It is a frustrating business being a Cambridge developer. For years, they have wished for the space and permission to build the homes the region desperately needs in a booming economy. Now they have got it. But there is a catch. Half of all private residential land will have to accommodate affordable housing.
South Cambridgeshire District Council, which controls a doughnut of land around the city centre, plans to have more than 32,000 houses built over the next 10 years. But for private developers, half of all development land will have to accommodate affordable housing.
That could mean developers achieve zero value from half of all residential development land. As a result, the local property community says residential values are approaching those of commercial.
Some local agents believe that, as residential becomes more difficult to deliver, some developers will seek commercial uses for land, while others will play the waiting game and leave sites empty. As a result, housing development in one of the country’s most congested cities could grind to a halt.
Rising ratio
The ratio of 50% affordable housing was introduced following the government’s housing needs survey of 2002. This was incorporated into the Cambridgeshire and Peterborough structure plan, which was adopted in 2003. Now SCDC is implementing it as part of its local development framework. This will raise the level of affordable housing in new private developments from 30% to 50%.
Brian Buckingham, partner in charge of Bidwells’ residential development team, believes getting the numbers to add up will be tricky. “Developers have to make contributions to education, to the guided bus, roads and highways. When you put this all together with 50% affordable housing, it is going to be a struggle to make this work.”
He cites a crude calculation for a five-acre site. A value of 50% affordable housing effectively reduces the cash-generating area to 2.5 acres, cutting its value in half, he says. “With open spaces, you are never going to achieve a built area of 2.5 acres, which means on a good run you are looking at a value of £4m.”
Performing the same calculation using a top commercial value of £1m per acre gives £5m for a typical B1 use.
“All that means is that land does not come forward, and we will see more and more CPO used, which is costly and time consuming for the local authority,” says Buckingham.
His colleague Dick Wise, development partner at Bidwells and head of the commercial division, agrees that commercial and residential values are converging, but issues a note of caution. “Residential still outruns commercial. It is still a long way before commercial overtakes residential.”
Chris Goldsmith, director at Turnstone Estates, says planning gain obligations are already resulting in millions of pounds being stripped from land values. Increased levels of affordable housing will, he says, add to this. Turnstone, primarily a commercial property developer, is involved with negotiations for housing development at Waterbeach, north of the city centre (see box).
Goldsmith believes that – at least in the short term – things will merely slow down. “We won’t see people knocking down office buildings for residential, which has happened a lot in the past. Two years ago, the economic case was there, but that will stop now.”
In addition, Goldsmith believes that city council plans to make commercial developments pay for affordable housing could result in a similar dampening of office land values. The city’s local plan will go to public inquiry in September and, unsurprisingly, Turnstone will be opposing it.
He believes councils will not wield the full force of their powers. “The 50% target is a maximum. I think there is a recognition of that, and it will be taken into consideration if you mount a good economic case and show that, if you enforce the 50% affordable housing ratio, then the land will not come forward.”
South Cambridge councillor Dr David Bard gives Goldsmith’s arguments short shrift. “The policy is there and it will be used,” he says. “There may be different circumstances on small sites but, on larger sites, we would be aiming for the full amount. It is a high priority for us.”
Much of developers’ worries centre on whether affordable housing will be socially rented, which is associated with effective zero value, or shared equity which, classically, confers a 30% value. Here, Bard says the council will look for a 50:50 split between socially rented and shared equity.
Bard is also sensitive to the argument that the policy could reduce the amount of land coming forward, and says the council is monitoring the situation. But he says that any approach for a change of use will not receive an easy ride. “We are fully committed to the local development framework and, if we are approached for a change of use that unbalances the housing and employment levels, then it won’t happen,” he says.
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It is not just the council’s 50:50 ratio for affordable housing that has drawn criticism from the property community but also the number of homes in the council’s local development framework. The number of homes built in the Cambridge area in 2003 was less than half the number constructed in any one year during the 1970s. According to the government’s housing needs survey, the number of homes built each year in the Cambridge subregion should be 2,800. To date, the figure is just 2,000 homes a year. Developers say that current policies make matters worse. They claim that, rather than pushing housing densities to the maximum that sites can accommodate, requirements made by South Cambridgeshire District Council only deliver the minimum amount they can handle. An example is Northstowe, a new settlement five miles north of the city centre between the villages of Longstanton and Oakington. Council documents show capacity on the site approaches 10,000 homes. However, it has now opted to go for 8,000. Fairfield Partnership, a 50:50 joint venture between Fairview New Homes and Marshfield Development, owns 400 acres of land that abuts the Northstowe site. Its strategic land director Steve Biart says: “The council decided to stick with only 8,000 homes. To me, that is daft, and typical of the council. It is nimbyism by any other route. It didn’t want a new settlement but got stuck with it, and now it is only doing the minimum.” Similar opinions are not hard to find. Turnstone Estates is promoting another settlement, Waterbeach. Its managing director Chris Goldsmith says: “The council’s plan should be seeking to marry housing and employment, and it has failed to do that. The number of houses sounds like a lot, but it is just scratching the surface.” The council says Waterbeach is “quite some way off”, and is not part of the north Cambridge negotiations. Councillor Dr David Bard says that a railway line created a barrier to extending the Northstowe site. “It just wasn’t viable,” he says. “The design gets quite difficult if you take in the neighbouring plot of land, and it is quite a small addition of houses.” Bard adds that the education authority has advised that 8,000 was an optimum number for a settlement. The Northstowe plan is in its second period of consultation, which will run until early 2007. Location is also a concern. Proposals for the Northern fringe area incorporate the sewage works. Nick Mager, associate director at Lambert Smith Hampton, says: “With remediation, it will cost £130m to build a new sewage farm.” Bard says negotiations are under way about moving the sewage works, but admits that, if they stay, “significant improvements” will be needed before housing can be built on or near the site. |
