BARRATT HOLMES, our housing correspondent, reports on how the council’s casino economics may have forced Brick by Brick to consider some sharp practice
Sources within the property business in south London suggest that the Fairfield Homes proposals being rushed through the council’s planning committee on Thursday may have already been touted to other developers, offering it for sale with planning permission granted. One describes the ploy as Brick by Brick “cashing in their chips” on a scheme that they can no longer afford to develop themselves.
The multi-million-pound project is a long-delayed scheme from Brick by Brick, who had to reconfigure their plans for the area between the Fairfield Halls and the London-to-Brighton railway after they failed to secure the purchase of a building from Croydon College.
Brick by Brick is the council-owned, loss-making housebuilder who, despite borrowing £260million-plus from Croydon Council, has managed to deliver just three purpose-built council homes in five years.
Failing to sell significant volumes of the homes they have built appears to have caused a mismatch between the company’s cash income and the money required to develop a large site such as at Fairfield. The Fairfield site also presents significant development problems, squeezed in next to one of the country’s busiest railway lines.
According to industry sources, construction projects adjacent to important transport links would usually be expected to provide infrastructure protection – in this case, effectively insuring Network Rail against the risk of an accident or damage caused to the Brighton mainline. Such protection can cost tens, if not hundreds, of millions of pounds.
“Given where we are today, with Brick by Brick’s existing borrowing and their poor sales, I very much doubt whether they can afford the build package for Fairfield Homes,” a source close to the matter told Inside Croydon.
“But if they have a site with planning permission that they can sell on, it would represent a quick-fix for some of their apparent difficulties,” the source said.
“The council’s gone in for casino economics by getting into the development business, and this would see Brick by Brick cashing in some of their chips.”
The scheme submitted to the council planning department has seen Brick by Brick double the number of housing units that they had originally intended to build, to 421. Yet only 69 of these homes are intended to be “affordable” – that’s 16 per cent, when Brick by Brick has a target of delivering 50 per cent affordable homes across all its new builds around the borough.
Having planning permission for such a large scheme with such a small proportion of affordable housing might appear attractive to some larger, better-run developers, who would usually have to include 35 per cent affordable homes in their London schemes.
The Fairfield Homes project has been valued as being worth between £120million and £180million – though all estimates are likely to undergo serious revaluation following the impact of the coronavirus lockdown on the economy.
What will not change any time soon is Brick by Brick’s need to generate some serious income, and quickly, and not from further loans from the council.
Revenues from the Fairfield Homes project were always supposed to cover the cost of refurbishment of the nearby Fairfield Halls, which Brick by Brick eventually delivered 15 months late and costing at least £43million – busting the budget by nearly 50 per cent.
The Fairfield Homes site may have been included on a list being circulated between London property agents in the past fortnight. It is being offered effectively with planning permission even before the council – Brick by Brick’s owners – have granted it planning permission. This may appear to be sharp business practice.
For a site to have planning permission, of course, usually provides an uplift in its value, sometimes worth many millions.
Certainly, Colm Lacey, the former council employee who was over-promoted to become the rookie chief exec of Brick by Brick, has been asked about the presence of the Croydon site on the developers’ list. He did not respond.
“There’s nothing unusual about land lists and it’s the means canny developers use to parcel development sites or book-end existing and proposed developments,” an industry source told Inside Croydon. “That’s what cut-throat property developers do, but until now, its been precisely what Brick by Brick doesn’t do.”
The source says that the list shows the land as being described as being in central Croydon and able to deliver “circa 500 residential units”, plus some commercial space.
“A typical mid-size development, yes, but it goes on to list expected developer financial obligations such as carbon offsetting and TfL contributions. You don’t normally know these figures until a planning application is at an advanced state.
“Is Colm Lacey trying to flog off the Croydon College site before he’s even got planning consent? Or is he making enquiries about selling it after consent? Is the council CEO Jo Negrini in on this too?
“This really ought to be raised as an urgent matter of business before the committee considers the proposals on Thursday.
“We’ve been talking about the changing nature of planning leading to the ‘marketisation’ of planning processes and ‘… indirect, even disingenuous, treatment of financial matters’. Has Brick by Brick taken this to a whole new level?
“If Bríck by Brick are using BLV, or Benchmark Land Value, to deal in their questionable developments pre-planning, in the knowledge that Paul Scott and his lackeys will wave it through with a planning permission – that’s a challenging matter for Croydon residents.”
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