The Council’s Housing Policy is for 35% ‘affordable’, but the new City Centre apartment developments have few or none

The Council’s policy is that 35% of new-build homes should be ‘affordable’. But the Council is allowing profit-seeking property developers to build dozens of luxury apartment blocks in the city centre with just 5% ‘affordable’ apartments – or even none at all. The result is an increasingly socially exclusive city centre for living, reinforcing the city’s geography of social inequality.

Birmingham Council has a policy on ‘affordable housing’: the Affordable Housing Supplementary Planning Guidance, adopted in September 2001.[1] This is what it says:

    1. What is Affordable Housing?

3.1 The revised UDP [Unitary Development Plan] defines affordable housing as

A. housing provided by an organisation – such as a registered social landlord or local authority allocating on the basis of need. While such dwellings will normally be made available for rent, they may also include subsidised home ownership, such as shared ownership, where a registered social landlord or local authority retains a continuing interest,

and

B. Low-cost market housing, helping to meet the needs of first-time buyers, single people, the elderly and other low income households, who cannot afford to rent or buy houses generally available on the open market.

3.4 The City Council is especially keen to ensure that the affordable dwellings provided as a result of this policy continues to meet pressing housing needs in the future.

But there are two major problems with the Council’s policy.

First, ‘Most new “affordable” housing in Birmingham is anything but’, according to a BirminghamLive investigation last year. [2]

Affordable housing is an umbrella term used by the government to describe lower-rent properties that are available to eligible households unable to afford the full market rate.

This includes both traditional social rent housing – which is similar to what most people know of as council housing – and “affordable rent” housing, which was first introduced in 2011/12.

Social rent is based on a formula that combines local wages and local property values, and typically sees rents set at around 50% of private rents in the same area.

“Affordable rent”, however, is capped at 80% of the full market rate – meaning that in many areas it will still be out of the reach of people on low incomes.

Charities say that affordable housing should only be considered truly affordable if it also factors in how much people in the area are earning.

THE GET-OUT CLAUSE FOR PROPERTY DEVELOPERS

The second major problem with the Council’s policy – and the focus of this article – is that there is a get-out clause for profit-greedy property developers. This is what the policy says:

5.2 […] on sites where affordable housing is being sought the City Council will expect that a minimum of

    • 25% of all dwellings will be affordable housing as defined in part A of the affordable housing definition (see paragraph 3.1) and;
    • 10% of all dwellings will be affordable housing as defined in part B of the affordable housing definition (see paragraph 3.1)

So the Council’s policy for new homes is a minimum of 35% affordable housing, BUT this only applies ‘on sites where affordable housing is being sought’. In other words, the Council won’t apply the 35% everywhere. And here’s the get-out clause:

4.4 As a consequence of these wide spatial and temporal variations in housing need within Birmingham, it would be inappropriate for the City Council to spell out precise affordable housing requirements to developers in this SPG. [Supplementary Planning Guidance]

In short, the policy is 35% ‘affordable’ housing except where the Council decides not to apply it. And when don’t they apply it? It’s when developers say they can’t make enough profit if they do. This was exposed in an article in the Birmingham Mail on 4 July 2018: [3]

The truth behind Birmingham’s affordable housing shortage

Developers are exploiting loopholes in planning regulations to avoid providing affordable housing in the city, figures obtained by BirminghamLive have revealed. … house builders are allowed to sidestep rules on affordable housing if they can show that providing discounted homes would stop the development making a profit.

Building luxury apartment blocks in Birmingham city centre is where the big profits are being made. Property developers don’t want ‘affordable’ homes, and the Council is letting them get away with it.

PROFITEERING FROM CITY CENTRE APARTMENT BLOCKS

Here are just a few typical examples of the Council’s supposed ‘affordable’ housing policy in action in the city centre.

