, key workers and ageing population.

There is a unique opportunity to utilise the surplus public sector land holdings that have been identified bringing back into use these redundant mainly brownfield sites where thriving neighbourhoods can be delivered quickly.

This will be a force for good. The social and economic benefits derived would create thousands of new jobs, strengthen our communities and generate the economic growth this country so badly needs.

We can and need to make this happen. We need to be building at least 240,000 new homes each year. With population growth, demographic change and the history of undersupplying new homes, there is an urgent need to significantly increase housing supply which is at historically low levels.

With current economic pressures and fiscal constraints, putting into place a process which utilises the resource and expertise of registered providers, housebuilders and the development industry is crucial to maximising the delivery of new homes for all.

Our recommendations do not require new legislation but seek to highlight and simplify processes whilst ensuring best value for the public sector is secured, with high quality schemes that provide excellent places to live and work.

For building to start, surplus public sector sites need planning consent, funding for infrastructure, a builder or developer and the private sector to shoulder the development risk within a simplified disposal system.

With this approach in place and the commitment to constructive partnerships, where a culture of trust can be created, this would rapidly transform this surplus, formerly used land into high quality thriving neighbourhoods delivering homes of all tenures, thousands of new jobs and help underpin the economic growth this country needs.

I would like to thank my colleagues on the Expert Advisory Panel; Keith Exford, Bob Lane and David Pretty whose knowledge and advice has been invaluable.

I would also like to recognise the support of the Homes and Communities Agency and Officers of the Department of Communities and Local Government which has been so important to bringing this report to its conclusions.

Tony Pidgley

Chairman, Expert Advisory Panel on Surplus Public Sector Sites



6



Foreword

Foreword

The Government is committed to its ambition to bring forward public land with capacity to deliver up to 100,000 new homes within the current Spending Review Period ending 2015.

The importance to the UK economy of providing much needed new housing to meet the demand of population growth and demographic change as well as the benefit to the economy from the jobs and growth created by building new homes and places is not to be underestimated.

The Expert Advisory Panel (“EAP”) brings private sector expertise to work alongside the public sector to consider and make recommendations to support the Government’s aspiration to put in place a framework for the delivery of new homes. The Terms of Reference for the EAP are highlighted below and this report has made a number of recommendations to deliver the objectives to:

1. Accelerate the release of public sector land to stimulate economic growth and provide much needed housing.

2. Unlock progress on challenging sites and attract private sector investment.

3. Drive forward the Government’s ambition to release land with capacity to deliver up to 100,000 new homes within the current Spending Review Period.

4. Maintain momentum across Government to deliver homes.

5. Widen potential role for increased partnerships, working between public and private sector and make use of the Government’s “build now, pay later” scheme.

The EAP welcomes the Prime Minister’s announcement of 6 September 2012 highlighting the importance of housing delivery to growth and launching new initiatives to speed up delivery. The EAP was encouraged by the support for its emerging conclusions including proposals for:

• applicants to be able to opt for the Planning Inspectorate to handle applications where the local authority are poor at processing decisions.

• reprioritising resource for the Planning Inspectorate and prioritisation for all major economic and housing related appeals.

• Government guarantees for infrastructure investment and housing development.

• Steps to enable the Planning Inspectorate to review the financial viability of major applications.

The contributors to the EAP have worked together, combining ideas, sharing experiences and bringing together public and private sector knowledge and case studies that aim to bring to life the recommendations and proposals set out in this report.

There is a unique opportunity to significantly increase the supply of good quality homes and provide exceptional placemaking through the use of surplus public sector sites. We can and need to make this work, providing more affordable and private homes for sale and rent, to help our young people, key workers and ageing population.

By accelerating delivery this will be a force for good, strengthening communities creating thousands of jobs and making a major contribution to economic growth.

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Executive Summary

With housebuilding output at its lowest level for almost 100 years, the necessity for new initiatives aimed at releasing land for development and implementing existing planning policy is key, not only to providing much needed housing but also to stimulate economic recovery and growth.

On 6 September the Government announced a range of initiatives to increase and speed up housing delivery on major large-scale developments and the release of public sector land. Many of these chime with the key findings and recommendations of the EAP; for example the need to speed up major housing applications and for Government support for investment in infrastructure and the further impetus given to the disposal of surplus public sector land, including a single shop window for site disposals. The EAP welcomes these initiatives and believes that together with our recommendations, they could achieve the Government’s ambition to deliver housing on surplus public land.

The challenge is to identify how the Government can create quick wins within existing policies, to help small and large builders and construct an alignment of interest with local authorities, landowners, developers and communities who want to see new homes and jobs for their area.

Through the work of the EAP, we have found very good examples of where the public and private sectors have worked well together and delivered great results. Excellent examples include the delivery of the Olympics, the regeneration of central Manchester, the transformation of Sheffield and a range of developments taken forward by the private sector on previously used surplus public sector land. The lessons learnt from these have influenced the recommendations. The tools are there, as is the policy framework.

A list of 18 surplus public sector sites was provided for the EAP by DCLG to enable an analysis of the issues and to undertake a detailed case study on the MOD site at Bicester. This work influenced the findings and has shaped a number of proposals, particularly relating to infrastructure funding and prompted the simplified disposals process. This element of the EAP’s work has been separately submitted to Government due to the commercially sensitive information incorporated, however can be summarised as:

• from the 18 sites 23,000 new homes could be brought forward in the next two years.

• the EAP has not identified any reason why the sites cannot be delivered with the existing planning framework.

• there is a clear need for funding support for major infrastructure.

• committed, co-ordinated and constructive response from statutory consultees are needed at an early stage.

At the heart of the recommendations is a change in approach to involve developers at an early stage in the process, a transference of planning risk to the developer and an ability to align the interests of landowners, local planning authorities and developers over the long term. These are the ingredients most likely to result in the delivery of new homes on surplus publicly owned land.

The fundamental framework to deliver these new homes is already in place. Together with the Government’s announcements of 6 September 2012 these recommendations can be implemented quickly to expedite the delivery of new homes on surplus Government land.

A five point plan of recommendations is set out. This is clear and simple. In essence, each public landowner needs to have a clear ‘plan for sale’ with Government incentives and sanctions to stimulate their delivery. Co-ordinated and constructive input from Statutory Consultees is required with a simplified disposal system and a fast track planning process alongside the infrastructure funding where necessary for major sites of over 500 homes.

Above all, constructive public private partnerships which align interests, built on trust will be essential to deliver the homes of all tenures this country needs with the social economic benefits and jobs this will bring.

Executive Summary



Executive Summary

Recommendations

The five recommendations in the report, therefore, seek to focus on achieving this. In summary we have proposed that for each site there is:

1. Implement a “Plan for Sale”

The Government should require all public sector landowners with surplus sites to create a “Plan for Sale”. This should be accompanied by a clear, strict and disciplined tender timetable. The Government should consider providing incentives and sanctions to ensure these sites are disposed of in an efficient, clear, transparent and speedy way.

The Homes and Communities Agency and ATLAS could also provide expertise and support to both the landowner and the local planning authority to assist wherever necessary.

2. A constructive co-ordinated approach from Statutory Consultees early in the planning process.

Each publicly owned site should have a statement establishing the fundamental principles of sustainable development and setting out the constraints to development. This should include a co-ordinated approach from Statutory Consultees (including English Heritage, Environment Agency, Highways Agency and Natural England).

3. A simplified disposal process which addresses current financial constraints facing the industry, but provides value for money to the landowner.

Surplus land should be offered to developers on a simple two year peppercorn option. The developer would be under an obligation to secure planning. The “build now, pay later” model should be adopted and can be used to align developer and landowners’ interests.

4. A fast track planning process which ensures community engagement and the quality and sustainability of the new homes.

It is vital that major housing projects are determined quickly to facilitate delivery. Classifying large housing developments as major infrastructure for determination by the Secretary of State would support a fast-track approach. For smaller applications enabling developers to opt for the Planning Inspectorate to determine applications in failing authorities and prioritising housing appeals would speed up delivery.

5. For schemes of over 500 homes infrastructure funding for enabling and/or abnormal works may be required.

Significant infrastructure is necessary on many sites. The Government should use the new infrastructure fund to support delivery. Using “build now, pay later” recognises significant upfront developer instruments and helps cash flow but in itself may not be adequate in all cases.


