The truth about property
developers: how they are exploiting planning authorities and ruining our cities
Affordable housing quotas get waived and the interests of residents
trampled as toothless authorities bow to the dazzling wealth of investors from Russia , China
and the Middle East
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The wave of developers buying up swathes of
London includes Malaysia
theguardian.com,
Wednesday 17 September 2014 / http://www.theguardian.com/cities/2014/sep/17/truth-property-developers-builders-exploit-planning-cities?CMP=fb_gu
“I always
said you should never trust a bank with property, or a property developer with
money,” says Peter Rees. The former chief planner of the City of London Heron Tower London Berkeley
Left
unchecked, the banks went off the rails in spectacular fashion, as they sprayed
money into the great mortgage mirage. And now property developers have been
allowed to follow suit. Fuelled by the dazzling wealth of investors from Russia , China
and the Middle East , who they turned to when
the banks stopped lending, their steroidal schemes are causing irreparable harm
to our cities.
Across the
country – and especially in superheated London, where stratospheric land values
beget accordingly bloated developments – authorities are allowing planning
policies to be continually flouted, affordable housing quotas to be waived,
height limits breached, the interests of residents endlessly trampled. Places
are becoming ever meaner and more divided, as public assets are relentlessly
sold off, entire council estates flattened to make room for silos of luxury
safe-deposit boxes in the sky. We are replacing homes with investment units, to
be sold overseas and never inhabited, substituting community for vacancy. The
more we build, the more our cities are emptied, producing dead swathes of
zombie town where the lights might never even be switched on.
Developers
have bounced back from the crash with bigger plans than ever before, acquiring
vast areas of land with the ambition to operate like the great estates of yore.
Framed with the cuddly terminology of “long-term stewardship” and “adding
value”, they are merely mimicking those aristocratic fiefdoms, recasting the
city as a network of privatised enclaves. The landed families of Grosvenor,
Portman and Cadogan have been joined by a breed of corporate giants like Lend
Lease, CapCo and Ballymore. The latter is overseeing the £2bn transformation of
Nine Elms into a high-security zone of luxury flats around the new American
embassy, that will apparently “draw inspiration from the attractive residential
and commercial estates which evolved over time in cities like New
York and Boston Earls Court Victoria
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A view of the Nine Elms redevelopment,
which is getting a £2bn transformation into luxury flats. Photograph: Dan
Kitwood/Getty Images
They have
been accompanied, and often outbid, by a newer kind of international
development force, supercharged by the untold riches of sovereign wealth funds,
national pension funds and the gushing pump of petrodollars. The Qataris, who
bailed out the Shard and snapped up the Olympic Village, have been joined by
the growing appetite of Malaysian and Chinese investors. Malaysian consortium
SP Setia acquired Battersea power station for significantly more than its
competitors could muster, while China
Bankers have
faced our collective wrath, but what about developers? The economy goes in
fickle booms and busts, cycling merrily through bubbles and crises, but cities,
built in concrete and steel, generally stay put. What we are making now, we
will all have to live with for a very long time. The iniquities of the banking
crash have been intricately unpicked, but the wilful destruction of the places
where we live and work remains something of a mystery. We may rant and rage
against ugly additions to the skyline, but what of the mechanisms that are
allowing it to happen? How did it come to this?
The
principal reason can be traced to the fact that awarding planning permission in
the UK 1990, a clause which
formalised “planning gain”, making it in the local authorities’ interests to
allow schemes to balloon beyond all reason, in the hope of creaming off the fat
of developers’ profits for the public good.
Introduced
as a negotiable levy on new development, Section 106 agreements entail a
financial contribution to the local authority, intended to be spent on
offsetting the effects of the scheme on the local area. The impact of a hundred
new homes might be mitigated by money for extra school places, or traffic
calming measures. In practice, since council budgets have been so viciously
slashed, Section 106 has become a primary means of funding essential public
services, from social housing to public parks, health centres to highways,
schools to play areas. The bigger the scheme, the fatter the bounty, leading to
a situation not far from legalised bribery – or extortion, depending on which
side of the bargain you are on. Vastly inflated density and a few extra storeys
on a tower can be politically justified as being in the public interest, if it
means a handful of trees will be planted on the street.
