The Haringey Development Vehicle – A £2 Billion Gamble with public assets

Doug Thorpe from Haringey Left Unity writes:

In July 2017 Haringey Council is proposing to sign a contract to hand over its land, property, and buildings including much of its Council Housing to a private company created jointly with private development company LendLease. The Council and LendLease will each own and control 50% of the company.

Councils have a genuine problem with providing housing. The Right to Buy has led to the selling off of much of the existing housing stock. Cuts in funding, restrictions on the use of money from the sales, and government caps on the amount councils can borrow has all but stopped any new council house building, and restricted the money available to refurbish estates falling into disrepair.

For the Tories this is a deliberate strategy to eradicate social housing. But 13 years of Labour Government also failed to reverse this process, or even to try. Instead, what funding there was, was channelled towards Housing Associations. These are increasingly moving towards the private sector. The majority of Labour Councillors in areas such as Haringey have either embraced the mythology of a third way, where private developers work jointly with local authorities on public projects. (PFI anyone?) Or, they are so demoralised they see no alternative to the market.

HDV

The significance of the Haringey plan is its vast scale – £2billion of public assets being handed over – and the loss of control over the venture. The ownership will be 50:50. No other Council has risked a local development venture on this scale. It is wholesale privatisation of the Council’s housing and public assets. If it goes ahead it may provide a model for the abandonment of Council housing in other areas, particularly other London Boroughs.

The principal is that the Council will put land and property assets into the deal –17 housing Estates (including large estates Northumberland Park and Broadwater Farm), Schools, Health Facilities, Library, and 500 commercial properties. The private partner will match that with finance and “expertise”. In theory they will share the profits and risks equally. The idea is that 50:50 control will create a ‘deadlock’ in decision making if the partners cannot agree, preventing the private developer making decisions the Council disagrees with. The Council hopes to develop new ‘affordable’ housing and to share in profits that can be ploughed back into Council services. The practice: on housing, profits, risks, and control is likely to be very different.

This is a transfer of public and community assets built up over generations into the private sector – the property, including any new development will be owned by the HDV not the Council. It will be private property.

All the details about how the ‘sharing’ will work have been kept secret (Commercially ‘privileged’ under the tendering process). We do not know how the Council’s property has been valued. You would think that the Council would want to maximise the valuation of its assets, so LendLease would have to match that with finance. but the the Council fears a high valuation would scare LendLease off. So they are likely to be selling the community short. For instance Northumberland Park Estate has been valued at minus 15 Million (ie the Council effectively will be paying the developer £15 million to take the estate!)

The Council says 40% of new properties will be “affordable”. But that includes “affordable” properties for sale. “Affordable” rental properties will be a much lower proportion, maybe 25%. In reality, experience shows that private developers eventually deliver much lower levels of “affordable” housing than the original plan. They argue the development needs to be viable. In planning terms this means the developer is entitled to take at least 20% profit from the development before passing any on to the Council. They will also use this requirement to ratchet down the amount of social housing well below the current targets. Most of the new build will be private housing for sale at market value.

“Affordability”

“Affordable” housing is itself a misnomer. It can mean up to 80% of market rent or property sale value. Local Housing Allowance average rentvaluations for Tottenham are £255.34pw for a two bed flat, £315.12pw for a 3 Bed – 80% of these is £204.72pw & £252.09 respectively, actual market rents are higher. The Council may ‘try’ to offer lower rents – but this shows what could be considered ‘affordable’. Worse however than this, the whole profitability of the venture is based on development forcing up property and rental prices in the area still higher. So the eventual ‘affordable’ levels will need to be even higher, or the project faces losses.Existing Council tenants are not guaranteed that they can return on the same rent and security of tenancy. The Council only says it will make best efforts to ensure this. But if it means what it says, it could write this into the contract with LendLease. The reason it won’t, is it knows the need to make profits will be the driving force in the project, and LendLease will not agree “guarantees” that would restrict its ability to make those profits at the expense of any other consideration.

Risk

The risk is huge. Post Brexit, and with London property ‘overheating’ slowing down, a continuing rise in property prices along the lines of recent years is not sustainable. The projections for this have not been audited. The Council’s own Scrutiny Committee recommended further evaluation. But the Cabinet ignored this. If the venture fails, 50% of the losses would have to be paid by Haringey Council Tax payers. Croydon Council Urban Regeneration Vehicle (CCURV) was a similar 50:50 project expected to be about half the size of Haringey’s. But Croydon has backed off from the agreement and is instead using its own housing company for current development. A smaller 50:50 Joint Venture by Tunbridge Wells with John Laing collapsed after 4 years with Council Tax payers having to pick up the debt.