EASTSIDE LOCKS

On 18 July 2019 the Council’s Planning Committee approved a new £200m luxury housing development of 753 apartments called Eastside Locks, on a prime site on the Digbeth Branch Canal near the HS2 station. The developer is St Joseph, which is the Birmingham arm of the London-based property company Berkeley Group. What is planned is 753 homes in apartment blocks, including four 9-storey blocks and a 37-storey tower.  The proposal would provide 364 one-bedroom homes (48%), 369 two-bedroom homes (49%) and just 20 three-bedroom homes (3%). It is aimed at the lucrative market of young professionals. The facilities for an estimated 1769 residents will include a residents’ lounge, a games room, a gym and a cinema.

Only 37 units – 5% – will be ‘affordable housing’ – far below the Council’s supposed target of 35%.

ONE EASTSIDE

Nearby is One Eastside, a £160m project for two tower blocks, one of 16 storeys and one of 51 storeys which would be the tallest in the Midlands, with 677 buy to rent one- and two-bedroom  apartments.  It will include a gym, cinema room, co-work spaces, meeting rooms, residents’ lounge and games room.  The developer is Court Collaboration, owned by Anthony McCourt, a Birmingham property developer. It was approved by the Council’s Planning Committee on 6 December 2019. This is what was agreed:

6.30 The application has been supported by a financial appraisal which demonstrates that the costs of the development are such that it would result in only a 10% profit on cost and a contribution towards affordable housing or public open space was not therefore proposed.

6.31 However, the financial appraisal has been independently appraised and whilst the City’s advisor notes that the applicant’s financial appraisal is largely well justified, with revenue as per the forward funding agreement and the build costs based on the appointed contractor’s quotation, officers have successfully challenged a number of the assumptions made. Consequently an on-site provision of 20 affordable private rent units at 20% discount (in line with NPPF requirements), equivalent to 3%, is now proposed.

So McCourt claimed he’d only make 10% profit so he couldn’t afford to include any ‘affordable’ apartments, the Council challenged this and he gave some ground – but not to 35%, just 3%!

SNOW HILL WHARF

Snow Hill Wharf, Shadwell St, near St Chad’s cathedral, is another luxury canal-side development by St Joseph, comprising 404 apartments in five residential blocks with heights of 3 – 21 storeys, with a gym, sauna and steam room, cinema and luxury lounge. 2 and 3 bedroom apartments cost from £322,000 to £679,000.

There will be no affordable apartments in this gated estate. Instead, the company will pay £500,000 to subsidise housing elsewhere, together with £300,000 for canalside improvements.

Richard Starkey, managing director at St Joseph, said that Birmingham is a ‘strategic priority’ for Berkeley Group. ‘The arrival of HS2 and a host of big brands, including HSBC and potentially Channel 4, are already having huge effects on the local economy. Supplementing this, and a big driver in rental demand, is the 52,000 students who graduate from its five universities every year – creating not only a huge talent pool, but the next generation of young professionals who need somewhere to call home.’ [4]

SHERBORNE WHARF

Sherborne Wharf off Broad St is a development by property company Inland Ltd of 87 1, 2 and 3 bedroom apartments at prices from £199,950 to £304,000. The Planning Committee approval statement says:

6.22….TP31 requires 35% affordable housing unless it can be demonstrated that this would make the development unviable.

6.23 A financial appraisal has been submitted to demonstrate that, with a policy compliant contribution, the scheme would not be financially viable. An independent assessment has been undertaken which concurs with this view, but considers that the scheme could support an increased financial contribution than that initially offered. A revised offer of £326,250 has therefore been agreed with the applicant.

So Inland have avoided providing 35% affordable homes by paying the Council little more than the cost of one of the 3-bedroom apartments.

EXCHANGE SQUARE

In December 2019 the Council’s planning committee approved the second phase of the Exchange Square project, Priory Queensway, by Manchester-based developer Nikal. It comprises 375 units developed in a 36-storey tower.  Councillor Lou Robson criticised the decision to provide only 5.5 per cent of affordable housing as against the Council’s supposed policy of 35%. But planning officer Nick Jackson said the application had been through an independently verified viability assessment, adding that the public square would be costing Nikal around £3 million alone.

