Hackney Mayor Philip Glanville has rejected as “utterly wrong” calls for a fresh approach to the council’s model of subsidising social infrastructure through the construction of private sale homes.
His defence comes as Town Hall officers work on plans to mitigate the “sales risks” within the borough’s flagship Britannia redevelopment.
Activists have long debated the wisdom of the high-profile Shoreditch Park project to build a new leisure centre, school and homes since its inception, with Save Britannia Leisure Centre campaigner Pat Turnbull recently speaking out on “the risk of depending for financing on the fluctuations of the property market”.
The Town Hall budget, set to be debated this week, identifies expenditure funded by dwellings for private sale as a “key risk” to the financing of the council’s capital programme, with the combined short-term borrowing requirement of Britannia and other regeneration schemes exceeding half a billion pounds through to 2023/24.
According to the budget, the risk of not recouping capital receipts at the values incorporated into planning has increased with the “destabilisation” of the housing market as a result of the impact of Brexit followed by the pandemic, while adding that the Town Hall does still expect to generate capital receipts in the years directly after 2023/24 to pay for the expenditure.
The finance documents further make clear that the funding of the three mixed-use schemes at Nile Street, Tiger Way and the Britannia by the sale of on-site private homes presents a “significant element of risk… [with]considerable work continuing to monitor and manage the risk that has been brought to bear in this new era”.
Quizzed on what the predicted demand for the borough’s private sale homes will be and what form the mitigation will take if they prove difficult to shift, Glanville stressed that all schemes large and small have “gateway processes” before they get the final go-ahead, with the council examining the costs of development and sales values through both in-house analysis and market experts to check that the schemes remain viable.
He added: “If [the schemes] face challenges, we look at our cost base, the viability assessments, and we’ll look at what sales and marketing say, and also at phasing and the delivery model. I made a series of promises on the delivery model on Britannia around being in-house and retaining control, that the quality and the tenure mix was secure and that it was an inhouse delivered project.
“You’d expect us to review both viability and the delivery mechanisms, and what we will be setting out this year is how we plan to deliver those private sale homes.
“We ultimately need to pay back the investment that we made in the social infrastructure in Shoreditch, and if there are viability challenges we obviously need to be transparent about them and talk about those delivery mechanisms. That is not the stage that we are at the moment.”
Glanville went on to point to the council’s own sales and marketing specialists Hackney Sales and its own Hackney Housing Company, which could be used to buy the homes themselves and rent them out at either Hackney Living Rent or at market rates.
The council’s two cross-subsidy sites at Nile Street and Tiger Way have seen different outcomes. Construction completed at Tiger Way in February of 2019, with the Nightingale Primary School operational on site in the same month and all 89 homes sold.
However, at Nile Street, while New Regents College opened on the site in summer of the same year with final construction completed in February 2020, sales of the homes were impacted by the pandemic, according to budget documents, with 86 of the 175 residential units sold.
Proposals to replace Shoreditch’s Britannia Leisure Centre were approved by Glanville’s administration in 2017, with the delivery of the new City of London Academy Shoreditch Park, with 80 affordable homes to be paid for with the sale of 400 private homes.
The Town Hall prioritised building the new leisure centre school and affordable housing first in January 2019, with the vast majority of the private housing (388 of the 400 homes) to be built as part of the project’s second phase. Construction on the first phase is understood to have stayed on budget and on schedule despite the pandemic’s impact on the construction industry.
Phase 2a of the Britannia project, which consists of 81 affordable homes and 12 for private sale, is due to start on site in July 2021 subject to government approval for the use of Shoreditch Park Primary School’s playground, for which the council has worked up a package of compensation including for the loss of playspace and a new early years centre.
Phase 2b has outline planning permission for the scale and principles of development, with 388 homes for sale envisioned to help pay for the new leisure centre, school and more affordable homes.
This year’s budget details just under £237m in council borrowing over four years through till 2023/24, which is primarily expenditure on the Britannia scheme to be funded by the sale of homes, and which in large part will take place post-construction.
The documents note that as income from capital receipts will only come in after construction, there will be a short to medium term borrowing requirement, adding that if actual sales are lower than anticipated or later than expected, funding may need to be financed by “another means.”
Glanville said: “What we did was be really honest with the community and say we did not have £110m to invest in a new leisure centre and school. That is still the case. The letter in the Hackney Gazette suggesting we should back away from that I think is utterly wrong.
“We have to deliver what we have said to residents and planners and raise that funding to make sure we pay back, and then that capital can be used on other projects, which is ultimately what this borough will need over the course of this decade.
“Due consideration continues to be given, through the governance structures already in place, to how the UK’s changing economic position is impacting on key parts of the capital programme as it currently stands.
“Adjustments to plans will be made where it is deemed in the best interests of the borough’s long term financial sustainability.”
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