COMMENT: Recent events across the country have shone a light on the role of the private sector in local authority development. In particular, events in Haringey and the collapse of Carillion seem to suggest that the public and private sectors will consider future collaboration with vastly increased trepidation. But does this signal the end of the public/private joint venture, or is it a temporary political blip? asks Colm Lacey, chief executive of Brick by Brick, Croydon Council’s development company.
A defining context for this question is the exponential growth of wholly owned council development companies. These companies offer councils complete control over the pace (and reward) of the development process, with a commensurate level of risk.
A recent study by Professor Janice Morphet from the Bartlett School of Planning suggests that 65% of local authorities are now directly involved in the delivery of housing themselves, with more joining this particular commercial conga on an almost daily basis.
It is worth noting that many of these companies have established themselves in direct response to market failure.
Thwarted ambitions
Put simply, the menu of joint venture agreements or market sale options available to them were simply not feeding their ambitions with regard to housing delivery or commercial return.
So perhaps what we are seeing is not the end of local authorities wanting to work with private sector partners, but the beginning the end of them needing to. A corrective rebalancing of commercial power, if you will.
Typically councils have procured private sector partners to provide access to finance or development expertise, not realising that they may already have had equivalent access to both. Most councils already have the attributes of a seasoned development actor. They are major land owners with enormous potential for new homes to be delivered on this land. They are trusted financial entities, with considerable short- and long-term borrowing capacity and excellent covenant strength.
They are staffed by people who, in one way or another, have been involved in steering the various processes of urban change through a range of economic conditions for time immemorial.
In many public private partnerships, these strengths have been undervalued by both parties, leading to resentment or worse.
Opportunities on offer
Of course, the more innovative of the private sector will see the growth of wholly owned companies as an opportunity rather than threat. As more local authorities – the great missing link of housing supply – enter the fray, cumulative development activity should grow significantly.
And activity means business. So while traditional joint venture opportunities may decrease somewhat, a whole world of new potential awaits, albeit on a more equitable commercial basis.
Our very own Brick by Brick in Croydon is a case in point. Established by the local authority, Brick by Brick is a private development company of which the council is the sole shareholder. From the council’s point of view, the company offers a direct stake in development activity in a rapidly growing market while also enabling high-quality schemes, which directly benefit local people, to be delivered.
For example, our housing developments to date have typically delivered around 50% affordable housing, almost three times what was achieved in the borough in the preceding years.
For the wider development sector, Brick by Brick activity offers a range of commissioning and partnering opportunities. Since inception last year, we have gained planning consent on more than 30 sites, many of which have now started construction.
Employment benefits
These means work for a myriad of architects, engineers, planning consultants, contractors, subcontractors, agents and the like.
Equally, this activity has brought a multitude of slumbering development sites throughout the borough into active use for the delivery of high-quality development schemes that have a positive effect on the surrounding streetscape and wider area. This creates a whole new market context and a range of positive externalities for adjacent landowners and potential developers.
So, far from signalling the end of partnering opportunities, the collapse of certain older joint venture structures may in fact signal renewed hope.
And who is to say where this will lead in the longer term? As local authorities around the country start to see more of the type of development they need to address their needs, what impact will this have on planning and regulatory regimes? Can this rising tide lift all boats?