So if the plan works, working class residents won’t be able to afford the new housing; and if it fails, the people of Haringey will be saddled with an unpayable debt. A two Billion Pound Gamble where the existing working class community loses, whatever the outcome.

To add insult to injury, the Council has just confirmed its preferred development partner is LendLease. A simple Google search reveals LendLease to be embroiled in corruption cases in Australia & New York. One of its other London developments is at Elephant & Castle – the former Heygate Estate, perhaps THE classic example of social cleansing and dispersal of the community. LendLease has a history of blacklisting unionised building workers. It claims this was only related to Bovis, a company it swallowed up. But there are more recent reports of LendLease itself using the blacklist.

Democratic deficit

There has been no meaningful consultation. The Council claims it has consulted through planning and strategy consultations. This buries the question in much larger documents. Effectively what emerges is that residents were asked whether they wanted better housing. Of course they want better housing, better spaces. But nowhere have residents been consulted on demolishing their estates and moving them to a private company.

There has been no ballot of tenants. Even the Council decisions are being made by the smaller Cabinet. The HDV has never been put to the full Council.

The proposed control structure for the HDV is a board of 3 from LendLease; and on the Council side: only one elected councillor + 2 Council officers. This is supposed to provide a ‘deadlock’ where neither partner can make a decision without the other’s agreement. But few believe that the Council representatives will be able to match the expertise and legal resources LendLease will have to argue their case, and ensure it skims off the profits it wants to ensure the ‘viability’ of the project.

One of the main campaigning demands against the HDV is for a ballot of all tenants and leaseholders before any estate is put into the scheme, or scheduled for demolition.

Residents

Existing Council tenants will be offered Council tenancies somewhere else in the borough away from their existing community. Even if a right to return is offered, by the time new properties are built the tenants will have put down roots elsewhere. The new rents are likely to be prohibitive. Experience from the Heygate Estate in Southwark was that of 1200 tenants with a ‘right to return’ only 46 did so. The rest were dispersed around the borough or moved away.

Compensation for leaseholders will not be enough to buy one of the new flats, or anything comparable in the area. Private tenants renting on the estates will have no rights and will be made homeless.

The scheme is based on forcing up property prices and rents, meaning even working class private sector renters will be forced out of the area. The Council’s own Equalities assessment says that most black residents will need to ‘get better jobs’ if they hope to remain in the area.

The existing Council tenants needing to be rehoused on other estates will take up all the available vacant properties for years. This will further reduce properties available for housing homeless applicants or those on the housing register. Homeless families will increasingly be exported to temporary accommodation outside London, away from their support networks. Even when new housing is eventually built, it will be beyond the financial reach of homeless applicants.

The plan amounts to social cleansing on a massive scale.

Opposition

A broad based campaign against the HDV has formed that Left Unity is part of. Called ‘The Two Billion Pound Gamble’ it has united tenants, both Constituency Labour Parties, a third of Labour Councillors, Momentum, Trade Unions, the Green Party, housing campaigns and Resident and Leaseholder organisations against the scheme.

10 Labour Councillors who signed a call in of the scheme to the Council’s Scrutiny Committee have been threatened with disciplinary action by the Labour Group leadership. Both local MPs (Catherine West and David Lammy) have expressed concerns.

The campaign has organised several lobbies of the Council and a march, Public Meetings in the areas affected, door-to-door and tube station leafleting and street stalls. It is putting out information about the HDV that the Council has tried to hide, or lied about. Increasingly tenants and residents are joining the campaign.

The District Auditor has been contacted and is launching an investigation into the financing of the scheme. Applications for Judicial review of the Council’s decision making process are being lodged, and the barrister advising judges these to have a good prospect of success.

But all this takes money, an estimated £25,000 for the legal cases alone. The campaign is seeking donations to this JustGiving Crowdfunding Page to help make the legal challenge happen:https://www.justgiving.com/crowdfunding/Haringey-2bn-gamble?utm_id=2&utm_term=y6QAPnqnG

The campaign is organising more events, including public meetings on 18 and 25 April and a May Day event. Details of these and other campaign actions can be found on the 2 Billion Pound Gamble facebook page https://www.facebook.com/2billionpoundgamble/

The Haringey HDV has drastic implications for council housing in other areas, particularly across London. Any assistance that can be given in fighting it, either in people’s time or money, will help defeat it.