Ship Street – no return on investment for 40 – 60 years
In 2017, the council admitted their “proposal to purchase the land at Ship Street, is not one that will generate a substantial commercial return for the Council and there is a risk that there could be a degree of loss.“
Ship Street – Folkestone, is not a viable site, hence why no developer has ever chosen to purchase it, and build it out.
In Apr 2021, the Council purchased the 1.54 hectare site for £400,000.
Ship Street – Folkestone – Google My Maps
Brownfield Site owned by FHDC who wish to place up to 200 homes on site
Developers have been reluctant to purchase & develop the site due to the levels of contamination and remediation the site requires, this would chew into the viability levels of the site and not produce the financial returns they are used to.
But now the council believe with a £3.55m funding package from the Brownfield Land Release Fund, for remediation of the contaminated former gas site, they believe they could “generate a break even financial outcome“
The total scheme cost estimate is £41 – £43m. The expected income the Council could generate from selling 150 finished homes and 4 commercial units is between £36 – £40m, so making a small loss.
The site is allocated for residential development in the local plan with an estimated capacity of 100 dwellings. And below is the first idea they had to accommodate up to 91 homes on the site; which would produce a significant loss and not attract any developer to enter into a joint venture arrangement with the Council.
Council officers have had discussions with a number of Property Developers and Partnership development businesses (six in total) in order to gauge interest in a Joint Venture arrangement regarding the Ship Street Site.
Four have expressed an interest in partnering with the council. However, all the parties set out conditions before they would consider entering into any Joint Venture arrangement with the Council. These were:
The land to be remediated ready for development or the Council to take
financial and legal responsibility for resolving this.
The site to have a value, or at least not a negative value, when considered
in development terms.
Ideally the scheme to have a sufficient number of market sale homes
circa 100+ in order to make their involvement and investment worthwhile from a return on capital perspective.
So given what the four potential developers stated the Council have now increased the numbers of homes for the site to circa 150 – 200 homes according to a briefing given to the Overview & Scrutiny Committee on the 6 Sept 2022.
However, in Report Number C/22/38 to go before Cabinet on the 21 Sept 2022, the number of homes has shrunk slightly to circa 150 to 175 homes for the site.
The Cabinet report sets out four scenarios which according to financial modelling produces at least a break even financial outcome, assuming they are successful in their bid for £3.55m of remediation funding and housing grant funding. The payback period on each of the scenarios below is between 40 and 60 years.
There are conditions attached to the £3.55m remediation funding, plus if the council push for more than the policy compliant 22% affordable housing, then the number of market homes reduces further, making it unviable and less profitable for the council and any developer who might partner with them in building out the site.
The Council could go it alone, but this too brings its own risks. That said it would allow them to retain full design and total control of the development.
It’s clear Ship Street needs to be developed as it is a blot on the landscape. It’s clear it is not a site which is going to bring financial rewards beyond the dreams of avarice. But one has to ask oneself, what is more important, houses which are affordable for locals on a site which has laid empty for the last fifty years, or making a small potential loss. Not an easy decision when you take into account the Council’s responsibility for obtaining value for money.
Whatever Cabinet choose on the 21st Sept, it means we’ll see no return on this site for between 40-60 years as the report states.
The Shepway Vox Team
Dissent is NOT a Crime
No one can rationally claim ‘no loss’ if the opportunity cost of that money is not deducted first.
Why should the council always have to break even or make a profit? Surely their money is our money and should be invested in our community to improve our home town and make our community better and stronger and more supportive of us residents.
The ownership should be entirely kept by the council, and the whole site should be council housing, rented out at a social rent.
The problem is restrictions and lack of funding from central government prevent community building, encourage only commerce and big profiteering development corporations.