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1. Report of the Expert Advisory Panel

1.1 Overview

The Government’s objective is to release land with capacity for 100,000 new homes on surplus formerly used land by the end of the Spending Review Period. The Expert Advisory Panel (EAP) has been charged with advising on how this can be achieved.

The need for new homes has never been more pressing. At a time of record low housing delivery, the country is experiencing population growth and demographic change which, coupled with years of under-supply, has created a housing crisis.

The Government also recognises the critical role that housing delivery can play in the growth strategy and has announced a series of measures and initiatives to support this.

The EAP has analysed a series of case studies to assess common constraints, what has worked and see what lessons can be learned.

The EAP has also assessed 18 publicly owned sites to understand their history and challenges and assess what needs to change to speed up the release of surplus public land and new homes.

This work is not incorporated in this report due to its commercially sensitive nature, but has been provided separately to Government. However the conclusions and recommendations have drawn from this review.

Surplus public land can play an important role in meeting housing demand as well as achieving sustainable development and raising much needed public funds.

This report of the EAP has identified key findings from the case studies and site analyses, whilst also drawing from the experience of the panel members bringing together knowledge from Registered Providers, Local Authorities, house builders and developers.

The five recommendations do not require any legislative changes and can be introduced rapidly to help the rapid disposal of these surplus sites bringing forward the new homes young people, key workers and other ageing population needs.

Further details of the scale of planning applications processed by the ODA can be found at www.growthinlocalism.net.

Position Statement


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1.2 Previous approaches to releasing public sector land

The disposal of surplus Public Sector Sites has been the subject of a wide range of initiatives over many years. A variety of initiatives have included:

1. Register of surplus Public Sector land.

2. A detailed process for the release of the surplus NHS sites, some eight years ago.

3. Wide ranging disposal processes through departmental and other public bodies and Government agencies.

The Sustainable Communities Strategy 2003 highlighted the importance of developing vacant public sector land and tasked English Partnerships with producing a register of surplus public sector land across Government.

The present Government has refocused on the role that public sector land has to play in meeting its housing delivery objectives while securing best value for the tax payer and generating revenue for the Treasury.

On 8 June 2011, the Housing Minister announced Government plans to release public land capable of delivering up to 100,000 new homes during the current Spending Review Period 2011-2015. The release of surplus public sector land is now a key objective of the Government’s Housing Strategy.

The EAP recognises the experience and track record of the HCA in successfully delivering development on surplus public land. Further information from their work and other public sector landowners with successful case studies could provide further background information.

Position Statement



1.3 Role of EU procurement on supply

The Modernisation of European Public Procurement to support growth and employment is currently under review to simplify the rules and procedures of the tendering process for public land.

Many public authorities beyond those already engaged in the Government’s initiative have scope to release surplus land through more efficient use of their portfolio and consolidating operations. The method of incentivising Government departments to release surplus land varies on a case-by-case basis. Where there is little incentive to release surplus land, the Government might wish to consider incentivising public authorities to make more efficient use of their land by enabling bodies to retain funds generated from land sales and those funds being additional to other funding and grant schemes.

Public procurement can be costly, complex and time consuming for those selling and bidding for public land. Public bodies are naturally concerned that they adopt a transparent and fair process and achieve the best return for their land. Bidders can be put off by the cost and time in procurement exercises which limits competition.

With the overwhelming need for new homes and for public authorities to raise funds by disposing of surplus land, it is critical that the procurement/disposal is improved and that authorities fully understand the options available to them. Simple land sales do not require an EU procurement process but frequently authorities will opt for one to limit risk of challenge.

When scoring bids, public authorities should ensure that appropriate weight is given to delivery and the track record of the bidder.

It is recommended that the Government needs to ensure full engagement to overcome the costly and burdensome procedures which often blight the disposal of public sector sites and to give clear and concise advice of when it is necessary to engage in the EU procurement process, as many sites can simply be disposed of without engaging in this complex process.

Position Statement


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1.4 Case Studies: Delivery of Manchester, Sheffield and Olympic Park

We have looked carefully at three very different, large and complex urban regeneration projects and drawn out four of the most important and most relevant lessons that can help inform our future direction of travel. All three have been public/private partnerships. They have very successfully managed to deliver results, tackling deep rooted challenges. They have all been delivered in areas of market failure and in a relatively short timeframe. All have provided the catalyst for much longer and wider transformational change. The three case studies are:

The rebuilding of Manchester City Centre after the terrorist bombing in June 1996(MML)

The Manchester case study shows how public intervention to create the right environment, opportunity and confidence created a new and previously unproven market for quality private sector city centre housing. In the space of a few short years housing units in Manchester city centre leaped from a few hundred to in excess of 10,000. The same happened in Sheffield, but on a more modest scale.

The regeneration of Sheffield City Centre from 2000 (URC Sheffield One)

Sheffield is a great case study of how a local authority turned round a poor reputation of partnership working into one where it worked very effectively with a range of private partners, working with the grain of the market, using its own land assets and focusing on efficient administration and city management.

The athletes village and Olympic Park (the Olympic Delivery Authority)

The ODA is the most radical example of a pro-active public sector approach and streamlined delivery. The public sector CPO’d the land, cleaned it up, delivered all the strategic infrastructure and secured all the necessary planning permissions (using its powers as a planning authority). Manchester also used its CPO powers and City Council land interests, combined with fast tracked planning and investment in the public realm, to deliver the City Centre rebuilding programme.

The ODA procurement machine was huge and was predominately web/electronic based so as to be efficient and practical. All its key contracts were a combination of incentive and penalty driven. The Olympic Village is an example of where the contract had been sufficiently flexibly drawn so that it could be renegotiated when the financial crisis made the original terms unviable and ongoing delivery and value for the public purse was the overriding priority.

Review of surplus Government land for housing

The regeneration of Manchester

The transformation of Sheffield

Olympic delivery



Key findings from Manchester, Sheffield and Olympic Park

1. The Market is the Starting Point

The overall economic and property market cycle clearly has a fundamental influence on the health of the property development industry and in particular the house building market. There is little that individual interventions at a local supply level can do to address issues which are macro and demand driven. Nevertheless, history shows how local intervention can address market failure at the margins and can, at its most successful, have a transformational impact. The starting point for any public intervention must be a deep understanding of the market dynamics for interventions to be effective. Often failure or inactivity is driven by a lack of understanding of the market dynamics – trying to deliver the wrong product in the wrong place, or by layering on so many requirements that development is just not viable.

2. Get the Basics Right

All three case studies started by pulling together a very sound database of the market, the sites and the opportunities. The market responds much more positively when a lot of the time-consuming and expensive preparation work has been done. This might range from a planning brief, ownership details, ground conditions, services and S106 requirements as part of a marketing package through to a masterplan or outline planning permission. The public sector can also help by making sure that their mainstream programmes support their strategic objectives. Getting basic processes right such as effective service delivery, hitting planning targets and being clear that investment from the private sector is welcome, all point to a well run authority and a place to invest. Increasingly local authorities are getting a reputation for being anti-development and it becomes increasingly difficult to do business in these areas, even when there is a housing need/demand/ready market. Incentives – policy and fiscal – are important in helping to align national and local political priorities.

3. Risk and Viability

The public sector and landowners need to be realistic about the risk appetite of private partners. For complex sites to be brought forward either at all or on an simplified timescale, it can mean a very pro-active approach from the public sector to deal with the most obvious constraints. The obvious areas are: site assembly; remediation; site preparation/provision of (or agreements to help fund or deliver) infrastructure; and a clear planning framework.

4. Effective Public Procurement

Effective and efficient procurement and striking the right partnerships with the private sector that can deliver sits at the heart of successful delivery. From a developers perspective European rules make the whole process hugely bureaucratic, long winded and process driven rather than focused on the right outcome. Layered over this many public bodies interpret “best value” in very different ways – adding further complications. Often there is a lack of urgency and a lack of focus on delivery of results. Procurement of development partners need to address issues of clarity and fairness but also of realism and finding the right partners that have a track record and proven access to funding (and not just the highest price). Often the best partnerships have open book deals which are sufficiently flexible to cope with changes in market conditions and have a realistic balance of risk and reward for all of the parties.



