Haringey “Development Vehicle” #HDV

14 Feb + 19 Feb 2017  The municipality where I live, Haringey, is proposing to pass a large proportion of the landed property it owns (we own) to a 50:50 private company. The plan has been brewing without consultation for some years but surfaced recently through an article in the national press by the great Aditya Chakrabortty and a response by the leader of the council, Claire Kober. I was asked to come to a meeting opposing the sell-off yesterday. A big meeting with 200-300 people: anxious and angry tenants, good analysis, diverse class mix and both Labour and Green parties – perhaps others – as well as non-party people.  My contribution below.

Video of the meeting, notes from Joe Beswick and other material at GreenN8  | Aditya Chakrabortty article | Claire Kober response | Scrutiny Committee report Jan 2017 | Business Case January 2015 | Statement by David Lammy MP 14 Feb | and I’ll add more stuff as it come to hand.

My 5 minutes:

I’m an economist and planner, and now a semi-retired professor at UCL’s Bartlett School of Planning. My comments draw mainly on my experience in supporting community groups negotiating with developers and councils at King’s Cross over 25 years and on the decade of experience across London in the JustSpace.org.uk network of community groups.

One of the big issues Just Space organisations have been battling ever since the GLA was created is the weakness of the Opportunity Areas policies in London – the policies for the main areas where large scale development is planned. There are 38 such areas and rarely any effective participation by residents or businesses in the formulation or execution of plans. These often emerge as cosy deals between developers, compliant borough councils and the Mayor’s office. The outcomes tend to be deeply inadequate provision of social housing, major displacement of low- and middle-income people living in and around the Opportunity Areas and of industrial and service businesses.

The Upper Lea Valley, within which lies most of Tottenham, is one of these and we can see the democratic deficit powerfully displayed in this HDV proposal, smuggled in with no effective consultation. (I’ve been a Haringey resident for many years, receive regular emails and glossy magazines from the council but heard nothing about the HDV until now. Even in the Borough Local Plan documents which I have plodded through I do not believe there is a reference to the HDV.) It seems that Haringey has learned nothing from the famous Supreme Court judgment against it of October 2014 which ruled that consultation is valid only if these conditions are met:

  • Consultation takes place at formative stage
  • Sufficient reasons are given, allowing intelligent consideration
  • Adequate time is allowed for consideration and response
  • Responses are conscientiously taken into account
  • “arguable yet discarded options” are set out with the reasons for the choice of preferred option.

The present proposal is in many ways the opposite of what would be sensible. We are in a period of great uncertainty. Planning and housing law changes frequently, governments in the coming decades might be much more to the left – and thus supportive of Council development— or even more to the right and thus finding ways to frustrate even the optimistic aspirations of the HDV. Interest rates could escalate to more ‘normal’ levels, thus further postponing Haringey council’s expectations of their 50% share of profits remaining after all costs are covered and debt repaid.

In these conditions of uncertainty it is rational, surely, to sacrifice as little as possible, preserving freedom of maneuver for better or even worse times to come.

Community organisations at King’s Cross urged Camden to do its deal with Argent phase by phase but the council refused and signed a single agreement for the whole scheme under the laws and policies obtaining in 2006. After the fall of the Labour government and the withdrawal of government subsidy for social housing, Argent were able to exercise a clause in their agreement to lower their social housing percentage. Prices realised in private market sales of flats in the scheme have of course escalated mightily since 2006 so the developer could well have afforded to maintain their original undertakings from their increased profit. But the contract had been signed in 2006 and could not be re-calculated. Argent argued, quite ‘correctly’, that their responsibility to shareholders, including pension funds, obliged them to do their best for profitability.

The rational course now is for Haringey to put the whole scheme on ice and do a grown-up and open public consultation on a variety of options. The consultation must include cash flow forecasts to deal with suspicions that the HDV proposal has Haringey giving up all its assets at the outset and gains no profit share until after the IP has enjoyed years or decades of profitable operations. The options must include:

A “do nothing” scheme in which businesses can continue to operate and tenant households to remain in situ, their homes remaining in the Housing Revenue Account while leaseholders remain under council freeholds. This is “battening down the hatches” hoping for a more benign policy environment to come. Since “estate regeneration” under current practices leads to a reduction in social housing, this could well be the best strategy for maximising social housing (London Assembly Housing Committee report Feb 2015 Fig 2).

Setting up a wholly-owned development company, as Croydon and now Hounslow have done, or one with a clear majority Council control. A tolerably good model for this is the Société d’économie mixte used all over France in which public bodies must have between 51% and 85% ownership and control.

They should also compare these schemes with a Mayoral Development Corporation. Just Space is very critical of the inadequate democracy embodied in the 2 MDCs established so far (at the Olympic Park and Old Oak Common) but they at least have clear public accountability, prepare local plans which are subject to examination in public and have planning committees open to the public – not to mention access to City Hall funding. So compared with today’s HDV proposal they are much more democratic.

Note: Supreme Court endorsed basic requirements in its Moseley case judgement 29 Oct 2014  http://www.bailii.org/uk/cases/UKSC/2014/56.html  Commentaries at http://www.out-law.com http://www.bdb-law.co.uk ….  R (on the application of Moseley (in substitution of Stirling Deceased)) (AP) (Appellant) 
v
 London Borough of Haringey(Respondent)

Added 19 Feb:  Close reading of the tory government’s recent Housing White Paper by the eagle eyed Joe Halewood points out that the Right to Buy would be extended to all sub-market rental housing (“affordable” as well as social) and to arms length housing companies as well. He wrote on the day the White Paper came out and again today.  He concludes “Hence there is never any chance ever that councils or ALMOs will ever build for social rent and hence all councils will become private landlords.”  Do read it.

There are many examples of this government forgetting to implement some of its more ludicrous or controversial ideas but we should assume the worst. And it reinforces my view —above— that “doing nothing” might be the best course of action for Haringey, or at least it merits careful evaluation against various possible futures.

Joe Beswick writes:  Your point about profits is interesting. A couple of things strike me.

I) a number of the partner offers were a coalition between finance and a housing association, but the council went for LendLease alone.  One of the reasons for this may be because the others were going to give management fees to the housing association, whereas LendLease will contract the council for management – potentially increasing council ‘profits’. The flipside of this is that this, if costly, may in reality put pressure on the HRA, and draw on funds which should be used for the council’s own stock. (This has happened in another borough, whereby these privatised properties are ultimately managed within the HRA.)
ii)  Someone at the meeting mentioned to me that they thought that LendLease are not actually going to contribute their own capital – instead they will just borrow against the properties to make up their contribution. I do not know if this is true, but if so it seems completely outrageous – especially if the costs of that borrowing are paid before profits are divided. And even if not, they would be using (part) public land to secure entirely private loans.
The need to see detailed breakdown of the funding and finances, a cash flow and detailed business plan are clearly massive.   Joe
(M.E. comment:  On both these important points Haringey Council must have the draft contracts or equivalent documents which answer these questions. Without these answers no evaluation of the project is possible, no.)