CROYDON COMMENTARY: The scheme to redevelop Fairfield Halls and College Green could cost more than £70m, with Council Tax-payers taking much of the risk, says DAVID WICKENS
Those that study regeneration and city centre proposals will have noticed that there is usually an associated development of flats – mainly two-bedroom ones.
Why is this, one might ask, as they can hardly be classed as family dwellings?
There were many high-rise developments in the post-war era, built to provide cheap public sector housing, that are now being demolished as they were found to be unsuitable for families and difficult to maintain.
Around the Millennium, there seemed to be a growth in numbers of city centre flats, often in converted warehouses and offices. These were high-specification and spacious apartments; they proved popular to the nouveau riche and wealthy professionals.
Croydon Council has a housing problem in that insufficient housing is available for those in need. Prior to the 2008 global financial crash, there were ideas to increase significantly provision of housing in the town and district centres. This is very laudable, but the prices would have been beyond what most existing residents could afford. I did enquire of Council Officers just who was going to buy these flats. I cannot recall any convincing response.
The flat-building craze is resurfacing as we come out of recession. The “Island” (or IYLO) and the Saffron developments are nearing completion, after a pause, and there is a new block in Coulsdon district centre on the former Toyota site. Taberner House is to be replaced with flats, the Nestle building is to be converted to flats, the Chinese have ideas for a skyscraper of mainly flats in Lansdowne Road and the island site development at Purley is intended to be partly funded through high-rise flats. And then there’s Ruskin Square, slowly taking shape beside East Croydon Station.
This is but a sample. Some proposals are mixed developments with retail or offices at lower levels, and some are segregated as regards residents with “poor doors” for social tenants.
What is this obsession with flats?
The answer is not so much about providing housing for the needy, but finance, often to fund the associated development proposals.
Simply speaking, a 75 sq m flat should cost about £115,000 to build. This will increase the higher you go, or for a particularly high spec or more spacious apartment. There is also the land cost, but this is very much reduced per flat for tall buildings. Thus there are a lot of proposals for tall blocks.
Compare this figure to the likely sale cost of a flat in Croydon: some schemes have been offering two-bed apartments “off-plan” – that is, not yet built – for £450,000. That gives a profit of £335,000. Per flat.
So what’s the catch?
Menta have consent for tall blocks in Cherry Orchard Road but don’t seem too keen to proceed. Other sites, including Ruskin Square on the other side of the tracks, are progressing, but only very slowly. Hammersfield – the £1 billion redevelopment of the Whitgift Centre and Centrale to be undertaken by Westfield and Hammerson – includes up to 600 flats, but is already behind programme.
Croydon Council may be about to take a risk in funding the Fairfield Halls and College Green redevelopment proposal based on a business plan that no doubt includes the “two-bedroom flat”. So what is the problem?
One needs to look at “buy-to-let”. Flats have proved to be popular as investments, partly in lieu of the much reduced provision in workplace pension schemes and low-interest rates on investments. Cheap mortgages, even on “buy to let”, also help. Such investments are fine when tenants could pay rents from housing benefits.
But the caps on benefits have burst that bubble, and low wage inflation has affected the private rental market.
Impending interest rate rises could be disastrous for investors. With the base rate at 0.5per cent, the only way is up. That should make investors cautious, particularly as an over-supply of flats – as seems possible in central Croydon – could leave many without tenants and hence no rental income to pay their rising mortgages.
We read that many flats in London are being bought up by foreign investors. That could lead to them being left empty or badly managed by absentee landlords. Where blocks are not fully sold or occupied, they deter buyers. Would you want to risk buying a flat in a block where few are occupied?
Many flats in Croydon will have not been allowed to make provision for parking, on the grounds that there is good public transport. That may suit some, but is hardly realistic. Where will be the town centre schools to educate the children living in the new towers? What about additional open spaces for the predicted rise in population?
The recent council report to the Town Hall cabinet on the redevelopment of College Green and the Fairfield Halls suggests that the council contribution will be just £12 million and that the Halls can finally be refurbished and a new college built from the proceeds of flats and other developments on the existing Croydon College site.
I have not had access to the contents of the Part B report put to the cabinet with the exact costings and budgets. Previously, schemes to redevelop the Fairfield Halls have been projected to cost around £34 million. I suspect that the new College plus the Fairfield redevelopment, including on-costs, is going to come to more than £70 million.
There will have to be considerable up-front expenditure by the council, prior to any income from the development of the college site. Just who is providing loan finance? Inside Croydon‘s loyal reader may recall that for Fisher’s Folly, the council’s vastly over-priced new offices, the council ended up taking on massive debt which was not originally planned. If there are problems in realising the value of the college site for this new scheme,then who is at risk?
There are massive risks and council officials and councillors should be very careful in making decisions that historically are best left to professional developers. Yes, consultants and accountants will advise, but so often there will be caveats that mean they will carry no risk of failure. In contrast to the private sector, it is so easy for the public sector to embark on these developments as they carry no personal liability. It is the tax-payers who will have to bear the risk.
As for the proposals themselves, based on my considerable experience in the construction industry, it looks like total nonsense to me. A planning decision is expected in April 2016 with a start on site in Summer 2016 (subject to agreement – with whom?) with completion in two years. If this is not met, then any borrowing costs will grow.
I see nothing in the programme for detailed design or tendering. This scheme would be subject to EU procurement regulations, all of which take time. Unless the design and tender process is already well-advanced ahead of planning consent, then it will not be possible to make a meaningful start in 2016.
There will be all kinds of advanced works and consents needed, quite apart from securing a construction contractor. There are lead-in times for land acquisition, utilities, traffic and other third-party approval and requirements. One should also factor-in the inevitable disruption to the local highways due to the Hammersfield development and associated road and tram proposals. Commencement in summer 2017 would seem more realistic.
- David Wickens is a former senior Croydon Council official with years of experience of major engineering schemes around the borough, including Tramlink
- Fisher’s Folly council offices cost more to build than The Shard
- Croydon’s ‘MasterPlan’ only makes housing crisis worse
- Croydon has built only 12 council homes in 18 months
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