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1.5 Developer Case Studies

The EAP has considered what lessons can be learned from three case study examples of land that has previously been released from the public sector and which has successfully delivered new housing. Full details of the case studies are provided in Appendix II to this report and are set out in summary below:

1. Parkwest, West Drayton

In West Drayton, London, Parkwest was a former RAF base used principally for RAF staff accommodation. In 1993, 4.5 hectares of land were declared surplus to MoD needs. In 1995 the MoD obtained a planning consent for 183 new affordable homes but this scheme was not delivered as it was unviable. The MoD released the land to St George Plc in 2003 and following planning consent for 574 new homes in May 2006, construction commenced in August 2006.

2. Royal Arsenal, Woolwich

Formerly the hub of Britain’s armaments and ammunition production, Royal Arsenal comprises 31 hectares of land that was transferred from MoD to English Partnerships in 1997. The site was heavily contaminated, requiring significant investment and making the financial viability for development marginal. With the support and partnership of Greenwich Council, the LDA, GLA, English Partnerships and English Heritage, the developer Berkeley has delivered some 2,000

new homes since the initial planning application in June 2000. The scheme is now expected to deliver 5,000 new homes together with a station for Crossrail due to open in 2015.

3. Woodberry Down, Hackney

Released by London Borough of Hackney to developers in 2005, the current masterplan comprises over 4,600 new homes. The first 1,000 homes are being delivered with over 530 of the new homes being built as affordable housing. The land agreement recognises the complexity of delivery and high cost of buying in the land through CPO process. The developer, Berkeley works in partnership with LB Hackney and HCA to deliver the scheme.

A number of key findings have been drawn from these case studies to inform the recommendations of the EAP:

1. The early involvement of developers is a key factor to achieving simplified delivery and finding a commercially viable development solution.

2. A long-term partnership approach between developers, landowners and planning authorities creates value.

3. The need for close collaboration, alignment of interests and trust are all crucial ingredients for successful delivery of projects.

4. The need to deliver a financially viable development solution has, in all cases required a commercial approach to land disposal that builds on a basic “build now, pay later” form of procurement but which has been adapted to the precise requirements of each development.


Parkwest

Royal Arsenal

Woodberry Down



1.6 Key Findings from 18 Public Sector Sites

The review of the 18 public sector sites alongside the examples of successful development on former publicly owned land have shown that a large number are capable of contributing towards the Government’s objective of delivering 100,000 homes on public sector land within the period ending March 2015. For reasons of confidentiality the detailed information has been supplied separately

The review has enabled a number of conclusions to be drawn in relation to the ability of these sites to deliver sustainable development, the quantum of housing that these sites could deliver and the constraints that will need to be overcome to secure their delivery.

1. The sites will mainly reuse previously developed land. Their development will therefore accord with the National Planning Policy Framework objective of encouraging the reuse of previously developed land.

2. All 18 sites could deliver sustainable development in accordance with the objectives of the National Planning Policy Framework.

3. 16 of the 18 sites have some planning status in that they either have planning consent, are the subject of an undetermined planning application or are identified in an adopted or emerging local plan.

4. The 18 sites could deliver over 30,000 new homes across southern and eastern England.

5. The delivery of the sites is contingent upon planning and technical constraints being resolved. The delivery of transport infrastructure, impact on heritage assets and environmental impacts are the most commonly occurring constraints to the delivery of the sites.

6. 15 sites could have planning consent in the next two years and bring forward approximately 23,000 homes.

7. The need for financing the enabling infrastructure is critical as is the impact of Section 106 obligations and CIL.

8. The co-operation of Statutory Consultees in the planning process, including The Highways Agency, English Heritage and Natural England will be critical.

9. The planning system is long, complex and costly. Steps need to be taken to speed up the process to minimise risks and cost and ultimately speed up delivery.

10. The need to align the interests of planning authority, landowner and developer is paramount.

11. The private sector has an important role to play by bringing in expertise, taking risk and accelerating delivery.

12. A simplified disposal process is essential, with a clear ‘plan for sale’ is essential if the quality of homes needed are to be delivered quickly, bringing forward the wide ranging social, economic benefits and jobs this country needs.



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Lessons Learnt

1.7 Constraints to Delivery: Summary

We can draw some conclusions from these case studies:

All prejudice delivery of major sites

Planning

Deliverability

Viability

• IS COSTLY

• TOO LONG

• PLANNING RISK/COST

• LOCAL AUTHORITY RESOURCES

• LENGTH OF APPEAL PROCESS

• LAND ASSEMBLY

• ALIGNMENT OF GOVERNMENT AGENCIES

• COSTS OF PLANNING TARIFFS

• HIGH INFRASTRUCTURE COSTS

• IMPACT OF EARLY LAND PAYMENTS

• HIGH FINANCE COSTS

• AVAILABILITY OF CAPITAL




1.8 A three step approach

STEP 1

STEP 2

STEP 3

Landowner to complete early delivery statement

Government simplified appeals process for surplus

Simplified Disposal

• LEGAL TITLE

• SERVICES

• CONSTRAINTS ANALYSIS

• UP-TO-DATE ENVIRONMENTAL SURVEYS

• STATEMENT OF SUPPORT FROM ALL STATUTORY PLANNING CONSULTEES

• PLANNING HISTORY

• PRIORITISATION FOR GOVERNMENT LAND

• SIMPLIFIED THREE MONTH DETERMINATION FROM DATE OF APPEAL

• ADDITIONAL RESOURCE REQUIRED

• OPTION ON NORMAL COMMERCIAL TERMS


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2. A new approach

2.1 Implement a “Plan for Sale” for each site


The Homes and Communities Agency and ATLAS should also provide expertise and support to both the landowner and the local planning authority to assist wherever necessary.

It is necessary to build a culture of trust between the public and private sectors so that site disposal can be achieved wherever possible without the slow, costly and cumbersome EU procurement process. Further clear and concise Government guidance should be provided to explain when it is necessary to engage in the EU procurement process.

Simple contract documentation that should comprise the landowners “Plan for Sale” should also incorporate:

• Tender timetable.

• Legal title.

• Service information.

• Constraints analysis and environmental surveys.

• Planning history.

• Consolidated, co-ordinated and constructive statement from Statutory Consultees.

Requirements for sustainable development and achieving best value should also be set out. Avoiding masterplanning sites prior to disposal will also speed up the process and enable private sector expertise to be utilised efficiently.

The National Planning Policy Framework established a “presumption in favour of sustainable development”. The development of surplus public sector sites can provide the land for up to 100,000 new homes, however, it is also crucial to ensure high quality homes are built with good environmental performance. It is clear that we need to build a lot more homes in Britain and it is estimated that over 240,000 each year, of all tenures, are required. However, you cannot separate this issue from the social question of what kind of places need to be created. The physical and social fabric of a community are inextricably linked. Whilst it is widely recognised that building new homes will generate jobs and help to underpin economic growth, we also need to build strong communities that generate thriving neighbourhoods by generating excellent placemaking and design quality.

Sustainable development is of course, the embodiment of environmental stewardship, economic growth and social progress. The disposal of surplus public sector sites therefore not only create the opportunity of new homes for our young people, key workers and ageing population by delivering social housing, affordable housing for key workers, and private homes for sale and rent; but also the opportunity to make social progress. Social sustainability can support a strong social and cultural life, opportunities to get involved with their community and scope for the neighbourhood to evolve and thrive. This, with excellent physical and environmental design will ensure the neighbourhoods we build now will provide a strong and cohesive legacy for the future.

Creating the conditions for the private sector to deliver housing



2.2 Early delivery statement and engagement with Statutory Consultees

Following the publication of the NPPF in March 2012, the Government sought to refocus planning policy to better support growth, to include a powerful presumption in favour of sustainable development to underpin all local plans and decisions, and to localise choice about the use of previously developed land and bringing to an end nationally imposed targets for housing. The proposals under the NPPF aim to speed up the planning system whilst striking the right balance between protecting the environment and stimulating economic development. The key to the success of this policy is greater alignment between local and central Government with Statutory Consultees, such as Natural England and the Environment Agency.

In George Osborne’s Autumn Statement in 2011, he said “… we need to go further to remove the lengthy delays and high costs of the current [planning] system with new time limits on applications and new responsibilities for Statutory Consultees”. The need to improve the performance of the key Statutory Consultees in responding swiftly to applications was identified and the Government committed to work with these bodies to ensure that they support the delivery of sustainable development in line with the NPPF and are held accountable for not doing so.

