Should Developers Prepare For A Lurch To The Left In Next Week's London Elections?

The development community could be forgiven for feeling pretty nervous about the London elections on 3 May.

Politics in London and the U.K. is in ferment, and housing development is at the centre of this change. For the first time since the mid-1990s, the Labour Party is moving to the left. Jeremy Corbyn and the Momentum movement that supports him have changed where the centre ground lies for Labour, and potentially for the U.K. more widely.

For London and its elections, this is crucial. Labour control 21 of London’s 33 local authorities, and could win control of more next week. The move to the left of the Labour Party means a move to the left for London politics, and potentially a new attitude toward development at a time when the capital needs to build more homes.

There are live examples of the impact this shift can have. Earlier this year a £2B joint venture between Lendlease and Haringey council to redevelop council land and housing the borough owned was essentially killed off when Momentum led a campaign to oust councillors who supported the proposal.

And since Hammersmith and Fulham council changed to Labour control in 2014, listed developer Capco has faced far greater scrutiny of its £12B redevelopment of the area around Earls Court, and there is now the probability the company will hand two estates it was going to redevelop back to the council.

But rather than London development facing a red peril, the picture is more nuanced. The upcoming elections are part of the complex matrix of issues facing London residential development, particularly large-scale estate regeneration like that being undertaken in Haringey and at Earls Court.

London needs more housing — the numbers show that starkly — but at the same time local authorities and communities want developers to be more transparent and engaged, to have a greater understanding of what existing residents need, and how to produce housing that is genuinely affordable, rather than just building what is most profitable.

Don't worry ... well not much

“The development community has grounds for being a bit wary and a bit anxious, but I don’t think they should get too carried away,” London housing analyst Dave Hill said. “What you’re talking about here is the extent to which Labour local authorities are likely to be swayed in their approach to development by Momentum or the Corbynite ranks within the council chamber or the local members, and the picture across London is quite uneven.”

Hill highlights how for every local authority like Haringey, where a move to the left was brought about by opposition to the £2B development vehicle and party membership ousted leader Claire Kober, there are other boroughs where things are likely to continue as normal.

“Those boroughs that were very focused on increasing supply and were willing to work with the private sector will likely continue to do so,” he said. “The addition of one or two more Momentum members to the council is unlikely to change the balance.”

Areas where there could be a new attitude to development include Lewisham, which unlike many London local authorities has a borough mayor. The Labour candidate likely to replace the retiring Steve Bullock is Damien Egan, who Hill pointed out had changed his stance on development during the selection race to see off a challenge from a Momentum-backed candidate.

Egan originally supported a controversial 35-acre housing scheme around Millwall Football Club that would have required their council to use its compulsory purchase order powers to progress, but has now come out against the proposal.

The times they are a'changin'

While the elections next week will give an indication as to where the gravity lies in terms of London politics, the changes facing London developers have been brewing for some time.

“More Labour leaders will have to stand up in front of their local party meetings — with a significantly left-leaning membership — look them in the eye and justify their actions. But what is happening with developers isn’t just about Labour and it isn’t that new — we’ve seen signs of it over the last 18 months at least,” public affairs firm Portland partner Chris Hogwood said.
 
“Local government has been much more assertive in how it wants to engage with the private sector and with developers. They are fed up of being the whipping boys and are asserting themselves more and more, asking developers to consult more widely and not being afraid to turn down schemes that don’t feel right. If local authorities approve schemes with 5% affordable housing, that isn’t going to pass the smell test — they know that developers need to make a profit, but they also want them to be good corporate citizens.”

Hogwood said this confidence has been bolstered by the fact that in many cases local authorities are becoming less reliant on the private sector to deliver housing. Many are creating their own housing development companies. Newham has set up a company called Red Door Ventures to build affordable rental housing. Changes to council borrowing rules could free up boroughs to build more of their own homes. 

One area of particular conflict between councils, developers and communities in the past year or so has been large-scale regenerations and developments of estates, housing and land owned by councils which were to be undertaken in public-private partnerships.

As well as the examples of Harinegy and Earls Court, in October last year Enfield Council terminated an agreement with housebuilder Barratt which would have seen 6,000 new homes built, because it did not like the terms of the deal. It has not announced a new partner.

And in December London Mayor Sadiq Khan refused planning permission for the proposed regeneration of the Grahame Park estate in Colindale, North London, because the number of affordable homes would be reduced.

Khan is also planning new measures which would mean that residents must be balloted before estate regenerations are granted planning approval.

Squaring the circle of estate regeneration

Estate regenerations are almost always controversial because large numbers of existing residents are usually displaced while the redevelopment happens, and sometimes permanently. There is often deep mistrust about the motives of private sector developers undertaking these schemes.

But for many, including Labour peer Lord Andrew Adonis, they are one of the best ways of increasing the amount of housing in London, as they offer the opportunity to add density to large areas and thus increase housing supply by a large amount in one go.

Part of the problem is that there are very few examples where these large, complex regenerations have been successfully achieved, so there is no template to follow.

One developer trying to get it right is Argent Related, the company formed when U.S. developer Related backed U.K. developer Argent, the company behind the highly successful Kings Cross Central scheme.

They are working in partnership with Haringey Council on a £1B scheme that will see 900 new homes built in Tottenham Hale, North London, with a mix of tenures including affordable, housing for sale and shared equity properties.

“In terms of creating more housing, the challenge is finding the right sites that can be made more dense, and when you do, creating a genuine mix of tenures and people, and doing it in the right way,” Argent Senior Projects Director Tom Goodall said. “Good public space lasts for 1,000 years, and good buildings last for 100 years.

“We start from the premise that scrutiny is a good thing. Large-scale developments are a partnership, and developers shouldn’t be afraid of scrutiny, they should welcome it. We try to be transparent in everything we do.”

Goodall said that the company had made efforts to embed itself in the local community. As well as getting to know the local councillors and planning officers it has tried to speak with the leaders of community groups. It has hosted consultation events that people could visit and attended community events including school fetes and mother and baby meetings to gauge what people wanted from any new scheme.

“Everyone does a certain amount of consultation, but it is about going beyond box ticking and doing the minimum required and actually engaging with the local community and listening to them,” Goodall said. “We’ve attended events ranging from one person to 300. It takes time and effort to get under the skin of a place and understand what people really want from the place they live.”

The elections next week are a convenient marker in time, but they are merely part of a wider change on how developers need to operate in London. People want more housing, they want it to be affordable, and they want a say in how it is built. That is a difficult circle to square, but to be given the right to build in London, it is something the property industry is going to need to work out.