Agenda item

[Report of the Director for Housing, Planning and Regeneration. To be introduced by the Leader of the Council.]

This report covers the request to waive one of the Development Agreement conditions to allow for early draw down of the following SDP sites: Welbourne, Ashley Road West and Ashley Road East. The report sets out the reasoning for this request and the benefits of this approach to the Council. This will allow the sites to be drawn down early to facilitate the timely delivery of affordable homes on the Welbourne site.

The Leader of the Council introduced the report which sought approval to waive the Building Contract Condition for sites 3 – Ashley Road West and 4 – Ashley Road East (the Building Contract Condition would remain in respect of site 2 – Welbourne).

The Leader continued to remind Cabinet of the overall aim of the Strategic Development Partnership between Haringey Council and Argent Related which was to create a new town centre for Tottenham Hale, including the delivery of new homes, workspace and a much-needed new health centre.

The Council had worked with Argent Related to change their planning application in November 2018 to include 131 Council homes on the Welbourne site. This represented 13% of the Council’s 1,000 Council homes target.

The Leader looked forward to seeing this development move forward into construction stage in the autumn, as a tangible example of the Council using all the tools at its disposal to secure the delivery of Council homes.

The Leader commended the recommendations for approval to ensure that this delivery happened immediately, securing the Council homes, and just as importantly the district healthcare facility.

In response to questions from Cllr Cawley- Harrison, the following was noted:

·         The Leader disagreed with the assertion that the Council were conceding on the previously agreed delivery timelines and were creating a precedent for other developers to follow. The Leader reiterated that this proposal was ultimately in the best interest of the Council due to the urgent need to provide people in Haringey with social housing. There was a judgement to be made on whether the re- evaluation of land would benefit the Council or the developer Therefore, on balance, it was felt that, if the land was re-valued, it would not benefit the Council and hence the Cabinet were considering this report in order to take a decision, at the present time, to make more money for the land and retain the opportunity to get housing onsite.

·         The Assistant Director for Regeneration further outlined that, on arrival of the new administration in May 2018, there had been re-negotiation on the nature of the homes to be contained on the Welbourne site. This had taken some time and the developer had facilitated this. Therefore, this had cost the Council a short time on the original process, However, what this facilitated, which the Council only missed by a few months, and not years, was a continuing regeneration with increased social housing. The Council did hold developers to account for timescales but when the Council were part of the factors to the change in the timings, this should also be recognised in the development agreement.

Further to considering the exempt information at item 24,

RESOLVED

1. To waive the Building Contract Condition in respect of site 3 – Ashley Road West and site 4 - Ashley Road East contained in clause 9.5 of the Development Agreement dated 21st March 2017 for the reasons set out in section 4 of this report to allow these sites to be transferred prior to the end of the Initial Period, on the condition that the developer complies with all the conditions precedent in respect of site 2 – Welbourne and that this site is drawn down prior to site 3 and site 4.

2. To an extension of the Construction Commencement Date as defined in the Development Agreement dated 21st March 2017, for site 3 and site 4 from six months to twelve months; and to an extension of the Construction Commencement Longstop Date contained in Schedule 3 (Landlord’s Right to Break) of the Lease to be granted for site 3 and site 4 from six months to twelve months.

3. To give delegated authority to the Director for Housing, Regeneration and Planning to agree any further non-material amendments to the Development Agreement dated 21st March 2017 after consultation with the Cabinet Member for Regeneration, the Assistant Director of Corporate Governance and the S151 Officer.

Reasons for decision

The Building Contract Condition is included in the Development Agreement in order to limit the time between transfer of land to the Developer and the commencement of the development on site, and to evidence the Developer’s commitment to that commencement.

In considering the recommendation to waive the Building Contract Condition and to subsequently vary the Construction Commencement Date and the Construction Commencement Longstop Date in respect of sites 3 and 4, the Council has sought advice from Avison Young (contained in full at Appendix B) on the risk that this poses of the commencement of development stalling. Avison Young concluded that ‘the extent of the Developer’s investment in this development to date would appear to be strong evidence that they will indeed progress development with as little delay as possible and that the risk of sites stalling, whether transferred early or not, is small.’