Statutory Consultees play a key role in guiding development but their involvement in the planning process often results in unnecessary delays in schemes securing planning permission.

The Penfold Review (2010) highlighted the following key problems identified in respect of the role of Statutory Consultees (non-planning consents) to enable development;

1. The lack of a standard ‘way in’ for developers and fragmentation of consultees.

2. Overlaps and duplicity between planning and non-planning consents.

3. Delays and increased development costs from non-planning consents.

4. Inconsistency and frustration characterising developers’ experience.



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The NPPF aims to achieve a more effective mechanism for planning applicants to obtain an award of costs, if there is an appeal against refusal of a planning permission where it is considered “… a Statutory Consultee has acted unreasonably through measures to be implemented in summer 2012”.

While the change in emphasis and the role of Statutory Consultees within the NPPF is a welcome measure to accelerate the planning process, there is a concern that the focus on speedy responses to planning applications may encourage consultees to ‘play by the book’ without giving due regard to the particular circumstances of an individual application. Therefore, it is important that the Government acknowledges the need to emphasise the quality of the responses of Statutory Consultees as well as the speed of responses, and that in formulating responses Statutory Consultees need to have regard to the emphasis that the NPPF places on sustainable development and the delivery of development.

Experience has shown that a collaborative approach between key agencies is critical to the success of complex projects. Aligning the interests of the landowner, Statutory Consultees and local authority at the start will save significant time later on.

For the Olympics this was achieved by paying for dedicated pre-application involvement of Statutory Consultees who were required to give a view within a strict timetable. Where problems were foreseen the bodies had to provide a solution rather than just flag the issue.

This sort of approach would be highly beneficial in achieving positive results in a short time. Consideration might also be given to whether dedicated teams are established at the start of the process made up of the key agencies.

A clear understanding of the constraints and issues upfront reduces risk and will help engage necessary authorities in finding the right solutions. The early delivery statement, co-ordinated by the landowner, will assist all parties. This could be expanded to articulate a shared vision which all parties sign up to and against which key decisions are made.

In summary, it is clear that a balance needs to be achieved between the roles of the consultees when providing the specialist views in their responses to a planning application, and the planning authority who considers these views in the light of all other material considerations, including the desirability of sustainable development.

It is recommended that each site should have a clear, co-ordinated strategy from these Statutory Consultees on how development can proceed and this would form part of the disposal package, alongside all of the other relevant site information.




2.3 Simplified disposal process

The EAP recognises the needs of Government agencies and bodies to ensure that best value for Government assets is achieved.

There is an understandable scepticism that involving the private sector can bring resources and expertise to the development process, maximising the site’s potential as well as shouldering the development risk.

From the private sector’s view, there are several case studies that serve to illustrate that the private sector can bring resources and expertise to the development process, maximising the site’s potential as well as shouldering the development risk.

The model often adopted by Government agencies is to obtain a planning application using external planning consultants to provide the necessary advice. On grant of planning consent, the land is then marketed on the best terms available. This approach means that the private sector is not involved until value has been crystallised through the grant of a planning consent, meaning that the private sector is unable to add value. The only way in which value can be added at this point is through the re-negotiation of the planning permission, which ultimately slows down delivery.

Such an approach has inherent drawbacks which are highlighted below:

1. Agreeing planning terms that are not commercially acceptable detract from the landowner’s value rather than enhance value.

2. Consultants cannot take the place of developers as they do not value risk and make decisions. This leads to a less than optimal time to deliver value and outcome.

3. It is inherently difficult to align the interests of consultants with those of the landowner to create best value as inevitably consultants will not share the risks and rewards.

4. The developer is able to draw on practical experience to agree terms with planning authorities and ensure that any scheme is financially viable.

Accordingly, the EAP has given consideration as to how the interests of the landowner and developer can be aligned to create best value and deliver new homes quickly and efficiently. The EAP has recommended a process that aims to ensure:

• Sites would be widely marketed on the basis of the grant of an option using the principles of “build now, pay later”. Reducing the entry cost to the acquisition of private sector land through the use of options and the principles of “build now, pay later” will create competition in the tender process and allow small developers with entrepreneurial flair to participate.

• Transferring the planning risk to the private sector early in the process will enable the development solution to be optimised through planning, creating best value to be shared by the developer, landowner and LPA.

• Aligning the landowner and developer by having a variable land receipt payable as a percentage of GDV so that risk and returns are shared.

• A short option period to require developers to invest the time and resource required to unlock delivery and prevent “land banking”.

• Retain the ownership of land with the Government, let the private sector develop it under licence and enable it to be drawn down on delivery milestones to align both parties to delivery of new homes.



24

The EAP considers that these objectives can be delivered using the following simplifi eddisposal process:

1. Land would be released into this process on meeting the following criteria:

(i) It is capable of delivering a sustainable development compliant with NPPF;

(ii) It has a workable land title.

2. Developers would be invited to submit a bid for the terms under which they would agree to purchase an option to acquire the land in the future, subject to obtaining a planning consent.

3. The price for the option would be set at a peppercorn value for an initial two year option. In consideration of the grant of the option, the developer would be obliged to promote the site for planning. It is envisaged that the term of the option would be extended in the event of a planning appeal.

4. The developer would be required to tender for the following terms under which they would acquire the land on approval of outline planning:

(i) A percentage of revenue payable to the landowner, to be paid from actual sales receipts from the development;

(ii) A bid for any subsidy required to fi nance the infrastructure of the development.

5. On approval of planning, the selected developer may elect to exercise their option under the terms on which they proposed, or alternatively, decline to take the option. The land would then be offered on the open market with the benefi t of a planning consent.


1. Land would be released into this process.

4. The developer would be required to tender for an option to acquire the land on receipt of planning on term including;

(i) % of revenue payable to landowner;

(ii) requirement for infrastructure fi nance.

3. The price for theoption would be setat a peppercorn value.

2. Developers would be invited to submit a bid for the terms under which they would agree to purchase an option to acquire the land.

5. On approval of planning,the selected developer may electto exercise their option under the terms on which they proposed.



2.4 Fast track planning

Despite the adoption of the NPPF in 2012, recent planning cases illustrate the inherent uncertainty of obtaining a planning consent in the current environment.

The cost and time taken of submitting a major planning application is a significant investment decision for all developers and in itself is a barrier to entry for many developers in the current economic environment. Such investment can only be justified where the planning risks can be accurately assessed at the outset and the developer has confidence in the planning appeals system to provide an objective framework to which planning law can be applied.

The DCLG 2009 report ‘Benchmarking the costs to applicants of submitting a planning application’ identified the average cost of submitting a planning application and negotiating consent for a development of approximately 100 homes as being circa £97,000. However, the highest cost identified exceeded £150,000.

Many of the costs relating to the submission and negotiation of planning applications are scalable relative to the size of the development proposed. Therefore, the costs identified in the DCLG study could be applied on a pro rata basis to larger and more complex development schemes than those examined in the report. To demonstrate this point, it is not uncommon for applications for developments of circa 500 homes to cost in excess of £0.5 million.

The EAP has considered ways in which the developers can be further encouraged to bring forward planning applications on publicly owned land within the existing planning framework and the current Spending Review Period. It is recommended that:

1. Consideration is given to a mechanism in which planning applications of major national importance say, 500 or more dwellings, are given a “fast track” process for planning appeals to run contemporaneously with the short option period designed to promote early delivery of schemes. Under this proposal, PINS would be required to commit the necessary resource and time to review the planning decision on major applications within three months of an appeal.

2. The reintroduction of a “minded to approve” interim inspector’s report would aid the process and enable developers and local authorities to find a mutually acceptable solution without the cost and risk of the current “binary” outcome of grant or rejection of an appeal.

3. Given the current economic circumstances and inevitable constraint that this places on resources within local authorities, capacity for additional resource needs to be made available within local authorities to ensure that good quality planning decisions are made in a timely manner. Whether financed by central Government, the landowner or the developer, the important issue is ensuring that local authorities are provided with a means of making adequate resource available.

4. The utilisation of Government Agencies such as the HCA and ATLAS can help Local Authority with their knowledge and expertise if required.