Exchange Square is close to the proposed Curzon Street HS2 station. Nikal’s Managing Director Nick Payne said ‘HS2 is an important stimulant to the Birmingham BTR market. We hope to see people living in Birmingham but working in London.’ [5]

CONNAUGHT SQUARE, DIGBETH

Digbeth is set to be one of the next big growth areas for large-scale luxury apartment developments in the city centre. The Planning Committee on 19 December 2019 approved Connaught Square, a 770-unit, four-building scheme, one of them 28 storeys, on land bounded by High Street, Rea Street, Bradford Street and Stone Yard. There will be no affordable homes. Instead, the applicant will pay £3.53m for public realm works mainly involving the river Rea and including a £1,250,000 contribution towards the provision of off-site affordable housing.

STONE YARD, DIGBETH

Still to be approved by the Planning Committee is an application submitted in September 2019 to build 928 apartments, a 50/50 mix of one- and two-bedroom units, in seven residential blocks including a 30-storey tower at the Stone Yard, at the corner of Alcester Street and High Street Deritend. It is another development by Court Collaboration.

What is different about the Stone Yard development is that it has provoked a big public campaign against it. The front-page headline in the Birmingham Post 2 January 2020 is ‘Gigantic 30-storey development will destroy Digbeth’s unique character, warn campaigners’. It continues:

‘Traders and residents based in and around the Custard Factory are lobbying against Court Collaboration’s planning application for the Stone Yard.

Hundreds of people have backed the ‘Digbeth Deserves Better’ campaign which launched after the plans were lodged in September, with little to no consultation with those based in the area they claimed.’

One of the issues in the campaign is the lack of affordable housing. McCourt’s response to the campaigners speaks of ‘stunning new homes to rent’ but says nothing about how affordable they will be. If it is the same 3% as McCourt’s other development, One Eastside, it would mean a total of 28 affordable out of the 928. In the Birmingham Mail 3 December 2019 Prof Carl Chinn said ‘While it’s wonderful to see lots of young people in the area and new facilities, the worry is what will be left for older and working class people. Lots more apartments will be built when we need social housing for young families in the city centre area.’

MORE PROPERTY DEVELOPMENTS IN DIGBETH ON THE WAY

The Council is due to publish new planning guidelines for Digbeth. According to the Bisnow Birmingham Newsletter 19 December 2019:

‘Digbeth, where the pressure for development is now intense, will be the subject of a new supplementary planning document. Public consultation is anticipated to commence in late spring/early summer 2020, with adoption of the final SPD in late 2020. Digbeth developments in prospect include Nikal’s plans for a 30- to 40-acre studio complex with up to 1,000 new homes and 1M SF of commercial floorspace, and Oval’s plans for a 45-acre site bounded by High Street Deritend, Milk Street, Digbeth Branch Canal and Liverpool Street, where 3.76M SF of new development including shops, offices, hotels, apartments and student housing is envisaged. A third area where residential developers have high expectations will also see new planning guidance: the Rea Valley will now be subject to a new masterplan. Consultation on the draft SPD took place from May through July 2019, and the draft can be found here. [6] It is anticipated that the final SPD will be adopted in spring 2020. The Rea Valley plans include 5,000 new homes in a green corridor expanding out from the Birmingham Smithfield development controlled by Lendlease.’

