Minutes:
6.1 Jeff Endean (Housing Programmes and Strategy Team Manager), gave a presentation to the meeting. The key points to note were:
· Lewisham’s Housing Strategy is on track to deliver 500+ new homes in Lewisham by 2018.
· The Council are now looking to intervene in the private rented sector. This will enable them to:
o develop high quality homes
o offer a high quality management service
o offer transparency of costs
o improve security of tenure
o Offer a range of rents including a “living rent”
· Intervening in the private rented sector will also allow them to make the best use of the Council’s land whilst maintaining a long term interest to drive quality; and enable the Council to benefit from rising land values. It will also generate an income stream for the Council while sharing the risks with industry leaders.
· The objective would be to start with large sites where efficiencies highest and able to leverage external investment and share risk
· It will potentially make a surplus for the General Fund – estimated 400,000 per annum minimum.
· In 2011-12 the private rented sector population in Lewisham became larger than the social housing population for the first time since the 1960s. Over half of private rented sector residents in Lewisham are under 34 and more than 85% are under 49. A quarter of households in the private rented sector have dependent children; 84% are economically active and a third claim housing benefit.
· With the national statistics showing that 18% of private rented sector tenants live in poverty before housing costs are taken into account and 38% live in poverty after housing costs, it is prudent to look to intervene in the market as it can add some benefits to residents.
· Research in Lewisham has shown a number of things about renting in the private sector in the borough:
o 28% of tenants in Lewisham are dissatisfied with the quality and condition of their accommodation
o The most common complaints are those relating to damp, leaks and cold and that properties are old and run-down
o Tenants often face high up-front costs: a deposit, rent in advance and agents’ fees
o 22% were considering moving as the cost was too high
o 51% expected their next property to be another private let; 16% hoped to own their own home and 16% hoped to move into social housing
· The private rented sector costs in SE14 (New Cross/Telegraph Hill) have risen 34% in the past two years, so this was chosen as the most logical place to intervene in the private rented sector.
· The proposal is to develop the vacant site in Besson Street. This is in the Telegraph Hill ward; and is 2.5 acre site.
· It was previously a New Cross Gate New Deal for Communities (now the New Cross Gate Trust) site, wholly owned by the Council. The Previous Planning Permission for the site was not built out due to financial reasons.
· The Council objectives on the site are for approximately 230-250 rental homes rental homes.
· The Besson Street development will allow the Council to deliver:
o A brand new doctors surgery and health centre
o New office for the New Cross Gate Trust and community space for everyone
o High quality public realm and open spaces
o Approximately 230 new homes, none of which will be sold
o 35% affordable (80 homes)
o Rent increases that track inflation, not the market
o Rents set to be affordable for lower income workers, where affordable at 35% of net income – ‘Living Rent’
o Fully pepper-potted development. No separate blocks, no “poor doors”, no differential in service levels
· Specifically on rents, the following is proposed:
o Looking at 60% of market rents, rent levels would be:
§ One bed: £175 per week, £700pm
§ Two bed: £226 per week, £960pm
o Living Rent: rent is affordable if it is no more than 35 per cent of net income
· Those who would be eligible for ‘Living Rents’ would include:
o In a one bed, a couple who both earn the national minimum wage
o In a one bed and a two bed, a couple or sharers who both earn the London Living Wage
o In a one bed and a two bed, a household earning the Lewisham median wage
· There are a range of options that the Council could pursue in developing the site, but the preferred option is a ‘joint venture’ with an expert developer.
· It will allow for a 50%-50% ‘partnership’ approach that would recognise the strengths of each partner:
o Public sector (Council): provide the land, place making, community and political leadership
o Private sector (Expert Developer): investment and delivery, risk management and alignment to market
· The council would be looking for an expert developer that could provide the following attributes:
o market leader,
o sound financial backing,
o solid experience of development,
o sound track record and share our instinct for place making,
o ability to deliver range of tenures
o ability to manage and brand the PRS product
· This could potentially lead to more partner developments for future sites subject to agreement by both parties; it will also allow scope to include other investors (pension funds) or delivery agents (major house builders) according to needs of scheme.
· The scheme will cost approximately £8m to build, yielding approximately £3m a year in returns once fully built.
· A report will go to Mayor and Cabinet on 9 December recommending the following:
o Pursue a joint venture as a preferred approach at this stage
o Carry out detailed due diligence to set out preferred model and process to be followed
o Officers will report back to Mayor and Cabinet in February and then launch the process to select a development partner
· Estimated programme time is set out as follows:
o partner on board in spring 2016,
o at planning autumn 2016
o starting on site by the end of 2016.
6.2 In response to questions from the Committee, the following was noted:
· Renters would not be expected to pay additional costs for extra service.
· There is the potential to alter rents on a new lease/contract in relation to income, if there is a significant change during the tenancy.
· Officers have been working with officer from Greenwich Council; they have developments that provide for ‘family-friendly’ floors.
· This development will not affect the Besson Street community gardens.
· Officers are looking into developing an intermediate allocations policy that caters for the private rented sector developments.
· The Besson Street development is primarily looking to attract those residents in Lewisham, who are not eligible for social housing, but are on lower incomes and cannot afford mortgages or are suffer under high rental costs of living in London. This will include those who are generally considered ‘Key Workers’.
· The Council are looking for a developer who has a history of providing developments on a long-term stable investment.
· Officers have been liaising with the Doctor’s surgery, who need to be in a new building by 2017.
· The Council will decide after this initial development whether they want to work with their expert developer again on another ‘joint venture’, or try another type of development.
· Officers will look to talk to a number of other boroughs to seek out experienced developers who they may want to work with on this project.
· The Council has already carried out a lot of the feasibility work for the project, so expect to start the construction of the Besson Street development by the proposed timeframe.
· The Committee were given an undertaking to be invited to similar development openings, as they were not invited to the opening of Ladywell Village.
6.3 RESOLVED: That the Committee note the presentation.