26

2.5 Infrastructure funding

The financial analysis of one of the surplus sites illustrates the requirement for substantial ‘upfront’ financing for large scale housing schemes. The extent of such funding requirements is driven by the need to put in place physical infrastructure, such as roads, services, improvements to drainage and extensive ground works in addition the planning requirements under S106 agreements and the Community Infrastructure Levy which encompass but are rarely limited to necessary community benefits of housing such as affordable housing, schools and local planning tariffs need careful consideration. At the outset of a new housing scheme, good developers invest heavily in creating a “sense of place” that invariably involves setting a street scene and high quality public realm whilst putting into place much of the infrastructure for the whole development at an early stage.

This is not a new phenomenon for developers but the EAP recognises that in the current financial environment where development funding is almost exclusively equity funded and is consequently expensive, the returns required by investors and the restricted availability of funding means that financial viability is a significant constraint to meeting the Government’s aspirations.

This is not solely a developer or planning authority problem. Simple economics means that large development sites made available for sale in the current market have few potential buyers with access to financial resources. The cost of money when combined with limited demand means landowners cannot expect to achieve best price for their land. Where planning becomes sub-optimal through lack of expertise (such as the wrong product for the market for example) the cost to the landowner is even greater. This is at the heart of the Simplified Disposal Process that aims to align the landowner with the developer to share the risks and returns over the long term in return for sharing the financing.

The EAP has also recognised the need to give consideration to how schemes can be delivered where the infrastructure costs are significant even where the land costs are deferred and how a model can be incorporated within its recommendations set out below.

The EAP has recommended that Government infrastructure underwriting should be made available to support the early delivery of new homes. The EAP has not made any specific recommendations on the manner in which such funding should be provided as this is outside its remit, but supports the Government’s announcement of 6 September 2012 to provide up to £40 billion of Government Guarantees together with the allocation of new capital funding of up to £300 million for major infrastructure projects.

In considering its recommendations, the EAP believes the proposal for a Simplified Disposal Process that is subject to a competitive tender process together with infrastructure funding will present an attractive investment proposition and one that has a number of in built mechanisms to deliver best value such as:

• Developers are encouraged to bid competitively, and competition maximised which is expected to drive down infrastructure costs, add value to land and maximise land receipts.

• The process is designed to allow smaller developers who can often offer entrepreneurial flair and local knowledge to become involved in the bidding process which is considered to be a significant “win”.

• The major beneficiary of infrastructure funding is expected to be the landowner in terms of higher land receipts and the local authority in terms of the planning outcome rather than the developer due to the competitive nature of the bidding process.

• The simple model for land disposal and infrastructure funding has been designed to be contemporaneous and therefore presents a solution that will apply irrespective of the land under consideration.




3. Conclusion

The EAP has identified five core recommendations which it believes can assist the Government to meet its objectives to bring forward the delivery of up to 100,000 new homes on surplus sites.

The EAP specifically highlights the potential to bring forward up to 23,000 new homes in the next two years, from 18 publicly owned sites reviewed as part of this process.

The recommendations embrace a change of approach rather than a change to the legislative framework and therefore the EAP considers its recommendations can be implemented quickly. There are several examples illustrating that the model recommended for releasing public sector land has previously been used to good effect including a “build now, pay later” model and incorporating elements of the Government’s infrastructure underwriting proposals set out on 6 September 2012.

It is critical to identify how the Government can create quick wins, help small and large builders, and construct an alignment of interest with Local Authorities and communities who want to see new homes and jobs for their area.

Inevitably there will remain communities and Local Authorities, who do not, despite Government incentives, wish to accommodate new development. It is recommended that a robust and rapid appeal system, including the use of ‘minded to grant’ decisions be put in place, particularly for sustainable development schemes.

Additional incentives to stimulate different Local Planning Authorities and Communities should also be explored.

The Government should also require all of its Statutory Consultees to produce reports on all surplus for desposed sites to identify what developments they could support, highlighting any mitigation needed as soon as a site is declared surplus to requirements. This would form part of the landowners ‘Delivery Statement’ which is part of the landowners Clear and Transparent ‘Plan to Sell’ Policy.



28





3.1 Benefits to Landowners

1. Encourages developers to take ‘planning’ risk on sustainable sites

2. Developers take cost risk on planning

3. Brings development expertise upfront to drive optimum value for Government

4. Assists disposal of formerly used assets

5. Increased housing supply

6. Supports economic growth and job creation

7. Supports wider investment in community infrastructure

8. Competitive bid tender process - to achieve value for money

3.2 Why it works for Developers

1. Access to strategic development sites with clean title

2. Simplified appeals process is attractive to take planning and cost risk

3. No upfront land payments

4. Substantial reduction in cost of funding

5. Potential investment by Government in infrastructure further improves scheme viability

6. Natural tension between land %, infrastructure and best value aligns all parties with risk

A selection of questions and answers have been set out overleaf to try to address some of the matters that could arise.



30

4. Questions and Answers

Q: How does the landowner ensure they get best value?

A: This is a competitive tender process. A key component of ensuring best value is to ensure that competition is maximised. This means setting as few constraints or barriers as possible and using a simple option. The developer is incentivised always to optimise value and the landowner is aligned to this outcome.

Q: How does the Government secure quality development?

A: Ultimately through the planning process. The competitive bid process will assist to ensure quality of design is used in order to optimise value.

Q: What happens if there are objections or non-determination of planning?

A: The application would go to appeal and adjudication by PINS under this framework.

Q: What happens if the developer cannot obtain planning within two years?

A: The option would lapse. The two year period places discipline and urgency on developers to process the planning. This is also why a simplified appeals process is important.

Q: How do we ensure value is maximised?

A: The key is an alignment of interest between the developer and the landowner. This is expressed as a percentage of revenues which together with the competition offered under the bid process will ensure best value.

Q: How does the Government ensure delivery of new homes?

A: The land could be granted to the developer under licence and can only be drawn down on delivery. Developers will be expected to tender on the assumption that (say) 100 units are delivered each year and if this is not achieved, the licence can be terminated.

Q: What prevents a developer bidding for infrastructure funding up front and not delivering the scheme?

A: Firstly, the competitive element of the bid will force developers to offer the best terms. Secondly, it is envisaged that any grant funding would only be released against milestones of delivery.

Q: On what terms might the Government offer infrastructure funding?

A: It is envisaged that this would build on the Government’s initiatives announced in September 2012. However, as the developer must also bid as a percentage of revenue, the greater the level of grant, the higher the percentage of revenue. Competition will ensure best value and we envisage a number of developers may choose to finance the infrastructure in return for a lower percentage.

Q: How will the tenders be evaluated?

A: This needs to be finely balanced between ensuring a wide spectrum of developers who can bid and putting in place non-financial and delivery constraints. The percentage of development is a discrete variable that can be compared. It is envisaged that the landowner grant would need to be converted to a percentage of revenue (based on an assessment of the likely revenue) in order to enable direct comparability of bids. Non-financial measures can also be used to assess the quality of bids but not to the extent that it will prevent competition.




5. Expert Advisory Panel Recommendations

The five recommendations in the report, therefore, seek to focus on achieving this. In summary we have proposed that for each site there is:

1. Implement a “Plan for Sale”


The Homes and Communities Agency and ATLAS could also provide expertise and support to both the landowner and the local planning authority to assist wherever necessary.

2. A constructive co-ordinated approach from Statutory Consultees early in the planning process.

Each publicly owned site should have a statement establishing the fundamental principles of sustainable development and setting out the constraints to development. This should include a co-ordinated approach from Statutory Consultees (including English Heritage, Environment Agency, Highways Agency and Natural England).

3. A simplified disposal process which addresses current financial constraints facing the industry, but provides value for money to the landowner.

Surplus land should be offered to developers on a simple two year peppercorn option. The developer would be under an obligation to secure planning. The “build now, pay later” model should be adopted and can be used to align developer and landowners’ interests.

4. A fast track planning process which ensures community engagement and the quality and sustainability of the new homes.

It is vital that major housing projects are determined quickly to facilitate delivery. Classifying large housing developments as major infrastructure for determination by the Secretary of State would support a fast-track approach. For smaller applications enabling developers to opt for the Planning Inspectorate to determine applications in failing authorities and prioritising housing appeals would speed up delivery.

5. For schemes of over 500 homes infrastructure funding for enabling and/or abnormal works may be required.

Significant infrastructure is necessary on many sites. The Government should use the new infrastructure fund to support delivery. Using “build now, pay later” recognises significant upfront developer instruments and helps cash flow but in itself may not be adequate in all cases.