Other current developments in Digbeth include Lunar Rise, with 517 apartments in a 25 storey tower, and Beorma with 140 apartments. In addition there is the site of the Irish Centre now it has moved to Kings Heath. It is vital that there is an effective public campaign to ensure that the character of Digbeth is protected, including the provision of affordable housing, not just more high-price luxury apartments. The same goes for the booming Jewellery Quarter, where a new statutory development plan will be produced during 2020. [7]

BUYING OFF THE COUNCIL IS MORE PROFITABLE THAN BUILDING AFFORDABLE HOMES

The Council acknowledges that it has fallen a long way short of meeting its 35% affordable housing target. On 17 December 2019 Cabinet received a report by the Interim Director Inclusive Growth on ‘Birmingham Local Development Scheme and Authority Monitoring Report’. It stated that

‘A total of 3,815 affordable dwellings have been completed between 2011/12 –2018/19 against a requirement of 5,358 for this period. This means that 71% of the target has been met with an under-delivery of 1,580 dwellings. In the same period the total value of Section 106 affordable housing commuted sums received has been £9.145m. The total value of unspent commuted sums is £3.014m. The delivery of social and affordable housing for rent remains a first priority for the city. With this in mind, at times, the 35% affordable housing policy requirement may not always be achieved, but a better mix or type of affordable housing is provided. For example, large family houses for social rent in place of 1 and 2 bed flats for rent. The City Council however, will continue to develop ways to increase the provision of affordable housing.’

The £9 million or so ‘commuted sums’ refers to the money that property developers have paid to buy them out of an affordable homes commitment. Why do they do it? Because it saves them money. It’s more profitable for them to pay a get-out fee – which is a tiny percentage of the total value of their multi-million pound deal – in order to build only high-profit luxury apartments.

THE COUNCIL’S POLICY IS REINFORCING SOCIAL INEQUALITY IN THE CITY

Part of the reason it is more profitable is that they believe that a social mix would undermine the image of the product they are selling. Just look for example at the St Joseph brochure, the developers of Eastside Locks and Snow Hill Wharf. It has a section called Education. This is what it says:

Private Schools

Edgbaston High School for Girls

King Edward VI High School for Girls

King Edward VI Camp Hill Grammar School for Boys

King Edward’s School, Edgbaston

Solihull School, Solihull

No state schools are mentioned. (Although actually King Edward VI Camp Hill is a state school, which might come as a shock to unwary St Joseph clients.)

The consequence of the Council’s policy of allowing developers to buy their way out of the 35% affordable housing policy is socially toxic because it is systematically exacerbating social inequality in the city. The Council proclaims an aim of inclusive growth but its planning strategy is having exactly the opposite effect – it’s exclusive growth. It is excluding from living in the city centre those on lower incomes. The focus on ‘young professionals’ and the predominance of one- and two-bedroom apartments is also tending to exclude families.

THESE MULTI-MILLIONAIRE PROPERTY DEVELOPERS ARE TAKING THE COUNCIL FOR A RIDE

Take for example Berkeley Group, which is based in London but has moved into Birmingham under the brand name of St Joseph. (BATC wrote about this in July last year but it’s worth repeating.) The Guardian headline of 3 September 2018 was ‘Berkeley calls affordable housing targets ‘unviable’ as chairman earns £174m’. The report says that ‘in 93% of Berkeley’s 57 London developments the company told local authorities that their affordable housing targets were unviable.’ It continued:

‘While for years Berkeley has successfully persuaded planning authorities that it could not make a profit from its developments if it met affordable housing targets, it has raked in £2.9bn of profit over the past seven years.’

Now Pidgley is pulling off the same scam in Birmingham. Eastside Locks provides the evidence. Under the headline ‘’Pitiful’ amount of social housing in canal scheme’ the Birmingham Post 25 July 2019 reported that ‘The developer, St Joseph, a subsidiary of Berkley Group, said ‘providing any higher percentage would reduce profits and threaten the viability of the scheme.’’ The Council capitulated.

But the current St Joseph brochure says it has made ‘£934.9M profit before tax’ and celebrates a ‘44% Increase in residential property values within 2km of Birmingham New Street Station in the past 5 years’.

