The master plan for the regeneration of the Heygate Estate site at Elephant and Castle has now been submitted by our development partners and will be decided by the Planning Committee in December. The application includes a commitment to provide at least 25% affordable housing across the site - made up of 50% social rented housing and 50% shared ownership.
The commitment to 25% affordable housing reflects the agreement which we reached with Lend Lease in July 2010 after we had won the local elections that year. Until that point the agreement between the council and Lend Lease included no minimum guarantee of affordable housing, it having been decided by the previous Lib Dem administration that this would be dealt with through the usual planning process. Since July 2010 we have been criticised heavily by the Lib Dems in Southwark for getting the 25% guarantee and foregoing some previoulsy guaranteed payments from Lend Lease in return.
Southwark Council planning policy still requires 35% affordable housing to be delivered in large housing developments; but several factors have affected the ability of developers right across London and the UK to deliver this sort of level of affordable housing in projects. Those factors include the economic slump since 2008 and the decision by the Tory/LibDem government to slash support for social home building. Until May 2010 every social housing unit built attracted government support of around £120,000; that figure has now been reduced to just £25,000. Both of these factors have impacted on the economic viability of major house-building projects. As we have seen from recent government announcements, they are now proposing that developers can go back to local authorities to reduce the requirement for social housing in certain projects to zero.
Looking around London we can see the same impact. At Battersea Power Station Wandsworth Council has agreed to just 15% of affordable housing in a major regeneration scheme; in Tower Hamlets the Council has agreed to 18% affordable housing at Wood Wharf; and at Earls Court Kensington and Chelsea have agreed to no affordable housing in the second phase of a major regeneration scheme. All these councils want to see regeneration happen in their boroughs, but have been forced to accept hugely reduced levels of affordable housing after developers and their own planners have calculated the amount of affordable housing which is actually viable in those schemes.
All planning applications undergo an independently verified viability test which determines the level of affordable housing which can be delivered on a scheme. In Southwark that test has been carried out in respect of the Heygate site and demonstrates that the amount of affordable housing which can be delivered is in the region of just 7% to 8%. This is the amount of affordable housing which would have been delivered through the usual planning process - the approach which the Lib Dems were taking when they were in power and which they still urge us to take! This means the difference between approximately 620 affordable homes which will be delivered under the 25% guarantee which Southwark Labour negotiated in July 2010 and less than 250 through the Lib Dem approach.
What is more we have also negotiated relatively low rent rates for the new social housing which will be delivered. The Coalition - supported by local Lib Dem MP Simon Hughes - introduced "affordable rents" in 2010 - which for many are anything but affordable - but which enable housing associations and other social landlords to charge up to 80% of local market rent rates for social housing which they let. Many housing associations have adopted this level of rent and on average most have set their new rent levels at between 65% and 75% of market rates. In comparison the rent for a council home equates to approximately 35% of market rates.
At the Heygate site we have negotiated that rents for 1 and 2 bed homes will be no more than 50% of market rates and for homes of 3 bedrooms or more the rent will effectively be the same as council rent rates. This means that there will be a genuinely mixed income community living in the new homes that will be built at the Heygate site.
I hope that the economic climate will improve to such an extent that later detailed planning applications for the Heygate site will mean that more than 25% affordable housing can be delivered. But it is clear that there is a long way to go to lift the scheme above that point given that we have a starting point of only 8% on planning viability tests.
And it is also clear that simply standing on the sidelines demanding 35% or more affordable housing is utterly unrealistic. The only reason we are going to achieve 25% affordable housing at this time is because Lend Lease have a cast iron contractual obligation - negotiated by us in July 2010 - to deliver that much.
So this is no "sell out" by the Council for the regeneration of the Elephant. This is not the Council being weak in the face of a large developer. It clearly shows that the Council under this Labour administration has been strong and it has been right. I am genuinely appalled when I imagine what situation we might be facing if the Lib Dems had remained in power in 2010 - or if they were in charge now. We would either have a tiny level of affordable housing at the Elephant & Castle or we would once again be mired in the dither and delay which was the hallmark of their entire approach to large regeneration schemes - unwilling or unable to make a decision.
Southwark's Labour administration is determined to deliver on the regeneration of the Elephant & Castle; to deliver on a scheme which has been discussed since 1998 and which the people of Walworth deserve to achieve the renewal of their area.