Southwark Council cuts number of affordable homes planned for 'at risk' regeneration scheme » Housing » 24dash.com

Southwark Council has taken the almost unprecedented step of reducing the amount of affordable housing earmarked for a major regeneration site in an attempt to kick-start development and ensure the scheme isn't 'mothballed'.

In the face of the economic downturn, pragmatic Southwark Planning Committee has approved a variation to a Section 106 Agreement, to reduce the affordable housing requirement and facilitate development at Larnaca Works in the Bermondsey Spa Regeneration Area.

The scheme gained its original planning consent in June 2007 for 90 residential units, including a policy compliant 35% affordable housing.

According to the Development Control Report presented to the Planning Committee on November 4, the adoption of a revised affordable housing SPD means that the vouncil is now able to review schemes on a case by case basis, for the inclusion of Social Housing Grant, where development viability is an issue.

Knight Frank compiled the financial viability report to demonstrate that in the current market, only 25.6% affordable housing could be supported on this scheme at Lanarca Works.

The Head of Regeneration, Gary Rice, accepted the Three Dragon’s appraisal to recommend this level of affordable housing for approval to the Planning Committee.

The downturn in the market has resulted in a reduction in the developer’s subsidy available for the scheme, and resulted in two principal changes:

1. The intermediate housing has reverted to private housing, as the mortgage lending market has contracted for new, low cost, intermediate home ownership products.
2. Social Housing Grant has been introduced to the social rented homes, so that the overall social rented provision can be maintained.

In order to protect their position, Southwark has insisted on a clause in the Section 106 Agreement, requiring the developer start on site within six months.

This is to encourage development to be forthcoming in a difficult market, juxtaposed with the avoidance of developers maximising on less stringent planning consents, in the event of future market recovery.

Sue Cocking, head of affordable housing for Knight Frank, said: “This is the most significant switch in the development sector we have seen for some time, and underlines how developers are having to consider ‘rebalancing’ the economics of their schemes in order for them to be viable in the current economic climate.

"The Mayoral policy which has targeted the delivery of 50% of new housing provision as affordable housing in London for example, will not work effectively in the current market.

"Therefore in many instances a ‘rebalancing’ could help to prevent schemes from being mothballed.

“In this case of Larnaca Works in Southwark, Southwark Council was quick off the mark. The local authority is keen to see the development move forward as it supports the overall regeneration of the Bermondsey Spa area.”

Mr Assaf Laznik, one of the Directors of the development company Union, said “The fact that the local planning committee has awarded this variation demonstrates its confidence in Union to deliver a landmark scheme in a strategic location that is key to the overall regeneration of Bermondsey Spa.

"We are now looking forward to starting work on the Grange Garden development at Larnaca Works, that will be the first of its kind in the area.”

Tim Hamilton-Miller, senior consultant in Knight Frank's affordable housing team, added: “Clearly this pro-active stance adopted by Southwark's councillors will pave the way for kick starting other stalled schemes in the borough."