Planning Application Y12/0897/SH, Folkestone Kent.

Charity is the proverbial gift of a fish to a hungry person

Philanthropy is teaching them how to fish

Developers such as the local philanthropist Sir Roger De Haan often describe themselves as “Place Makers” & creators of “sustainable communities” in the beguiling language deployed by the industry.

Sir Roger De Haan money-making plan, is, as you may know to try and make Folkestone ‘cool’. He bought the Folkestone Harbour & Former Rotunda amusement park and is redeveloping the seafront with 1000 homes, restaurants and shops.

In 2014 Shortlist Magazine reckoned that Folkestone was the 5th coolest place to live in the UK. At Folkestone Central there is a poster which reminds all and sundry of this fact nearly 3 years on.

In 2014 Sir Roger’s philanthropy produced rewards beyond the feel good factor. Accounts filed at companies house show the value of his Folkestone Property portfolio had risen £11.3 million

In his bid to build his ‘phased development’, Sir Roger will be building 8% affordable housing. In 2012 a letter written by Savills (for and on behalf of Sir Roger) and accompanying the viability report states:

the seafront development site could support between ‘5% & 7.5% of the units to be provided as affordable rented units.‘

Shepway District Council’s (SDC) Policy HO4 requires all developments of 15 dwellings or more (or over 0.5ha in area) to provide 30% affordable housing. So why a drop of 22% on the seafront development?

In the cut throat land development industry a company’s profit margin substantially improves if more units can be crammed onto a site.

First however, there is a hurdle to overcome – the planning system. As a condition of securing planning consent, developers such as Sir Roger are required to meet a local affordable housing target. In Shepway as we have said, that target is 30%.

A combination of Former Chancellor George Osborne’s huge housing grant cuts and the house price boom means there is now little if any incentive for developers like Sir Roger to build affordable homes.

It has reached the point that many developers like Sir Roger see affordable housing as a cost they need to control and reduce. In this present market, he’d be stupid not to.

Luckily for Sir Roger, the planning system provides a helpful escape valve: the affordable housing target is NOT A LEGALLY ENFORCEABLE MECHANISM. It serves merely as guidance. It is trumped by national policy. This states that if a developer can prove building affordable homes makes a residential scheme financially unviable, the local authority’s target for low cost homes can be waived or reduced.

In the letter to Ben Gering Major Projects Officer for SDC, from Savills for an on behalf of Sir Roger, Savills remind SDC that ‘provision of affordable housing on individual sites will be subject to negotiation’

So as it is not a legally enforceable mechanism, Sir Roger can legitimately not build 30% affordable housing but 8% instead on his phased seafront development.

Developer’s such as Sir Roger use what is known as a financial viability assessments to prove a local authority’s affordable housing target makes their scheme uneconomic. The assessment lays bare to council officers the economics of the project – so long as the figures given for and on behalf of Sir Roger, by Savills are accurate. According to independent experts who scrutinise the figures, often they are not.

The assessment works by subtracting a scheme’s projected cost, including 20% profit for the developer, from its potential revenue based on current property values.

The resulting figure is called the ‘residual land value’. If there is hardly any difference between a sites residual land value and its current value, developers argue it does not make sense to build the scheme – unless affordable provision is reduced. So assumptions on costs and revenues become critically important in assessing a scheme’s viability.

In the letter to Ben Gering Major Projects Officer SDC from Savills on the 26th Sept 2012 it states:

‘The residual development value … varies from £239 million pounds to £253 million pounds (2012 values). This development value relies upon the devlopment being built in phases as indicated on illustrative phasing plan submitted with the application and also upon a certain level of growth sales values over the development … over an estimated timeframe for the development of 20 years.‘

Savills go onto say:

‘This is an unusual site which attracts significant headline costs in order to provide the infrastructure required‘

and the costs for developing the site are £194,388,483.

With these figures presented 4 years ago, Sir Roger’s percentage of profit ranged between 18.4%  (£45 million) to 23.3% (£59 million). What is the residual development value in 2016? Higher?

So in the end Sir Roger has set aside 80 homes from the 1000 intended to be built on the seafront development in Folkestone. SDC readily admit there is a ‘Significant need for affordable housing in Shepway‘ but there is little they could do, apart from taking legal action and spending taxpayers money on a case that there would be no certainty of winning, against a developer with deep pockets.

What is happening here in Folkestone is a story replicated across the district, the county and much of England: the death of affordable housing by thousands of cuts.

Developers profits across South East England are going through the roof. Bulging profits for the land development industry sit uneasily amid a deeping national housing crisis where what is needed above all else are decent, genuinely affordable homes.

In a town lucky enough to have a philanthropist such as Sir Roger De Haan are 80 ‘affordable homes’ on his 20 year phased development a truly viable state of affairs in 21st century Folkestone? We’ll leave you to decide that.

Shepwayvox

All quotes taken from: viability assessment seafrontobj