Monthly Archives: July 2014

Councils told to stop restricting residential conversions

Government ministers have acted to stop councils restricting the conversion of commercial office space to residential use. Islington and Broxbourne councils, specifically, will no longer be able to use a legal loophole to prevent conversions, in situations where they would otherwise be allowed.

The move will give developers greater certainty when looking over tired office buildings, with an eye to creating new apartments from them. While less prevalent in the capital, the transformation of such buildings is credited with helping to deliver substantial numbers of new homes. Some developers are using conversions to create substantial private rented sector apartments, such as Westrock, as detailed here.

The office to residential conversion route was eased last year, when government officials decreed such conversions would be permitted development – meaning they could go ahead without the need to seek planning permission for a change of use. Several central London boroughs sought exemptions from the scheme, claiming they needed to retain their stock of office sites. Some, such as the Corporation of London, argued successfully for the exemption, others won an exemption in certain parts of a borough; others were unlucky.

Islington and Broxbourne chose another route to prevent the conversions in their area, harnessing an existing legal power, the “article 4 direction” to prevent schemes going ahead. Ministers have pointed out that an article 4 direction can only be used in exceptional circumstances, where there is clear potential to damage a neighbourhood, not as a blanket ban.

Earlier this year, planning minister Nick Boles commented: “Ministers are minded to cancel article 4 directions which seek to reimpose unjustified or blanket regulation, given the clearly stated public policy goal of liberalising the planning rules and helping provide more homes.”

Those involved in planning have welcomed the government intervention. Charles Mills, planning partner at Daniel Watney, commented: “This will be welcomed by developers as these article 4 directives essentially prevent them carrying out office to residential conversions under permitted development rights. It is somewhat ironic that Islington, which is in dire need of new homes, was one council deliberately holding up new development off the back of political grandstanding.”

Sutton council sets up house building company

A south London borough is to set up its own housing development company, building private rented homes as well as affordable housing for local people. The move is one part of a three pronged strategy by the council to get housebuilding going at a faster rate in the borough.

Alongside the development company, Sutton will also start building its own council housing; and it has already launched an initiative to work with the private sector to encourage housing developments locally.

The initiative echoes moves being taken elsewhere in the country, which are seeing councils and local authorities moving to play an increasingly proactive role in housing provision. Birmingham councillors recently approved a feasibility study into the creation of a development company to build open market homes for rent, on the council’s own land. And in Manchester, the city council recently announced it will work with Abu Dhabi investors who already own one of the city’s football teams, to develop sites for housing.

In London and the south east, Sutton is the first authority announcing an active move into development. But it is not alone in seeking to speed up the provision of private rented homes in its patch. Last month, Wandsworth borough approved a project at Nine Elms that will see private housebuilder Bellway deliver open market rental apartments, albeit reserved for local people. In Wandsworth’s case, the deal was made via planning agreements rather than a direct financial intervention.

Sutton says it is going back to building homes directly for the first time since 1989. It has promised a variety of council and open market homes, in a variety of sizes, with rental only open to people who have had a connection with the borough for the previous two years. It is hoping to deploy council borrowed funds at low rates, and bring forward development sites that have been stalled for a variety of reasons.

“There is a huge demand for new homes that isn’t being met in our borough and we are determined to do something about it,” said councillor Jayne McCoy, who heads Sutton’s housing, economy and business committee. “We want to build new council housing and new private housing with a social purpose at its heart. It will give people more choice and a greater chance of getting on or moving up the housing ladder.”

“By being involved in the development of new homes, we can stipulate that they are only for Sutton residents and make sure there is a focus on the housing we want such as family homes, rather than expensive studio flats. We can also ensure high standards of development, generate funds to reinvest in housing and create new employment and training opportunities in the construction sector. It shows what a council can do, despite ongoing government cuts.”

Sites have already been identified for around 140 of the proposed council houses, with Sutton planning a search for development partners this summer. And it says its work to encourage the private sector, under the banner Opportunity Sutton, has already helped bring forward 644 new homes across three sites.

M&G makes £43.5m private rented forward funding commitment

Investor M&G Real Estate has confirmed it has forward funded a £43.5 million development of flats for the private rented market, at a site in west London. It has backed developer HUB which will create 152 private rental homes in Acton.

The project will be held within a strategic fund being developed by M&G which kicked off in 2013 with the purchase of a portfolio of properties from Berkeley Homes. The challenge of finding suitable large scale private rental projects to invest in has led M&G to put funds into what might, in other property sectors, be considered a speculative development. However, such is the demand for private rented homes, there is minimal risk on the project, which is likely to let fully at market rents the moment it is completed.

“With this deal now complete, we are looking for more opportunities to fund mid-market developments via our fully scalable UK residential strategy,” said M&G’s Alex Greaves. “Hopefully deals like this will encourage more institutional investment into the sector and bring forward much needed housing stock.”  It is understood the Acton project took around nine months to complete, so it is more than likely M&G has other investments in its project pipeline.