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“Council
chief executives will allow schemes to be pumped up as much as they can go
before they get political push-back from councillors,” says one planning
officer from a London
It is a
system that is all too open to political pressure, given that any officer who
advises against a new development can be conveniently framed as “anti-growth”,
heartlessly preventing a promised tidal wave of new public amenities from flooding
into the borough. Based on negotiation and discretion, the result is entirely
down to the individual planning officer’s ability to squeeze out as good a deal
as they can get, a battle that all too often ends in the developer’s favour.
The results
of such botched bargaining can be seen sprouting up across London tower
of One the Elephant promises to “set
new standards for contemporary London
Bypassing
Southwark’s requirement for 35% affordable housing – which would have meant
around 100 units – Lend Lease has instead contributed £3.5m in lieu towards the
construction of a community leisure centre next door, which will cost £20m to
build. A triumph for the public good, you might think, until you realise that
the equivalent cost of building 100 affordable units would have been around
£10m, three times what the developer paid. Pressure group 35 Percent – which
campaigns for the borough-wide policy of 35% affordable housing to be enforced
in Elephant and Castle – estimates that, in the six biggest schemes in the
area, developers have avoided paying £265m in off-site affordable housing
tariff payments required by policy. And of the 4,282 new homes being built,
just 79 will be social rented (ie. managed by registered providers for those on
low incomes).
The same
story is repeated the other side of town, where Haringey awaits the momentous arrival
of Tottenham Hotspur’s new £400m football stadium. This bulbous mothership was
promised to bring 200 new homes, half of which would be “affordable”, and an
abundance of public benefits to the area. But, once again, the affordable
component has been mysteriously waived, replaced with 285 flats for solely
private sale, while the Section 106 contribution has been reduced from an
agreed £16m to just £477,000 – a token contribution towards transport
improvements.
The system
has spawned a whole industry of S106 avoidance, with consultancies set up
specifically to help developers get out of paying for affordable housing at all
scales of development. Section 106 Management, set up by
solicitor-turned-developer Robin Furby, is one such company that offers a service
to small-scale developers, promising “to establish the profitability of your
project and thereby reveal unviable Section 106 obligations”. Its website
displays a list of case studies proudly showing how much they have helped
developers dodge, and boasting of planning permissions achieved “without any
contribution towards affordable housing” at all, saving “tens, if not hundreds
of thousands of pounds”.
So what
exactly does it mean when a property developer pleads poverty? “If the profit
margin for your scheme is pushed to below 17.5% by Section 106 payments, you
should talk to us,” says the website. Other consultants promise to safeguard
20% profit margins and upwards, before any Section 106 contributions are even
considered. If a scheme is declared “unviable”, it simply means “we’re not
getting our 20% profit so why should we bother”.
The power
of the policy to leverage affordable housing has been further eroded since the
introduction of community infrastructure levy (CIL) in 2010. A non-negotiable
fixed-rate tax on new development, CIL was intended to introduce more
transparency and give developers a level of certainty about how much they would
be expected to contribute towards infrastructural improvements. But, in
reality, it has provided another excuse to dodge Section 106 obligations. A
further change to the town planning act last year has made Section 106
agreements renegotiable, allowing review and appeal of all existing
obligations, in a misguided attempt to promote growth – which simply makes it
easier for developers to wriggle out of their promises, as happened in
Tottenham and elsewhere.
“Not
surprisingly, developers are now even keener to renegotiate the S106 after
they’ve got planning permission, finding they can’t negotiate the CIL,” says
Peter Rees. “In most cases, they manage to prove that they can no longer afford
to pay for the affordable housing that they agreed – it’s simply ‘not viable’
any more.” One planning officer puts it succinctly: “There has never been a
worse time to give schemes consent, in terms of securing public benefit.”
In all
cases, how developers prove what they can afford to pay for comes down to the
dark art of “viability”. The silver bullet of planning applications, the
viability appraisal explains, through impenetrable pages of spreadsheets and
fastidious appendixes, exactly how a project stacks up financially. It states,
in carefully worded sub-clauses, just why it would be impossible for affordable
housing to be provided, why the towers must of course be this height, why no
ground-floor corner shop or surgery can be included, why workspace is out of
the question; indeed, why it is inconceivable for the scheme to be configured
in any other form. Presented as a precise science, viability is nothing of the
sort; it is a form of bureaucratic alchemy, figures fiddled with spreadsheet
spells that can be made to conjure any outcome desired.
