Council policy is no new city centre homes unless you’re well-off

The Council’s Planning Committee has just approved a 61-storey luxury apartment tower in Broad St, with only 5% ‘affordable’ homes when Council policy is 35%, handing over even more profit for the developers. Only one Labour Councillor objected.

On 16 January 2020 the Planning Committee, which has a majority of Labour members, voted to approve yet another city centre luxury apartment development, a 61-storey tower, the tallest in Birmingham, with 503 apartments, only 5% of which would be ‘affordable’ – a total of 25. Yet again the Planning Committee disregards Council policy.

Here we show how the Council wriggles out of its policy commitments. Here is what the proposal says, as presented in writing to the Committee by the Council officer. It begins by stating the existing policy:

6.23 Policy TP30 states that proposals for new housing should deliver a range of dwellings to meet local needs and support the creation of mixed, balanced and sustainable neighbourhoods.

But ‘mixed, balanced and sustainable neighbourhoods’ doesn’t apply to the city centre

The 503 apartments will only be one- and two-bedroom. Nothing for larger families.

6.24 The proposed mix would deliver only 1 and 2 bed apartments but this in itself does not make it unsustainable. Sustainability requires the consideration and balancing of a wide range of economic, social and environmental factors. In addition, the applicant has also submitted a comprehensive Housing Need Assessment which demonstrates that the composition of the household size and future demand for the city centre is markedly different to the wider strategic housing need and that there is an economic and social demand for units of this size in this location.

6.25 Therefore whilst the City’s housing evidence base and policy indicates that there is a need for larger properties this is with reference to the wider Birmingham Strategic housing area as a whole. It does not take account of demand in more localised areas such as the City Centre where there is significantly less land available, housing densities are expected to be higher and detailed data indicates different need. […] As such the proposed development would be sustainable and compliant with policy in this respect.

So ‘the creation of mixed, balanced and sustainable neighbourhoods’ turns out not to apply to the city centre. And why doesn’t it? Because people with larger families needing three bedrooms don’t want to live there! And how do we know? Because the property company, real estate investor Euro Capital Investments, says so! It has ‘submitted a comprehensive Housing Need Assessment’, and ‘detailed data indicates different need’.

Affordable housing? No, profits come first

The application now moves on to the question of ‘affordable’ housing:

Planning obligations

6.30 …Policy TP31 which requires 35% affordable housing unless it can be demonstrated that this would make the development unviable, are applicable.

6.32 The applicant’s financial appraisal has been independently assessed and officers have successfully challenged a number of assumptions made within it. As a result an offer of approx £2.4million, equivalent to 5%, is now proposed and the applicant accepts that this should be used to provide on-site afford home ownership. … I concur with the independent appraiser’s view that the proposed scheme would not be financially viable if a greater contribution were required particularly due to the design and engineering qualities to deliver such a scheme.

So Euro Capital Investments made an initial bid with no ‘affordable’ homes at all, the Council objected, and the developer then made a token concession, which it had probably planned all along, of just 25 apartments – 13 one-bedroom and 12 two-bedroom – making 5% ‘affordable’, at 75% of market value, and the Council gave in.

Why didn’t the Council demand 35%, or at least substantially more than the token 5%? Because the mega-rich developers said that more than 5% ‘affordable’ would not be ‘financially viable’, and the Council agreed! What does not ‘financially viable’ mean? It simply means that Euro Capital Investments wouldn’t make enough profit.

And this is the secret at the heart of this and every planning deal: what is enough profit? And who decides? This crucial piece of information is not in the planning application or the Council’s response, and is not revealed to the Planning Committee – or of course to the citizens of Birmingham.

‘Slipping through the loophole. How viability assessments are reducing affordable housing supply in England’ is the title of a report by the housing organisation Shelter in 2017. It explained:

‘Viability assessments are financial appraisals carried out on planned housing developments. They estimate the amount the developer will spend building the homes, and the profit they will make from selling them. If this profit level is too low, the scheme can be said to be ‘non-viable’ – in which case the development may not proceed at all. The local authority may therefore decide to reduce the amount of affordable housing it demands, and/or other contributions towards local infrastructure, in order to raise the developer’s profit to a viable level.

What is considered a viable level of profit is therefore critical. Since 2012, the National Planning Policy Framework has defined viability as ‘competitive returns’, which the industry and the planning system interpret to mean at least a 20% profit margin.

This is the viability loophole. Developers can cite viability concerns to lower the amount of affordable housing they are required to provide, in order to guarantee them a 20% profit margin and inflate their bids for land.’

So let’s ask a simple question: how much profit are Euro Capital Investments planning to make out of their 503 luxury city centre apartments?

Multi-millionaire property developers are making a fortune out of Birmingham by taking the council for a ride, as we said in our previous article on 17 January and is worth repeating here because it is such blatant evidence.  Berkeley Group, which is based in London, has moved into Birmingham under the brand name of St Joseph. 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 St Joseph is pulling off the same scam in Birmingham. Eastside Locks is one of its deals:  753 apartments, and the Council has agreed to only 5% ‘affordable’. 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’!

It’s not surprising that in the Birmingham Post’s recent 2020 Midlands Rich List’s top 50 the most profitable sector is property and construction. That’s where 15 out of the 50 make their money from, with number 1 worth £5.7 billion. (Manufacturing comes second with only 6 in the top 50.)

One Labour Councillor tells the truth about the 61-storey apartment tower deal

The Planning Committee has a majority of Labour councillors. There were 7 Labour members out of 12 present at the meeting on 16 January: Diane Donaldson, Peter Griffiths, Julie Johnson, Zhor Malik, Sadak Miah, Lou Robson, and Karen McCarthy, the chair. (There were apologies for absence from Mohammed Fazal, Keith Linnecor and Martin Straker Welds.) Only one councillor objected to the Euro Capital Investments deal: Lou Robson, Labour Councillor for Hall Green North. This is what she said:

‘My point is that a lot of what we’re seeing with these tall buildings […] that the level of design and expense involved in these luxury apartments then comes back to the viability assessment. And we’re told that they can’t afford to provide 35% of affordable housing that’s required. Again I think that’s disappointing.

