Newman’s £18m ‘cast-iron guarantee’ that bucks the market

WALTER CRONXITE on how a Labour-run council that says it is committed to housing the homeless meanwhile needs to maximise profits from a property development at College Green

The people of Croydon should be worried.

Housing genericTony Newman has offered what he called “a cast-iron guarantee” over funding for the re-fitting of the Fairfield Halls.

Newman, the leader of the Labour-run council, is fond of using the word “ambitious”. He has yet to embrace the meaning of the word “delivery”, which could be cause for worry in respect of the council paying the £30million costs of the works proposed for Croydon’s much-loved arts venue.

Newman’s guarantee involves raising more than half the costs of the Halls’ refitting through the sale of homes around College Green, just at a time when the sale price of new builds in London are having to be discounted by 10 to 15 per cent and property market experts are warning that we are “on the cusp of a bit of shittiness”.

The council has £12 million set aside for the long overdue refurbishment of the Fairfield Halls. The remaining £18 million must come from the council adopting the role of property developer in the sale of perhaps as many as 2,000 flats… sorry, “luxury executive apartments”, on the adjoining College Green site.

Newman was questioned on this matter at a meeting in the council chamber last month, which was when he uttered the words which could fill any ratepayers with dread. “I give a cast-iron guarantee,” Newman said.

It is impossible to discover quite what information Newman has received to be able to offer such a confident promise. It’s fair to assume he’s had some discussion with council executive officials, people such as the increasingly powerful Jo Negrini, who is driving forward the “Cultural Quarter” development, or her deputy Colm Lacey, who has recently been installed as chief executive of the private housing company, Brick by Brick.

The council's latest images of how the College Green development might look, with a new college building and several tower blocks of flats, which Tony Newman says will generate £18m in profits to pay towards the Halls refurbishment

How College Green might look, with a new college building and several blocks of flats, which Tony Newman says will generate £18m in profits to pay towards Fairfield Halls refurbishment

Negrini and Lacey last month attended the annual “Booze and Hookerfest” at MIPIM, the property speculators’ conference in the South of France. There, even among the developers, the general mood about the property market was on the gloomy side. Maybe Negrini and Lacey didn’t share that bit with Newman?

According to Richard Waite, the senior news reporter at the Architects’ Journal, there was “… a confident showing from the London boroughs, with Croydon’s efforts again among the more progressive and design-focused of the capital’s authorities”.

This, no doubt, tied-in with Lacey’s Brick by Brick announcement that they had found it necessary to hire seven different firms of architects for the council’s £250-million-worth of house building.

According to Waite’s report, the mood at MIPIM turned dark after Chancellor Gideon Osborne’s Budget announcement, and his downgrading of (his own) growth predictions. “Talk turned to whether the property ‘market had topped’ and, if so, to what extent there would be a ‘rebalancing’ of the economy.

“‘Yes, we are on the cusp of a bit of shittiness,’ agreed a partygoer,” Waite wrote.

Waite outlined the various factors which are influencing whether developers are actually going ahead with multi-million-pound deals: uncertainty over Britain’s EU status (“Architects spoke of projects being put on hold until the referendum”); the Chinese slowdown; global instability.

“The super high-end luxury apartment market, which had been filling the coffers of the capital’s developers, was –temporarily at least – super cooled. Figures emerged showing that lending to UK property developers had halved since 2014, down from £34billion two years ago.”

Senior council official Jo Negrini: building something, just not houses

Jo Negrini: council executive who is driving force behind the College Green speculative development

None of this is good news for Croydon Council, the Fairfield Halls or Tony Newman and his “cast-iron guarantee” of making £18 million-worth of profit from the sale of flats. Remember, the College Green scheme is likely to become available after thousands of other flats on the Hammersfield site, at Ruskin Square, along Wellesley Road and elsewhere in central Croydon have soaked up some of the demand from investors at the pricier end of the market. The basic rules of Supply and Demand still apply in property, even in Croydon.

Waite did, though, find a chink of cheerfulness as the champagne glasses clinked in Cannes: “While the current nervousness was deterring the quick-hit, yield-hungry, buy-then-flip fly-by-nights, the mood was much more buoyant among those with longer-term goals – such as the billion-pound pension funds.