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“Councils
just don’t have the expertise to challenge viability reports,” says one senior
planning officer. “We can’t argue back.” Instead, they can commission viability
assessments, produced by the same consultants that work for developers, to
determine whether the report is accurate – but not to propose an alternative.
The figures may well stack up, but it doesn’t mean the scheme could not be
designed in a different way, which would still guarantee the developer’s 20%
profit margin.
“You only
have to modify one of the variables very slightly to get completely different
outcome,” says one planning consultant. “You can very easily go from something
being rip-roaringly viable to completely unviable by tweaking something very
modestly. If a planner doesn’t understand that, they’re not going to do very
well.”
Evidence
suggests that is all too often the case, judging by the number of planning
officers’ reports that diligently conclude a scheme would simply be unviable if
it was obliged to fulfil the policy objectives. With calculations often
undisclosed for reasons of commercial confidentiality, councils are forced to
blindly accept the developers’ figures as the ultimate de facto truth, allowing
their own policies to be flagrantly breached.
“I’ve never
been confident in reports that I’ve received on viability,” says one planning
officer, describing how the big property consultancies operate as something of
a cabal, with one wary of challenging another’s figures. “Every consultant
that’s advising a local authority is hoping to advise a developer tomorrow. If
they put the boot in on a big development scheme, they simply won’t be hired
again.”
A
relatively new field, viability has been given increasing weight by the
government’s National Planning Policy Framework, introduced in 2012, which
slashed 1,300 pages of policy down to 65, as part of the coalition’s triumphant
bonfire of red tape. The NPPF introduced a “presumption in favour of
sustainable development”, which sounds innocuous enough – but as Rees points
out, “the definition of ‘sustainable’ has nothing to do with green issues or
energy at all. It means one thing: commercially viable.”
Immune from
public scrutiny, viability assessments have rightly come under fire for
clouding the accountability and transparency of what should be a statutory
public process. Their confidentiality is closely guarded, in order to preserve
developers’ trade secrets, but where the sale of public assets is concerned,
there is increasing pressure for the books to be opened.
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Southwark’s Heygate Estate is to be
replaced by a redevelopment with far fewer social-rented homes. Photograph: Dan
Kitwood/Getty Images
|
One such
case recently ended in victory for housing campaigners, when after two years of
fighting, which culminated at a tribunal, Southwark Council was ordered to
disclose the viability assessment produced by Lend Lease over its controversial
redevelopment of the Heygate Estate. The 15-year project is seeing more than
1,200 mainly social-rented homes on the post-war estate replaced with over
2,300 units, only 25% of which will be classed as affordable, with just 79
flats for social rent. Many leaseholders were subject to compulsory purchase
orders so low they have been forced to move to the far reaches of outer London,
their decent-sized two-bed flats valued at under £150,000, while the new homes
of “Elephant Park” will be sold for prices reaching £420,000 for a one-bed apartment.
The figures
explaining why this was the only feasible way to develop the site were safely
locked away in the viability appraisal, which Southwark fought tooth and nail
to keep secret. The borough has been particularly keen to keep financial
details under wraps since it accidentally disclosed it had sold the entire
nine-hectare site for just £50m, having spent £44m on moving residents out –
while estimating its gross development value at £990m.
“Without
some commercially sensitive information remaining private, developers could
simply refuse to work with councils, leaving boroughs without the housing and
regeneration we all need,” says a spokeswoman for Southwark Council. The
borough brought a legal challenge against a decision by the Information Commissioner’s
Office last year ordering the council to disclose the full details of the
viability report, after a freedom of information request was denied. Southwark
argued that full disclosure would “damage regeneration”, while Lend Lease, in a
defence that verged on farce, pleaded the human right to “peaceful enjoyment of
its possessions”, arguing that disclosing the viability assessment would amount
to “unjustified interference with this enjoyment”.