We did hear at the Design Panel that this is going to be quite a unique building, certainly in terms of engineering, and while I find that very interesting I do think it’s a shame that this level of affordable housing can’t be accommodated, especially if we are making significant buildings, it would be very nice to think that all our population can live in them.

And the point where the developers said they’d done an assessment of the housing need and they can only find there’s a demand for one and two bedroom houses, I would like to see a bit of social responsibility in encouraging different groups of people to live in these buildings. We’re getting far too many buildings that are just designed for quite a narrow part of the population. It would be really good to see a mix, especially with all the interesting developments that will be going on all around it in Ladywood, I’d like to see contributions there.’

Conservative councillor Gareth Moore supported the application and made no mention of affordable housing. The officer presenting the application dismissed Cllr Robson’s concerns in a sentence. The application was approved with just one vote against.

But Cllr Robson’s objections are completely in line with what the Council’s ‘Birmingham Development Plan 2017’ explicitly says, and the Committee’s decision is in complete breach of it:

Homes and neighbourhoods

3.21 At the heart of the City’s growth agenda will be the promotion of sustainable neighbourhoods as a means of supporting the City’s increasing and diverse population in the most sustainable way possible.

3.23 In delivering the principles of sustainable neighbourhoods a wide choice of housing sizes, types and tenures will be provided to meet community needs including homes for families, the elderly and appropriate levels of affordable housing.

Policy TP27 Sustainable neighbourhoods

[…] Sustainable neighbourhoods are characterised by:

    • A wide choice of housing sizes, types and tenures to ensure balanced communities catering for all incomes and ages.

8.5 All new residential development will need to demonstrate that it is meeting the requirements of Policy T27, thus ensuring that it contributes toward meeting the broader objectives of the BDP.

8.16 […] New housing should add to the choice of accommodation available to people, whatever their circumstances. It should therefore be a mix of both market and affordable housing, and should consist of a mixture of tenures and prices, sizes and types.

The Council’s city centre regeneration strategy reinforces social inequality

What the Council is doing is part of the strategy of city centre regeneration that Birmingham Council has been carrying out for the past 30 years, since the late 1980s, under Labour leadership for most of that time. This is how Barber and Hall summarise that strategy in their 2008 paper ‘Birmingham: Whose urban renaissance? Regeneration as a response to economic restructuring’ (Policy Studies, 29(3), 281-292):

‘A distinctive “entrepreneurial” model of urban economic development has evolved worldwide […]. This involves investment in service sector physical infrastructure, promotion of ‘creative’ industries, ‘boosterist’ city marketing campaigns, development of up-market housing in the central business district (CBD), hosting internationally-important sporting and leisure related events, and ‘themed’ neighbourhood regeneration […]. These interventions are designed to re-invigorate economically urban areas and, thus, contribute to economic competitiveness. They are commonly branded as examples of “urban renaissance”. In reality, the links between urban renaissance and competitiveness are ambiguous […]. These entrepreneurial strategies are typically conceived, funded and implemented by coalitions of local government and business stakeholders and are characterised by exclusive, corporatist forms of political process […].’ (I have omitted the academic references)

This policy in Birmingham was challenged in the 1990s in a series of papers by Patrick Loftman and Brendan Nevin, two researchers at the University of Central England, now Birmingham City University. In ‘Prestige project developments: Economic renaissance or economic myth? A case study of Birmingham’ (1994) they wrote:

A number of urban local authorities in Britain have been influenced by the much publicised “success” of models of urban regeneration based on privatism which, it is claimed, has secured the revitalisation of previously declining cities such as Baltimore and Detroit […]. One such model, uncritically imported into Britain in the 1980s, has been termed the prestige model of urban regeneration. Of the British local authorities which have sought to replicate the prestige model, Birmingham (under the leadership of Sir Richard Knowles) has most enthusiastically embraced this approach, investing over £276 million in its prestige projects and city centre redevelopment between 1986 and 1992 […]. (p308)

There is, however, a considerable body of research examining the distributional consequences of US CBD-focused [Central Business District] regeneration models based on privatism, which has shown that such models have benefited service sector and better-off residents’ and workers’ interests at the expense of deprived inner urban areas, and services on which the poor depend […]. (p309)

In this neoliberal scenario the role of the council is not just to partner business development. It is to provide a city environment capable of attracting global business and high-end earners. The ‘gentrification’ of Birmingham city centre was begun by the Labour council in the late 1980s with the building of prestige projects – the International Convention Centre, the Symphony Hall and the National Indoor Arena – funded by money taken from the education and housing budgets. This strategy for signalling the city’s aspiring global status has continued ever since, with upgraded transport (the renovation of Snow Hill and New St stations, the tram extension and HS2), the new shopping centre (Grand Central) and up-market retail provision (Selfridges, Harvey Nichols, John Lewis), and most recently another spectacular public building, the new Library of Birmingham.

The final element of the strategy is the promotion of city centre living by professional and managerial employees in the knowledge-intensive services companies in the CBD through the creation of the conditions for new private housing investment in expensive new-build apartments. Of course the regenerated city centre also requires many low-paid low-skill workers such as cleaners, security, and retail staff. They are welcomed to travel in every day from the suburbs to work in the city centre, and to spend money in its shops, bars and eating places, but not to live in it.

 

Richard Hatcher

28 January 2020

Richard.Hatcher@bcu.ac.uk

 

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