“For far too long, renting has been seen as a stepping stone to home ownership and, at times, a backward step,” said Greaves. “These 152 built-for-purpose rental homes are a clear statement that renting can be the tenure of choice for an upwardly mobile workforce who require the flexibility of renting, but who also want high quality service and support, to feel abut to lay down roots and settle for longer should they wish.”

The Victoria Square scheme will include a mix of one, two and three bed apartments in a scheme designed by Newground Architects, which is part of a wider regeneration scheme being supported by Ealing council.

 

Foxtons and Felicity Lord accused of unreasonable rental fees

Letting agents Foxtons and Felicity J Lord have been named as two of the worst for charging high fees to residential tenants – and acting in a way that has encouraged the Labour party to call for legalisation to ban upfront fees.

Aside from fanning flames of the debate for greater regulation, the excessive charging of some agents is encouraging others to enter the market. New landlord brands such as Fizzy Living and Get Living London are dealing with their tenants direct, cutting out the letting agent as being a middle man with insufficient value to add to justify their fees. At the same time new entrants are coming into the lettings market, convinced they can still create a workable business, while charging less substantial fees.

The high charges were revealed by a Labour member of the London Assembly, Tom Copley. In a recent article in New Statesman, Copley said he had even gained an acknowledgement from London mayor Boris Johnson that the fees charged by Foxtons – famous for their swanky offices and fleet of company Minis – were “unacceptable”.

“Foxtons charge new tenants £420 as an ‘administration fee’,” said Copley. “Felicity J Lord charge £165 per property for a ‘tenancy agreement’, £65 per person ‘for reference checks’, a £60 ‘admin fee’ and a £120 ‘check-in fee’.”

He noted the problem is more widespread than just the two letting agents named. “A constituent that contacted me from the London Borough of Camden was asked by a letting agent to pay £300 just to be added to a tenancy agreement. He was told that this sum would not be refunded even if his references didn’t come through.”

Copley has called for the rest of the UK to adopt the system employed in Scotland, where letting agents can only charge fees to landlords – who will then amortise these in the rental charged. He says Labour’s other proposals, for longer tenancies, and some form of ceiling on rent rises, do not amount to a return to rent controls, as some have suggested. Ed Miliband’s proposals are “are a shift to the kind of second generation rent regulation seen in most of our European neighbours”.

“Tenancy reform would help to create a more stable private rented sector for tenants, and make the rental market more affordable,” he insists: though acknowledging that the other major issue is getting more homes actually built.

The overcharging cowboys are also encouraging new entrants to the marie. One letting agent convinced there is a better way – at a less punitive cost – is Seren Living. Covering the South Wales area from a Newport office, the company was set up under the auspices of the Seren housing association; and lettings agency is something other housing associations are also getting involved in. Despite the connection with their parent, the office lets properties for a range of private landlords. Manager Emily Samuel told me part of their service is to advise on such things as installing smoke alarms and stair handrails; issues which prevent landlords from the danger of being sued down the line.

The New Statesman article is here.

Landlords call for better enforcement, not more regulation

Local authorities are out of touch with the reality of the UK’s private rented sector. And that distorted view is leading to a situation where ill-considered further regulations are being considered and imposed, when they may not be necessary.

“In 2013, private individuals put an estimated £20bn into providing much-needed housing in the UK, so it’s frightening that councils simply don’t seem to understand the approach and motivations of most landlords or how successful private lettings businesses work,” said NLA chief executive Richard Lambert.

Speaking to a seminar of local government housing professionals at the New Local Government Network, he added: “There is an expectation, especially from the political level, that licensing is some kind of panacea, which will resolve everything and introduce new standards and requirements, when in fact they already exist, but are just not effectively enforced.”

This misunderstanding has led to unhappy situations such as in London’s borough of Newham, where the local authority has managed to alienate responsible landlords in the borough by pushing through a landlord accreditation scheme.

“Time and again, we find that where licensing proposals are being considered – and in some cases where they are already in place – no thought or budget has been given to ensure that the required enforcement action, which is inevitably needed, can take place,” added Lambert.

“The responsible landlord community should be the strongest advocate for the drive for higher standards and tougher action against rogue operators and criminals.  But councils won’t be able to build that alliance if landlords have no confidence in their council’s understanding or awareness of what’s really happening in the rented sector”.

Alan Ward, chairman of the Residential Landlords Association, also recently suggested that, with proposed rent controls – a Labour party suggestion – and greater licensing, “you could be forgiven for thinking that war had been declared on the British landlord”.

In an article carried in the Daily Telegraph, he argued: “A growing private sector has a key role to play in tackling the housing shortage. Rather than bashing private landlords, we should help them to flourish.”