Further to this, in bringing the transfer of land forwards ahead of 31st October the land value the Council will receive will be as per the agreed deal. From a Best Consideration perspective, the value will also still be reflective of the original deal and the approvals obtained in entering it at the time.

The risks of the Council not taking the recommended course of action are set out below.

Programme risk

• If a mechanism cannot be agreed to enable the transfer of sites before the end of the Initial Period and therefore at the indexed values as originally envisaged in the DA, the Developer has indicated that they would delay the transfer of any single site until all the sites were ready, which would be after the Initial Period.
• This would cause significant delays to the construction programme for sites 2, 3 and 4. The extent of this delay is currently estimated to be about 6 months. This would likely push the delivery of the 131 Council homes beyond the term of this Council.

Outcomes risk

• Delay to the start on site date for construction of the Welbourne development could put at risk the GLA grant funding for 131 Council homes at Council rent on the site and NHS England funding for the Welbourne health centre

Liabilities risk

• The Welbourne site, Ashley Road West and Ashley Road East are currently the responsibility of the Council to manage and have been vacated in order to enable predevelopment surveys to be carried out and to allow the developer to set up their marketing suite.
• The developer currently occupies the sites under a license arrangement and has no responsibility for security when they are not in attendance.
• Welbourne and Ashley Road East have both been occupied by trespassers over the last six months which has taken a significant amount of officer time to resolve and has incurred costs to the Council of an estimated £100,000 for site security and clearance of fly-tipped material.
• The ongoing costs of security of these sites are being borne by the Council until the sites are transferred to the developer. These costs are estimated at £2,900 per week.
• The timely transfer of the land will relieve the Council of the significant burden of security and management and transfer the risk and cost of security to the Developer.

Financial risk

• Advice that the Council has received from Avison Young asserts that the market is currently facing unprecedented levels of uncertainty, as will remain the case in October.
• This means that the value of the sites if left to a revaluation is far from certain and could be higher or lower than that which the Council will receive on an indexed basis if transferring before October.

As described above, the risks associated with waiving the Building Contract Condition and varying the Construction Commencement Longstop Date in respect of sites 3 and 4 (the proposed mechanism) are significantly less than the alternative scenario of delaying transfer until after the end of the Initial Period.

Alternative options considered

Building Contact Condition - proposed option

Waive the Building Contract Condition in the Development Agreement between the Developer and the Council in respect of the Ashley Road West and Ashley Road East sites (labelled 10 and 2, 3 ,4 in Appendix A) to allow these sites to be transferred prior to the end of the Initial Period.

Building Contact Condition - alternative option: do nothing

Under this option, the transfer of all sites would be delayed until after the end of the Initial Period to allow for the sites to be revalued together. This would require the parties to agree the form of appraisal that will be used to re-value the land in the whole Development Agreement, including agreeing to all the inputs such as values, cost and developer return. This is likely to be a time consuming, costly and risky process for the Council for the reasons set out in this report. For these reasons this option has been rejected.

Vary the Construction Commencement Date and Construction Commencement Longstop Date - proposed option

Should the recommendation to waive the Building Contract Condition in respect of Sites 3 and 4 be approved, it follows that the Construction Commencement Date and Construction Commencement Longstop Date would need to be varied to account for the date of transfer being brought forward prior to the building contracts for each site being agreed.

Construction Commencement Date and Construction Commencement Longstop Date - alternative option: do nothing

Should the recommendation to waive the Building Contract Condition be approved but the Construction Commencement Date and Construction Commencement Longstop Date not be varied, the developer would then have a six month period from the date of the transfers in which to negotiate the building contracts and commence construction on all three sites (site 2 – Welbourne, site 3 – Ashley Road West and site 4 – Ashley Road East). Based on the current estimated programme (paragraph 6.7.3), it is acknowledged that this timescale is unlikely to be achievable and as a result this option has been discounted as unrealistic.