The
tribunal concluded that the information must be disclosed, stating that “the
importance … of local people having access to information to allow them to
participate in the planning process outweighs the public interest in
maintaining the remaining rights of Lend Lease”. It sets an encouraging
precedent for campaign groups battling similar situations elsewhere, from Greenwich Peninsula Earls Court
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A scale model of London
on show at this year’s Mipim international real estate fair in Cannes , France
The Heygate
decision comes after increased scrutiny of Southwark council’s cosy
relationship with Lend Lease, following reports in Private Eye of perks enjoyed
by Peter John, the Labour leader of the borough, at the expense of the
Australian giant. From a pair of £1,600 Olympic opening ceremony tickets to a
£1,250 trip to the lavish Mipim property fair in Cannes, these sponsored
outings were reported to have joined a lengthy list from the previous year of
Proms tickets and dinners at the Ivy, paid for by at least 10 other companies.
Developers
getting into bed with local authorities might usually happen behind closed
doors, but at Mipim the conspicuous chumminess was proudly on show along the
Croisette for all to see. In the wake of headlines decrying public money being
spent on councils attending the champagne-soaked jamboree, their private
“development partners” have been more than willing to step in and foot the
bill. With a borough’s presence at Mipim costing up to £500,000, developers
happily pay for glistening city models, trade show booths and yachts, where
cakes iced with their logos are handed out by mayors. More than 20 local
authorities took part this year, with developers sponsoring everything from a
“Croydon on the beach” cocktail party to an entire “Manchester
“The
boroughs might be proud that they’re not here at the public’s expense,” says
housing campaigner Jake Freeland, who held a protest in Cannes
Developers
have long thrown parties and funded foreign trips as a way of lubricating their
plans through the system, but the quest for permissions now extends into the
statutory planning process itself, through the rise of deals known as planning
performance agreements. Introduced to help fast-track large, unwieldy schemes
through the system, PPAs see the applicant pay for a new dedicated position in
the council’s planning team to focus solely on their application, guaranteeing
a faster turnaround and a better “bespoke” service.
Capital and
Counties Properties (Capco) paid over £2m to Hammersmith and Fulham council
under a PPA to have its £8bn redevelopment of Earls Court Westfield
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The £8bn redevelopment plans for
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“There’s
nothing wrong with planning performance agreements,” says one planning officer.
“It’s just like allowing people to travel club class. You pay for a better
service.” Quite whether club-class planning should be offered by a statutory
pubic service is questionable, but developers have few qualms about throwing
money at an authority, spitting out as many applications and fees as are
necessary to see a project through. “We pay vast sums of money to have things
determined quickly,” says the director of one major development company. “We
pay the planner’s salary, cover their lawyers’ fees and everything, but we
wouldn’t expect preferential treatment. It’s not a bribe.”
Under the
coalition’s localism agenda, the wheels for private-sector encroachment into
public planning have been further oiled, with the introduction of neighbourhood
plans. Presented as a means of empowering communities, they have in fact left
the door wide open for canny developers to move in, host a few community coffee
mornings with felt-tips and post-it notes, and engineer a plan to their own
advantage. There is no requirement for those who draw up the plan to even
reside in the neighbourhood and, although they need a 50% “yes” vote at
referendum, there is no requisite minimum turnout.
But such a
tactic would require at least cursory engagement with the community and the
council, something which many developers are increasingly choosing to bypass
altogether. Since the introduction of the NPPF, there has been a sharp rise in
the number of planning applications won on appeal, as many applicants choose to
go straight to the inspectorate, conscious of the new “presumption in favour”
of development.
Rather than
being the last resort option, after negotiations with the local authority have
broken down, the process of planning by appeal has become a tactic in itself.
One developer is particularly candid on the matter: “Planning decisions are so
often the result of political wrangling at committee anyway,” he says. “Why
would you waste months negotiating something to get the planning officer on
side, when they can’t guarantee delivery at planning committee?” On appeal, it
comes down to a battle between planning lawyers, the judgement often determined
by who can afford the best representation. When the Rolls Royce legal team of
the private developer meets the quivering case officer of the emasculated
public sector, its not hard to guess the outcome.
