How luxury flats avoid affordable housing regulations

Interesting. A couple of SE1 developments are included.

Here

Noticed how little response there was to this post.Have we just given up and allowed London to become a dirty money ghost town? I hope not.
I went past this development on the train the other day. Whole thing looks like a movie set before the actors come along. No wonder. It is empty, and merely a piggy bank.
Sadiq, are you going to do anything about this?
SE1 residents make a bit more noise as these towers are springing up on our very doorsteps.
Here is a link for anyone interested. Anyone interested???
http://www.theguardian.com/society/2016/may/24/revealed-foreign-buyers-own-two-thirds-of-tower-st-george-wharf-london

JazzyQ wrote:

Noticed how little response there was to this post.

Well, in my case, only because there was nothing new or surprising there. No slight intended to La Martinet, it's just that I've already read a fair bit on this by following links from previous posts on the Forum in this subject. Developers get their accountants to construct analyses that "prove" that proper provision of affordable homes will scupper their cost/benefit case; councils settle for what they can get without a fight.
Sadiq Khan had a lot to say about housing during his campaign; let's see.

Breaking news...All the way from Islington we have a new Deputy Mayor for Housing at City Hall

"Housing is a top priority and I want all Londoners to be able to buy or rent a decent, affordable home. James Murray comes to City Hall with a strong track record of success, having championed the delivery of innovative housing solutions for years. I know he will be a huge asset to the team as we work towards building the thousands of affordable housing London needs.”

taken from Mayor of London website.
Fingers crossed he succeeds where others have not even tried.

"... innovative housing solutions ...”

I'd settle for the non-innovative type.

It's interesting though, I didn't realise that's what they were all up to. I like the new skyscrapers even less now I know what sort of flats they contain.

I struggle to understand the outrage. Let's look to SE1 and Southbank Tower as an example: 191 flats were developed and sold, and the article states that a £22.6m contribution was made to Southwark for affordable housing, which will provide 89 affordable homes. That means that each purchaser made, on average, a contribution of £118k per flat purchased, or, put another way, every two private flats sold paid for the provision of 1 affordable unit.

Towers are expensive to build. If this arrangement did not happen the tower construction would not be viable and we would be left with either an undeveloped site or a substantially smaller and less expensive development. Let's say that a much cheaper redevelopment took place with 100 units of which 30 are affordable. We've now created 100 flats instead of 280, and only 30 affordable flats instead of 89. Is that better?

I understand the frustration with empty flats, although if you do some research you'll realise that this is a red herring and is quite insignificant in relation to the overall housing stock - I've posted some numbers on this in previous posts. It's also a short to medium term problem, as few investors can truly allow their investments to continue as a cash flow drain in perpetuity (although we really need to consider a land value tax / property tax, with increased rates for non-owner-occupied properties (see Singapore as an example), which would help with the perceived empty flat problem). But we also need to recognise that the foreign investment in London does help increase our housing stock and provides the city with an asset that cannot be removed.

The problem is that few are really affordable, and if they don't sell in 3 months, the owner can sell at the market rate. The other problem is that they are not homes for 'ordinary' people on 'ordinary' wages. And of course there's that age old problem that some boroughs just don't have any land left to build on even though they have all this 'in- leu' money. Southwark council will end up squeezing new blocks on to green spaces on existing estates which will make them unpleasant to live in. I've yet to be convinced that these luxury blocks are making a real contribution to the housing needs of people in this borough, or helping towards the development of social housing.

Karen I wrote:

I've yet to be convinced that these luxury blocks are making a real contribution to the housing needs of people in this borough, or helping towards the development of social housing.

I am pretty sure that they don't help towards any of those. I was in Battersea recently for the first time in maybe 6 months or so, and I was stunned by all the new luxury flats that now now have been finalised. The massive Waitrose is also a very clear statement of intention. I am not poor, but nowhere in the league that that area seems to aspire to, and for the first time I felt a vey strong pang of realisation that at some point the "likes of me" might not be welcome here anymore either. Seems they want to turn the place into Dubai...

A level playing field has to be created, or else the current situation will continue. With land values so high, of course every developer will use all the experts and methods they reasonably can to minimise their liabilities and maximise profits. Shareholder owned companies have a duty to their shareholders to do just that, and local authorities are required to operate under principles of 'best value'. In London right now local authorities own large amounts of land with little or no development on but are trying to increase its value in legitimate ways like planning permissions. They have nothing to lose by leaving some land empty or rented out, and everything to gain, because we do not tax land in this country.

Is there agreement about what the problem is? Is it foreign ownership, or cash buyers, or the mere presence of luxury new properties? Each of those things are legitimate objections in a world city.

The 50pc affordable housing policies of Livingstone and Prescott provided a goal and showed what they thought success would look like - a city where half the new housing stock (which itself is a tiny proportion of the overall stock) is affordable - but they didn't work out as intended. Today they've both trotted out cute excuses for why they allowed the St George Wharf tower - one "hoped" it would be for locals and the other "didn't know" it would be bought mainly by investors. And they point out that planning cannot regulate who lives somewhere, just as it cannot say that Joe Blogg's Café can open up but Starbucks can't.

A revolution in planning and land laws seems about as likely as a new electoral system or a written constitution. But land value taxation as mentioned above as used in many well planned and rich countries - Denmark, Hong Kong, Singapore for example - could ensure that land does not sit empty; that land is not simply 'flipped' on gaining planning permission (witness how Battersea Power Station's "value" has been jacked up over decades by a series of sale>planning permission>resale processes).

The possibility of compulsory purchase of largely unoccupied properties was suggested today in the Guardian by Livingstone and might work within existing legislation if there was a (substantial) public interest - though it is a drastic interference in individuals' rights.

Or if we are saying that the current model is not delivering enough affordable housing then massive, public sector led affordable housing delivery would seem to be the only option left. This would work if they had the right to buy land at its unimproved rate (like the New Towns bought land at agricultural prices) but might take a long time to deliver and risks creating the sort of monotonous built environment that we now regret being built in the 60s and 70s. Development corporations could speed up delivery perhaps and powers to create these already exist.

Karen - I've not heard of this 3 month sales window for affordable housing - do you have a link to any information on this (genuinely curious)? Seems strange, but would be ridiculous if true. I'm also having trouble understanding your other points: these luxury blocks ARE making a real contribution to the housing needs of people in this borough - a £22.6m contribution to fund the development of 89 affordable homes! Also, Southwark Council owns nearly half of the total area of the borough (one of the biggest landlords in the country!), so it's hard to believe that there aren't a multitude of available sites. And of course these aren't homes for 'ordinary' people on 'ordinary' wages - they're located in one of the most prime locations of a prime area of one of the world's great cities!

Colinio raises some very good points - I'm with the view that a land value tax makes sense (accompanied by a proportional reduction in SDLT and income tax). Let's get building!