“As one source said: ‘How you see things depends on your end game. There is a state of flux, which is being felt more by those with a shorter term vision’.”

As ever when the housing market appears to be on the brink of collapse, there are mixed messages. The next official statistics on national house prices come out tomorrow. This is the monthly index based on national mortgage completion data. It will be the first since tax changes were introduced on buy-to-let – there was a rush to get deals done before the end of the financial year.

Property market sources suggest that there may be some more encouraging trends for Newman, Negrini and the council, as they embark on their “Son of CCURV” property development wheeze. The fear of Brexit is driving down prices in central London, but the prospect of Crossrail opening in 2019 may be making outer London homes more valuable, even in non-Crossrail Croydon, where the average house price rose 15per cent in the past 12 months.

That’s fine for those who already own property in the borough, or the speculators who may have bought office-to-resi conversions with the intention of renting the up-graded rabbit hutches for £1,500-plus per month. But it’s of no help to those nurses, teachers and other essential service workers and their families, who need to provide a roof over the head of their children and yet still be able to afford to eat.

Last week, in a letter to the Evening Boris – oh, the irony: a newspaper which makes much of its money from flogging ads to estate agents who are flogging the over-priced properties which have done much to create the capital’s housing crisis – more than 50 business leaders warned of the threat to their interests of ever-rising house prices.

“If not addressed, whole sectors, including our world-beating technology sector and creative industries, will struggle to recruit and retain staff and find themselves losing out to international competitors,” they said. And not before time.

Also last week, the Croydon Guardian carried an interview with a demoralised twentysomething, who was caught in the housing trap, living with his mum and dad in Purley and saving furiously but unable to reach the first rung of the housing ladder, now or possibly ever.

Council leader Tony Newman: the "saviour" of the South End Food Festival, with £20,000 of tax-payers' money

Tony Newman: profiting from housing is a problem when you have 3,000 homeless families on the council housing list

“It is hard to catch up. If you are saving now, can you actually save enough as house prices rise? I would say that’s rarely the case,” said Alex Parsons, who is Croydon’s representative for Generation Rent, the housing campaign group.

“The responsible thing to do should be to try and save up and buy a place but the dream just seems so out of reach. Roughly speaking it is bad for people in my position or similar positions because it isn’t going to be a temporary thing. If it has gone up this year it is probably going to go up next year as well.”

Even finding somewhere that you can afford to rent in Croydon is proving impossible for growing numbers of people.

As at February this year, Croydon had 3,125 homeless families living in temporary accommodation. Nearly one-third of those had been waiting for a home for three to five years, and 237 had been on the list for five to 10 years.

And there are 92 Croydon families who have been waiting to be housed for more than a decade.

Just to be able to rent a home in the private sector today someone would need more than £2,000 – to cover the first month’s rent and a deposit, based on a London Labour calculation that the average monthly rent in Croydon is now £1,025.

Therein lies the dilemma for Tony “cast-iron guarantee” Newman and his £18 million funding target for the Fairfield Halls, and the flaw in his speculative “strategy”.

Croydon Labour is committed to building more homes – around 700 through Brick by Brick by 2019 – and it promises to ensure that half of these properties should be “affordable”. That is where the word “affordable” is misused to mean at a price or rent set at 80 per cent of market levels, which in Croydon therefore means £800 rent per month.

And even if all 700 new homes were available tomorrow, that would provide housing for fewer than one-third on the council’s waiting list.

As with all local authorities over the last 30 years, Thatcherite “right to buy” policies have deterred and even prevented councils from building enough homes. In the first 18 months of the present Labour administration in Croydon, they built 12 new homes. This year, another 74 have so far become available.

There is a need for many more, and at rents well below what the market “demands”, or what is arbitrarily determined to be “affordable”.

Yet if Newman and his Labour-run council delivered such social housing as part of the College Green and Fairfield Halls redevelopment, they would be unlikely to achieve the profit margins they need to raise the £18 million to pay for the arts venue refurbishment.

And all this in a housing market “on the cusp of a bit of shittness”.

Good luck with that cast-iron guarantee, councillor.

About insidecroydon

News, views and analysis about the people of Croydon, their lives and political times in the diverse and most-populated borough in London. Based in Croydon and edited by Steven Downes. To contact us, please email
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