32

Appendix



Appendices

1. Market Conditions 34

2. Case Studies Parkwest 40 Royal Arsenal Riverside 44 Woodberry Down 48

Appendix


34

Appendix I - Market Conditions

The need for new housing

The 2011 Census has shown that since 2001, the population of England and Wales has grown by 7% per annum on average. This is the fastest rate since records began, creating a need for 170,000 additional households each year.

During the period 2001-2011, the population of England and Wales grew by a net 3.7 million from 52.4 million people in 2001 to 56.1 million people in 2011. This is the largest population growth between censuses since census taking began in 1801.

In addition to the population growth, more people are living alone meaning that average household sizes are falling adding further pressure for the need for new homes. The combined effect of this is that the number of households in England is projected to continue to rise quickly in the future.

The latest household projections predict that the number of households in England will increase by 5.8 million (27%) over the period 2008-2033 to a total of 27.5 million – an average increase of 232,000 households each year.

Household growth in London and the south east is projected to grow faster than anywhere else in England. The London and south east regions have the largest projected actual increase in households of any region, accounting for approximately 75,000 additional households per year projected respectively over the period 2008-2033.

60

50

40

30

20

10

01951 1961 1971 1981 1991 2001 2011

Appendix



Inadequate housing supply

While population and household growth has been rising at an increasing rate, the supply of housing has been falling. As a result, the amount of housebuilding over the past 10 years has fallen well short of demand.

Over the last 10 years, an average of 160,000 new homes have been completed per year in England. However, housebuilding rates are falling. In 2011, only 121,000 homes were completed reflecting the continuation of a marked reduction in housebuilding since the economic recession in 2008.

The current level of housebuilding is at its lowest peacetime level since the 1920s and leaves a shortfall of new homes when compared against the additional 232,000 households which are projected to form each year.

The shortfall in housing delivery over recent decades has meant that increasing numbers of families are living in unsuitable, overcrowded housing, people are unable to achieve their aspiration of home ownership, homelessness has increased and economic growth and job creation has been frustrated.

350

300

250

200

150

100

50

0

House Completions (Thousands)

1950

1960

1970

1980

1990

2011

2000

Appendix


36

Previous measures implemented to boost housing supply

Successive Governments have recognised the problems created by inadequate housing supply and have developed policies aimed at increasing delivery.

The previous Government commissioned independent reports to examine ways in which the planning system could be reformed and housing delivery improved. These highlighted the extent of the housing shortage, its social and economic consequences and made recommendations to improve the supply of new housing.

In 2007, the last Government published its Housing Green Paper which set out proposed measures for increasing supply to achieve an ambitious housing delivery target of 240,000 homes per annum by 2016.

However, despite these initiatives, policy aimed at increasing housing supply has failed to improve housing delivery. It is now 34 years since 240,000 homes were delivered in a year.

Addressing the housing shortage is a key priority of the current Government and was a principal objective in The Plan for Growth published in March 2011, which set out a strategy for long-term sustainable economic growth.

Following on from The Plan for Growth, in November 2011, the Government published a new housing strategy “Laying the Foundations: A Housing Strategy for England” which sets out the Government’s strategy for unlocking the housing market and increasing housing delivery.

� “�One�of�the�most�important�things�each�generation�can�do�for�the�next�is�to�build�high�quality�homes�that�will�stand�the�test�of�time.�But�for�decades�in�Britain�we�have�under-built.�By�the�time�we�came�to�office,�housebuilding�rates�had�reached�lows�not�seen�in�peacetime�since�the�1920s”.

� �(Foreword�by�the�Prime�Minister�and�Deputy�Prime�Minister,��Laying�the�Foundations:�A�Housing�Strategy�for�England).

The strategy sets out a number of new initiatives aimed at increasing housing supply by increasing the availability of mortgages, especially for first time buyers, kick-starting stalled housing developments, unlocking infrastructure constraints to housing supply, making funding available to developers who are ready to build, releasing surplus public sector land for development, incentivising local communities to plan positively for growth and making the planning system simpler and more responsive.

• New Build Indemnity Scheme led by the Home Builders Federation and Council of Mortgage Lenders to provide up to 95 per cent loan to value mortgages for new build homes.

• Consultation on a proposal to allow renegotiation of planning obligations agreed prior to April 2010 where development has stalled.

• Growing Places Fund providing £500 million of investment to support infrastructure required to unblock housing and economic growth.

• Get Britain Building investment fund of £400 million to support building firms in need of development finance.

• Free up public sector land with capacity to deliver up to 100,000 new homes on a “build now, pay later” basis.

• £30 million of new funding through a Custom Homes programme to encourage people to build their own homes.

• Streamlining the planning system through the introduction of the NPPF.

• Give communities the power to plan and deliver the development they want through Community Right to Build and Neighbourhood Planning.

• Incentivise local authorities to deliver housing through the New Homes Bonus, Community Infrastructure Levy and local business rates retention.

Appendix




The housing market

The UK is facing a chronic housing shortage and the lowest levels of new housebuilding for almost 100 years. Additionally, the average cost of a home, in real terms, doubled between 1997 and 2007. Housing is central to economic success. Building new homes can be a driving force for growth which is greatly needed, creating new jobs and great places to live and work, as well as meeting the enormous demand for housing across the country. When housing is provided in town centres, residents can reinvigorate these areas by bringing new vibrancy and economic strength to support local shops and businesses.

Demand for housing is expected to continue to rise steeply against the current level of supply for all sectors in the housing market. More than 1.76 million households, or the equivalent of 4.5 million people, were on social housing waiting lists in 2009, representing a 23% increase in the last five years.

Further, the backlog of supply, particularly in social housing nationally, but acutely in London, exacerbates the need and demand for new homes of all tenures. In London, the shortfall on housing provision may be as high as around 5,000 homes each year. The 2004 Barker Review highlighted the backlog in supply and its impact on the market, the low levels of housing production and recessionary impacts have added further to the gap in supply.

The United Kingdom economy officially came out of recession in January 2010 but has since re-entered recession in the first quarter of 2012. Although London and the South East have seen a moderate recovery in the housing market, conditions continue to be extremely challenging across much of the rest of the United Kingdom.

The housebuilding industry cites mortgage availability as one of the major obstacles to consumer demand. Mortgage lending has recently been stable, albeit at historically low levels.

In the spring of 2011, the Council or Mortgage Lenders (CML) forecast net mortgage lending for 2011 to be 25% less than 2010, and a fraction on 2008 lending. This is reflected in the Bank of England’s table for net mortgage lending for UK house purchases from January 2000 to July 2010.

Appendix


38

The Homes & Communities Agency has found that 55% of 18-36 year old households, currently in the private rented sector are unable to save for a deposit. This has raised concerns that a generation of people is being priced out of home ownership. The FirstBuy programme has been established to help first-time buyers with mortgage deposits.

The impact of reduced lending, however, appears to be affecting all types of borrowers, but has a more pronounced impact on first-time buyers, who have suffered a 19% reduction compared to other market sectors. CML’s table below illustrates loans by different type of borrower between January 2002 and October 2010.

It is unlikely that there will be any significant increase in mortgage lending in the near future. The business of lending is a constrained market with wholesale markets closed and liquidity issues prevailing. Additional regulatory constraints are envisaged from European Capital directives and the FSA Mortgage Market Review.

In spring 2011, the Building Societies Association property tracker identified concerns arising over job security. This is normally tied to the public’s perception of the general economic recovery. Should interest rates rise, in turn affecting monthly mortgage repayments, it is likely that this will again be viewed as a significant barrier to the purchase of homes.

Therefore the purchase of new homes relies on mortgage availability, alongside consumer confidence and thus, demand.

The Department for Communities and Local Government’s Regional House Price Index, Nationwide and Halifax all show similar patters in the annual rate of house price change in the UK over the last 10 years.

Appendix



With the economic recovery set to remain muted for the year ahead, it is likely that this will be reflected in the housing market across the UK.

The private sector starts and completions of new homes over the last 10 years, set out below, reflect the steep 2008-9 decline with slow growth returning to housing starts from August 2010.

Regionally, London is showing the strongest year-on-year growth; however, the recessionary declines in London were more marked than in other regions.

Across the UK the number of stalled sites remains a cause for concern, yet also an opportunity for a significant increase in production if these sites can be brought forward.