Developers
with bigger ambitions are choosing to bypass the local authority in a different
way, by going straight to the top and playing for a “call-in” – waving their
schemes under the nose of the mayor of London Mount
Pleasant in north London Camden
“It is hardly surprising that the mayor has
called this in,” says Duncan Bowie, lecturer in planning at the University of Westminster
The same thing happened at Convoys Wharf in
Deptford, where a £1bn proposal for 3,500 units (of which just 15% will be
affordable), in the form of three towers rising up to 40 storeys, was called in
by the mayor after the Hong-Kong based developer wrote a blustering letter
complaining of planning delays. The scheme was approved in April, against the
advice of the local authority and the cries of heritage groups.
“It’s common practice to play the mayor off
the borough,” says one senior planning officer. “We recently had one vastly
oversized scheme that we’d spent months trying to tame, then we had a meeting
with the GLA planning team, and their first response was ‘why not make it taller?’”
Driven by tick-box housing targets, the GLA merrily rubber-stamps whatever
comes its way, yet most of these schemes are doing nothing to help the housing
crisis, given the fraction of “affordable” homes they include are still out of
reach of most, at up to 80% of market rent.
“Developers have quickly latched on to the
fact that, even if they can’t get local authorities to approve schemes, they
can get them through the mayor or the government,” says Peter Rees. “The bigger
the better. And they know that they’ll happily allow towers to be built outside
designated clusters.”
As deputy prime minister, John Prescott
personally approved both the Shard and the Vauxhall
Tower , the latter against the decision
of the planning inspector and after strong warnings from his advisers that it
“could set a precedent for the indiscriminate scattering of very tall buildings
across London Dubai
on Thames . A wall of glass stumps is beginning
to sprawl along the river from Wandsworth and Battersea to Nine Elms and
Vauxhall – and beyond.
“It is an absolute fiasco,” says Mark
Brearley, professor at Cass Cities and former director of Design for London
A similarly galumphing form of urbanism is
appearing across London City Road
“Once an outline permission is granted, it
makes it very difficult for us to refuse a scheme further down the line,” says
one officer. In Stratford
City
Conditions that have been agreed are relentlessly
renegotiated at reserved matters stage. Good architects are employed to win
outline planning, then ditched for a cheaper alternative; high-quality
materials are substituted for flimsy plastic panels – all in the name of
viability.
Just like the banking crisis, the problem
of botched urban development has long been encouraged by a system that is open
to exploitation and all too susceptible to careless regulation. But it is also
not something that can be easily fixed. “There’s only so much mileage in
vilifying developers or planners,” says Brearley. “Making cities is imperfect
and messy, and has been for thousands of years. But we should be able to do
better than this.”
It comes down, he thinks, to the fact the UK
One former planning officer is frank about
the reality of the imbalance in our confrontational system. “If you throw
enough resources at a planning application, you’re going to manage to tire
everyone out,” he says. “The documentation gets more and more extensive, the
phone calls get more frequent and more aggressive, the letters ever more
litigious. The weight of stuff just bludgeons everyone aside, and the natural
inclination is to say, ‘Oh yeah okay, I’ve had enough of this one,’ and just
let it through. It’s like a war of attrition.”
And it is a war in which the side
representing the public interest has been systematically drained of expertise.
The number of architects employed in the public sector has fallen from over 60%
to less than 10% over the last 30 years, while planners have been relegated to
third- and fourth-tier officers, with some boroughs contracting the service out
altogether. As part of the Farrell Review into architecture and the built
environment, a “Plan First” initiative has been proposed, by GLA regeneration manager
Finn Williams, on the model of Teach First, to try to lure the best graduates
into planning. But it faces an uphill struggle to overturn the years of neglect
and transform a system that is fundamentally anti-plan-making.
“To this day our planning system is the
wrong way around,” says Rees. “It evolved to protect the countryside from the
encroachment of the towns, rather than to make the cities better. It isn’t
about building great places, it’s about protecting non-places.” And in the
process, it has allowed our cities to cannibalise themselves and become those
non-places it set out to protect.
Bullied and undermined, planning
authorities have been left castrated and toothless, stripped of the skills and
power they need to regulate, and sapped of the spatial imagination to actually plan
places. As one house-builder puts it simply, “The system is ripe for sharp
developers to drive a bulldozer right through.” And they will continue to do so
with supercharged glee, squeezing the life out of our cities and reaping
rewards from the ruins, until there is something in the way to stop them
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