Regeneration schemes incorporate a high percentage of residential units. Kerry Kyriacou and Simon Randall explain how registered social landlords can enhance or build communities
Most large-scale regeneration schemes have a significant residential element and, under existing planning obligations, up to 50% of the residential units will offer affordable housing. Housing is thus a key catalyst for regeneration, and registered social landlords (RSLs) are essential players in any scheme.
Regeneration improves areas that are recognised as being run down, neglected or otherwise deprived, where RSLs have a role in improving the quality of life for present and future residents. The role of the Homes and Communities Agency set out in the Housing and Regeneration Bill (EG, 5 April, p140) is aimed not only at improving the supply and quality of housing in
A growing trend
For many RSLs, regeneration has long been a core business, as it has for those private developers that have recognised the commercial opportunities that it can deliver.
RSLs in particular have gained significant expertise in regeneration, working alongside local authorities, communities and other stakeholders. Unlike private developers, they have the long-term commitment to carry through such projects, not only in the development phases but also through stock retention, management and the ongoing involvement with the community. RSLs are committed to neighbourhood investment. A number of the private regeneration specialist developers are beginning to recognise the importance of a long-term commitment to an area, by giving greater support to community development trusts and community-based management companies.
A growing number of private developers are moving into the regeneration sector, largely because planning policies have increased residential densities and the investment market is buying up the myriad developments of flats. The sustainability of this growth in smaller flats may be problematic. Although demographic trends show an increase in single people needing a home, a closer examination of the figures shows that these are not only young people starting out but many other people whose needs are not necessarily met by a one-bedroom flat. The economic and planning drivers for high-density development need to be managed so as to avoid creating future regeneration opportunities.
State of the market
The strength of the RSL sector has been highlighted in a recent report from the Housing Corporation. RSLs own 2.2 million homes and have a turnover of £9.1bn. The value of their properties stands at £77.4bn, in respect of which private finance of £43.5bn has been arranged. If the four largest housing association groups were to float on the London Stock Exchange, they would almost certainly justify a place within the FTSE 250 and feature high on the list of quoted property companies.
This strength has advantages, in that RSLs can build up their land banks and make speedy decisions on development opportunities. However, it has also led to calls from the Housing Corporation for RSLs to utilise the equity in their homes to increase borrowings and consequently to reduce the amount of social housing grant available for each new home.
Today’s economic climate will affect regeneration and housing targets, as developers and funders are abandoning riskier brownfield regeneration schemes in favour of less risky opportunities. This has been evidenced by developers seeking to sell unsold flats to RSLs.
RSLs are not immune to the economics of development and they face the same market concerns as private developers. Grant rates for affordable housing are now so low that should RSLs wish to develop affordable rented housing, they must find ways of offsetting the resulting financial losses. Consequently, most RSLs have developed shared-ownership schemes as their core business. However, many are increasing the scale of such projects as well as building market-sale housing to subsidise their rented programmes.
Housing group Affinity Sutton generates income from shared-ownership sales and its, albeit relatively small, market-sale programme to subsidise its social-rented programme to similar levels as the social housing grant subsidy. Thus, as with private developers, it is directly exposed to property value and mortgage availability risks. To stop or reduce the development of shared-ownership or market sale to avoid these economic risks is not a simple option for Affinity Sutton, since it would mean stopping or reducing its affordable rented programme.
Planning changes
RSLs become involved in regeneration schemes in three principal ways: they may own stock in a planned regeneration area a local authority may transfer its own stock for regeneration and investment or additional stock may be transferred to the RSL following a section 106 obligation where affordable housing is provided as part of a residential or mixed scheme.
It is to be hoped that the changes to the planning system under the Planning Bill will facilitate the speedier provision of new housing, whether resulting from brownfield or
The levy is designed to ensure the provision of adequate affordable housing in order to achieve genuinely mixed communities, and that this should be provided wherever possible on-site and through negotiated section 106 planning obligations, as is now the case. There is a fall-back provision, whereby affordable housing is included within the bill’s definition of “infrastructure”, but the levy is not intended to be used to fund such housing unless this is shown to be necessary.
Joint ventures
Despite today’s economic climate, the private sector is becoming more willing to collaborate with RSLs and local authorities.
This is partly for economic reasons, such as sharing risks and funding, but there are also practical advantages. Affordable housing no longer forms only a minor part of a development, but typically comprises between 30% and 50%. Moreover, RSLs are well placed to liaise with the local authority, the community and other stakeholders.
Affinity Sutton, through its subsidiaries, has embraced partnerships with private developers because it makes economic and practical sense, and developers offer benefits such as marketing and project-management skills. Its most recent schemes have entailed two joint venture (jv) companies that were set up with Galliford Try/Linden Homes and with the developer Cathedral Homes.
The jv with Galliford Try/Linden was a single purpose vehicle designed to deliver, with English Partnerships, a mixed-use redevelopment of a 96-acre former hospital site north of
Although
The jv with Cathedral is a limited liability partnership (LLP). It will undertake challenging regeneration projects, the first of which is refurbishing two unpopular tower blocks in south
Symbiotic relationship
Both of the developments, as with others undertaken by RSLs, reflect the changing environment in which RSLs operate.
They aim to build communities or neighbourhoods, stressing the importance of mixed tenures within estates and the need for leisure, shopping, health and employment facilities. Residential elements are essential to the regeneration of our town and city centres because they enhance vibrancy, and shared ownership offers opportunities for the first-time (and often younger) buyer. In addition, RSLs are heeding the requirements to build homes that conform with the government’s Code for Sustainable Homes.
When it comes to regeneration projects, private developers and RSLs need to work together – and they can.
Kerry Kyriacou is group director of development and new business at Affinity Sutton and Simon Randall is a partner at LG LLP and chairman of Broomleigh Housing Association