Appendix


4040

Creating the conditions for the private sector to deliver housingExecutive Summary



Appendix II - Case Studies

PARKWEST – CASE STUDY

1. Background

• Parkwest is a 4.5 hectare (11.2 acre) brownfield site located in West Drayton, London Borough of Hillingdon.

• The site forms part of a wider 36 acre former RAF base. The Parkwest part of the site was used for RAF staff accommodation. Interestingly the accommodation blocks were used as the athlete’s village for the 1948 Olympic Games.

• The site was declared surplus to Ministry of Defence (MoD) needs in October 1993.

• Soon after, the MoD selected Notting Hill Housing Trust (NHHT) as their preferred developer for the site.

• In 1995 the Council resolved to grant planning permission for 183 affordable homes subject to a separate agreement with NHHT for 100% affordable housing nominations. This scheme was not viable, the S106 agreement was not completed and planning not issued.

• The site lay vacant and a burden to the MoD from 1993 through to St George PLC becoming involved in the site in 2003.

2. Constraints and challenges

• The key challenge was how to find a way to secure the delivery of the new homes while achieving best value for the MoD. This was against the backdrop of a previously unviable planning permission in a relatively low value residential area.

• In 2003 NHHT, in conjunction with the MoD launched a competition to find a private sector developer to help them unlock the site. St George was selected as NHHT’s partner out of this process.

• NHHT were unable to lead the development process themselves due to resourcing constraints. St George therefore agreed to take the lead in the development process becoming responsible for all professional fees and importantly land payments to the MoD.

• A new legal structure was put in place between the MoD, St George and NHHT. This set out the roles and responsibilities and the mechanism for achieving best value for the MoD.

• The structure was simple. An indicative land value was established based on an anticipated planning permission. The actual land value was then to be re-measured in an open book way when planning was achieved.

A substantial upfront payment was made to the MoD together with an overage agreement that captured future sales success.

• Through the open book structure the interest of the MoD, St George and NHHT were aligned. Best value could be certified for the MoD without the need for an expensive and time consuming OJEU process that might have further delayed the delivery of the new much needed homes.

Parkwest


42

3. Engagement strategy

• An extensive community consultation process took place throughout 2004-2005. This included public exhibitions and meetings with key groups, Councillors and Local MPs. The Civic Trust were appointed by St George to assist with this process. St George led the process in conjunction with NHHT.

• As part of the stakeholder consultations, visits to both St George and NHHT sites across London were carried out.

• The MoD were kept informed of all efforts throughout this process.

• Regular meetings were held with the local planning authority and between the parties to ensure issues were overcome. The principal issue of density however remained as Council officers and members regarded the site as only a low density housing opportunity. Their view was at odds with prevailing and emerging national and regional planning policy.

4. Process and key players

• A joint St George and NHHT planning application was submitted in June 2004 for 624 homes. A subsequent application was submitted in January 2005 for 594 homes and a further application in July 2005 for 574 homes.

Throughout this process amendments were made to the scheme. There was a real spirit of co-operation established with the local planning authority however the ‘in principle’ difference of view concerning the appropriate housing density remained. This was not an issue that could be resolved at local planning level.

• A public inquiry was held in January 2006 and in May 2006 the Secretary of State granted consent for 574 homes comprising 371 private and 203 affordable homes.

The MoD were kept informed throughout this process. The land value was then re-measured in July 2006 in accordance with the open and transparent formula set out in the contract.

Before After

Parkwest



5. Disposal structure and timescale

• The disposal to St George was via a subject-to-planning contract with the MoD.

• The contract provided for an open and transparent structure whereby the MoD’s land value was re-measured following the grant of planning permission.

This structure provided best value for the MoD and did not necessitate an expensive and time consuming OJEU process.

• The key time line was as follows;

St George selected by NHHT Autumn 2003

Pre-application consultation commences Spring 2004

St George, the MoD and NHHT sign Development Agreement June 2004

Upfront payment made by St George to the MoD June 2004

First planning application submitted June 2004

Second planning application submitted January 2005

Third planning application submitted July 2005

Public inquiry held January 2006

Planning permission granted by Secretary of State May 2006

Final land value agreed with the MoD in accordance with contractual structure July 2006

Start on site August 2006

Second land payment to MoD made May 2007

First new residents move into their homes October 2007

Overage payments assessed and paid every 6 months March 2008

Estimated scheme completion November 2013

6. Outcome and lessons learnt

• The Parkwest site has proved to be very successful for the MoD, NHHT and St George.

• Through working in partnership a viable development solution was found for a site that had lain dormant for over 10 years before the involvement of St George.

• The MoD received best value for the site through an open and transparent framework that created an alignment of interest and did not necessitate OJEU.

• Since starting on site in August 2006 construction has continued despite the national economic difficulties.

• To date 321 private and 176 affordable homes have been completed. The final 50 private and 27 affordable homes are currently under construction and the total site completion is expected by November 2013.

• The site has been a recipient of a number of awards which reflect its success as a high quality place that has played a key role in regenerating the area and being a catalyst to other developments.

• The project has demonstrated that by using the capabilities of a private sector partner delivery was enabled.

Parkwest


44

Before After

Royal Arsenal Riverside



ROYAL ARSENAL RIVERSIDE

1. Background

• The Royal Arsenal is one of London’s largest brownfield sites, 31 hectares (76 acres), located in Woolwich, Royal Borough of Greenwich, South East London.

• Historically the majority of the site was once the centre for Britain’s armaments and ammunition production and more recently Woolwich Power Station was located on the western end of the site.

• Woolwich Power Station was demolished in the late 1970s and converted into a public park and after half a decade of decline, the MoD ceased its final operations in the mid 1990s.

• The MoD transferred the site to English Partnerships in 1997 for £1, together with a dowry of £44m.

• English Partnership, Greenwich Council and English Heritage prepared a masterplan to deliver a mixed-use development on the site. Decontamination works were undertaken and progressed, and the site was transferred to the LDA taking in 2000.

• Berkeley Homes was selected in 2000 following a detailed tender process to deliver the residential part of the proposed masterplan.


• The historic uses led to the site and buildings being heavily contaminated. The limited funding through the MoD and English Partnerships enabled a partial remediation process to be undertaken and new infrastructure established.

• The majority of the Royal Arsenal is designated a conservation area, incorporating a high number of listed buildings, constraining development opportunities and requiring long-term detailed consultation with English Heritage and Greenwich Council.

• Fronting onto the River Thames and located to the East of the Thames Barrier, there is an established risk of flooding which has required a robust flood strategy and consultation process with the Environment Agency to be incorporated within all development proposals.

• The original Royal Arsenal was constructed as a walled development, cut off from the surrounding amenities and services, aligned by the River Thames and Plumstead Road dual-carriageway. New strategic connections have been established, specifically in relation to the surrounding transport nodes.

• The adjacent Town Centre of Woolwich has seen much decline over the last 50 years and up until recently has received little funding for redevelopment but still presents a limited retail offering and limited quality, low-value residential stock. A focused sales and marketing strategy has been required.

• Establishing the regional importance of regeneration on the Royal Arsenal, the LDA were unable to deliver their proposed mixed-use masterplan without private development partners. Berkeley was originally selected to provide the necessary private sector support to enable the delivery of the residential element of the masterplan.



46


• Extensive consultation has taken place, by Berkeley in partnership with English Partnerships, the LDA and Greenwich Council. A series of public exhibitions, presentations and workshop groups have been held to ensure full engagement with Councillors, Local MPs, businesses, residents and the public.

• Berkeley has continued to appoint a series of experienced Communication companies to establish the relevant local groups and focus on full exposure to all events and proposals for example through quarterly magazines, press releases, flyer drops, community group panels and events.

• Through the Development Agreement, a framework of stakeholder update meetings and presentations with the LDA were formalised.

• Regular meetings were held with Greenwich Council, building an understanding of the wider proposals for Woolwich and allowing early collaboration with the Council’s planners, conservation officers and design advisers.

• The specific history of the Royal Arsenal has necessitated continuous engagement with English Heritage, aligning planning proposals and construction methods with their expectations so as to safeguard key aspects of the site.

• Pre-planning consultation has also engaged wider groups, with presentations and workshops with CABE and specific Design Review Panels being held with third party architects and representatives from the GLA.