BirminghamLive 27 September 2018 carried a revealing report of the cosy relationship its founder and chairman, Tony Pidgley, has with Birmingham Council:

‘Mr Pidgley, who was made a CBE in 2013, said Birmingham City Council had been a major factor in attracting him to the city. “It’s a city that’s growing, with all the right credentials, but also the right political leadership.” He said he saw the relationship with the public sector as key and Waheed Nazir, the city council’s strategic director for economy, was a big part of that. He explained’:

“I rang up Waheed one day and we were considering a number of places to work. You want manners, collaboration and the truth, I rang him up and he said ‘When? Today? Tomorrow?’. We want certainty and when we ask the question of a local authority we want an answer.”

In other words, Birmingham’s Labour Council has proved a compliant partner in Pidgley’s profiteering, happy to do deals that cut affordable housing to the minimum, even if it’s far below what is supposed to be the Council’s policy of 35%.

WHERE IS THE SCRUTINY OF PLANNING POLICY?

Planning decisions have been criticised for failing to enforce the 35% on property developers by Labour Councillors and Planning Committee members Lou Robson and Peter Griffiths. The Birmingham Post online July 2 2018 reported that

Birmingham Labour councillor Peter Griffiths, who was until May the city’s cabinet member for housing, argues that the council should be more forensic in its analysis of developers’ figures.

He also suggests linking affordable housing contributions directly to the profitability of building projects.

Griffiths, who is now on his second spell on the city’s planning committee, is sceptical about the viability assessments that developers have to do to prove that they could not afford to build if forced to discount homes, and wants to get more of them independently audited.

In some cases he has found figures to be questionable. Affordable housing is supposed to be below 80% of market value, yet he says that some developers make assumptions of 60% just to tip the development into a loss on paper and excuse themselves the discount.

But the role of the Planning Committee is limited to considering individual applications. It does not address the wider issue of overall planning policy. That should be the role of an Overview and Scrutiny Committee, but there isn’t one specifically for Planning. It might be thought to come within the brief of the Housing and Neighbourhoods Scrutiny Committee but there is no evidence of city centre planning and housing on its agendas. Apparently the issue actually comes under the Economy and Skills Scrutiny Committee but again there is no sign that it has either addressed the issue or scrutinised the work of the Planning Committee.

In short, it is clear that there is an ongoing fundamental failure of the Council’s Scrutiny system to hold the Council, and specifically the Planning Committee, to account on the issue of the avoidance by city centre property developers of providing affordable housing when they can well afford to do so.

TWO IMMEDIATE STEPS THE COUNCIL SHOULD TAKE

The real solution is a radical transformation of the whole profiteering housing market. But there are two urgent measures the Council needs to take right now.

First, the Council must drive a much harder deal with property developers. No deal unless they meet the Council’s 35% ‘affordable housing’ target – and using Shelter’s definition, not the government’s. And include in that a substantial quota of social housing.

Second, establish an effective Scrutiny system – involving citizens and community organisations – to get to grips with the issues posed by big city centre housing developments and hold the Council to account as it is supposed to.

 

Richard Hatcher

17 January 2020

Richard.Hatcher@bcu.ac.uk

Birmingham Against the Cuts

Links

  1. gov.uk/downloads/download/289/affordable_housing_supplementary_planning_guidance Affordable Housing Supplementary Planning Guidance, Adopted September 2001.
  2. co.uk/news/midlands-news/birminghams-new-affordable-housing-anything-15826583 14 February 2019
  3. https://www.birminghammail.co.uk/news/midlands-news/truth-behind-birminghams-affordable-housing-14853116 4 July 2018
  4. https://www.insidermedia.com/news/midlands/new-cgis-of-landmark-birmingham-residential-scheme-revealed 22 August 2018
  5. https://www.bisnow.com/birmingham/news/build-to-rent/nikal-brum-lead-100127
  6. https://www.birminghambeheard.org.uk/economy/rea-valley-spd/
  7. https://www.bisnow.com/birmingham/news/construction-development/watch-out-birmingham-city-planners-have-big-plans-for-2020-102261?utm_source=CopyShare&utm_medium=Browser 19 December 2019

 

 

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