• The original Development Agreement established a land value based on the masterplan. Land payments were made over a number of years on an agreed timetable.

• Subsequent Development Agreements were entered into to deliver an enhanced masterplan.

• The key time line was as follows;

MoD cease onsite operations and commence decommissioning 1994

MoD transfer site to English Partnerships who commence remediation 1997

Initial Mixed-Use masterplan developed 1999

LDA take control of the freehold 2000

Berkeley sign first Development Agreement with the LDA 2000

First planning application of Stage 1 submitted 2000

Berkeley sign second Development Agreement with LDA 2003

Stage 1 (1,249 homes) complete 2006

Masterplan for Stage 2 (2,517 homes and 25,173m2 non-residential) submitted September 2005

Masterplan for Stage 2 approved August 2006

Berkeley sign a transfer agreement with LBG for the Western Riverside land December 2007

Revised Stage 2 masterplan of 3,711 homes including Crossrail received resolution to grant November 2008

S106 signed and formal approval received for the revised masterplan of 3,711 homes February 2011

Berkeley purchase the LDA freehold February 2011

1,992 homes completed and Crossrail Station Box under construction. August 2012

Full 4,960 home masterplan targeted for completion 2030





• The Royal Arsenal has provided regeneration to this historic employment site, establishing a new mixed-use community and continuing to deliver new homes and facilities in South East London.

• Successful public-private partnership has enabled a viable development solution to come forward on a constrained and contaminated site within a low value area.

• The scheme continues to deliver in line with the aspirations of its current and historic stakeholders, English Partnerships, LDA, GLA, Greenwich Council and English Heritage.

• Delivery has continued during the recent economic downturn, through the commitment of Berkeley and support from the HCA. Berkeley has also made a large financial and production commitment to support the delivery of Woolwich’s proposed Crossrail station.

• To date 1,992 homes have been completed, with a further 2,968 planned, 25% of which will be affordable. Completion of the 4,960 units is expected by 2030.

• The scheme has been submitted for and been successful in winning a number of awards, particularly in relation to large scale regeneration and quality of delivery in the context of its heritage assets. The scheme has previously been awarded a Gold Building For Life designation, underlining the holistic approach to community and design.

• The Royal Arsenal represents a significant investment in the local area and has already shown signs of serving as a catalyst to the regeneration of Woolwich.



48

Before After

Woodberry Down



WOODBERRY DOWN

1. Background

• Woodberry Down is an existing Council-owned estate in the north of London Borough of Hackney (LBH) on the border of LB Haringey and LB Islington.

• The Estate was constructed in the 1940s and 1950s, measures 33.5 hectares and originally comprised of c. 1,900 properties, predominantly social rented in tenure.

• Beset by social and economic problems and in need of major refurbishment and repair, LBH began investigating options in 1999 to address the issue.

• In 2002, they elected to seek a private developer partner to progress a complete redevelopment of the Estate.

• In 2005, Berkeley was selected as the preferred developer for Phase One (sub-divided into seven Kick Start Sites) following a lengthy OJEU process.

• After several false starts, work commenced on Kick Start Site One in 2009. The masterplan for the whole Estate was consented in the same year.

• Berkeley was selected as the preferred developer private partner for Phases 2 to 5 in 2009 and Genesis as the preferred RP following a second OJEU process.

• The masterplan comprises over 4,600 new homes (41% affordable) and various community and commercial spaces. The development programme is expected to last 20 years.


• Woodberry Down Estate had been an ongoing problem for LBH for many years with high levels of unemployment, high crime rates and anti-social behaviour. It had become a ‘no-go area’ for many living in the locality.

• The physical conditions of the existing buildings was generally poor with several being declared as structurally unsound.

• Developing and marketing properties in such an area presented a significant challenge and it became clear a high level of early investment to lift the area would be required if Woodberry Down was to become a viable opportunity.

• LBH also committed to minimising the number of local residents who would be expected to ‘double decant’, i.e. move twice. This meant only minimal residents were moved away from the Estate to make the small Kick Start Sites available for development.

• This presented significant difficulties in construction, marketing and seeking to create a different perception of the Estate.

• With the credit crunch impacting on the global economy from 2007, this created an even greater challenge with increasing uncertainty on sales values and the need for Berkeley to commit its own cash reserves to progress the project in absence of external financing.

Woodberry Down


50


• The local community at Woodberry Down were generally opposed to the regeneration and were very suspicious and sceptical of the development partners. Their preferred scenario would be for LBH to simply repair and refurbish their existing blocks. However, this was not an economic possibility for the Council, particularly as much of the required repair work would have been structural.

• LBH had been consulting with residents for several years prior to Berkeley’s involvement in the project and the residents had felt let down following a range of undelivered promises.

• Berkeley sought to engage fully with the local community but in a very open and honest way. It was understood that the key was to build trust between the developer and resident and ensure that the residents felt fully included in the process.

• Over time, the trust has become well established and resident representatives are now seen as one of the key members of the development partnership.

• By not making false promises and delivering on those commitments that have been made, the community are now seeing the numerous benefits that the regeneration process can deliver and the resultant improvements in their every day lives.

4. Process and key players

• Berkeley submitted a detailed application for Kick Start Site One to tie into the outline application that was still under consultation. The full masterplan was granted consent in July 2009.

• Berkeley has since submitted detailed and reserved matters on a phase by phase basis. Each phase has been fully assessed against the applications to ensure that the optimum solution is being delivered.

• The legal agreement between Berkeley, LBH and Genesis establishes the roles and responsibilities of each party:

i. Berkeley – detailed design, project finance, all construction works, marketing and selling new private properties

ii. LBH – managing the decant process, providing vacant land at nil cost, managing completed public spaces

iii. Genesis – purchasing and managing the completed social rented and shared ownership properties

• Each phase is subject to a pre-planning and pre-commencement viability test and the profit levels to be achieved by Berkeley are capped with any additional profit to be shared through an overage arrangement to be re-invested into future phases if required.

• Due to economic challenges in the wider market, public sector funding has been secured from the HCA (now GLA) to assist in the delivery of some of the early Kick Start Sites. This has enabled new social rented homes to be ahead of programme unlocking future phases of the development.

Woodberry Down




• Phases of the development are drawn down from LBH by Berkeley as detailed consents are secured and implemented.

• Upon completion, land occupied by private properties is retained by Berkeley, land occupied by affordable properties is leased to Genesis and all public open space and highways are adopted by LBH.

• Any overage is paid by Berkeley to LBH on completion of a phase.

• A summary of the development timeline is as follows:

LB Hackney investigate options to address Estate issues 1999

Agreed that Estate should be comprehensively redeveloped 2001

Berkeley Homes appointed as developer for Phase 1(Kick Start Sites) 2006

Masterplan established 2007

Permission for revised masterplan granted Start on site for Kick Start Site 1 2009

Berkeley Homes appointed as developer for Phases 2 to 5 Genesis appointed as preferred affordable housing provider 2010

Start on site for Kick Start Site 2

First residents move into new properties Skinners Academy and Community Centre opened 2011

Start on site for Kick Start Site 5

Permission granted for revised Kick Start Site 3 scheme Commencement of masterplan review process 2012

Completion of the development 2031


• With over 1,000 new homes delivered, in a very challenging economic climate, in the first six years of development, the transformation of Woodberry Down into a place is well underway.

• Of the first 1,000 homes being delivered, 530 of those are social rented which has led to over 40% of the existing families in sub-standard accommodation being relocated into new homes.

• The success of the scheme has been due to the partnership working to each other’s strengths and allowing a degree of trust to grow between the parties.

• Despite testing economic conditions, the key objectives and aspirations of the parties have remained aligned and are being delivered.

• Aside from the physical regeneration, all parties have played a very active role in ensuring the development delivers social and economic regeneration in a sustainable way.

• Various awards have been achieved including an award recognising the efforts that have been made to encourage and employ local apprentices to become involved in the construction process giving them valuable skills to use in the future.

Woodberry Down


RELEASING

PUBLIC S

ECTOR

LAND FOR IN THE

HOUSINGM

ANCHESTER

LONDON

BIRMINGHAM

CAMBRIDGE

OXFORDGLOUCESTER

PORTSMOUTH

PETERBOROUGH

LEICESTER

MAID

STONE

IPSW

ICH

UKBRIGHTON


November 2012


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