Select Committee on Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Memoranda


Memorandum by Gallagher Estates Limited (HOU 10)

INTRODUCTION

  Gallagher Estates welcomes the opportunity to give evidence to the Housing, Planning, Local Government and the Regions Select Committee's inquiry into Affordable Housing.

GALLAGHER ESTATES—BACKGROUND

  Gallagher Estates is one of two divisions of JJ Gallagher. It majors in residential and mixed-use schemes, whilst Gallagher Developments specialises in retail, leisure and business development.

  Gallagher Estates is a town/communities developer, not a house builder. The company:

    —  remediates and services land;

    —  retains responsibility for the performance of planning obligations;

    —  sells serviced land to house building companies;

    —  builds the commercial and social elements of projects; and

    —  contractually binds companies to develop in accordance with the design guidance.

  Gallagher Estates is one of the largest developers promoting residential and mixed-use schemes through the planning system in Britain today. The typical housing component ranges from 1,000 homes, through to new towns of up to 10,000 homes.

  Current development schemes and local plan allocations include 40,000 homes, 7 million sq ft commercial and 2 million sq ft commercial investment portfolio.

  The company is also committed to providing integrated transport systems on its development, informed by multi-modal studies. These include the promotion of a new railway station and 27km of light rapid transit system.

GALLAGHER ESTATES' ROLE IN ACHIEVING A DECENT HOME FOR EVERYONE

Providing additional housing in new communities

  Out of the 40,000 homes promoted by Gallagher Estates, 21,000 are within the Milton Keynes-Cambridge Arc; part of the Government's key strategic growth area. 17,500 of these homes are anticipated to be within two new towns near Bedford and Cambridge. It is worth noting that one of these new towns is larger than the entire Millennium Community programme, and it will require little or no reliance on public funding.

Providing additional affordable housing

  Each new Gallagher Estates scheme requires significant affordable housing allocations in order to provide a balanced community and housing choice. Collectively, the aggregated affordable housing requirement over the next 10 to 15 years is likely to be around 6,500 affordable homes.

The use of public funds to provide affordable housing

  Gallagher Estates welcomes the extra Comprehensive Spending Review (CSR) funds intended to achieve the Government's target of a decent home for everyone by 2010. However, given the scale of affordable housing requirements of each of our new developments, we anticipate that there will be insufficient grant to finance all of the new affordable housing. Additionally, in our experience, irrespective of the availability of increased funding, Local Authorities are increasingly taking the position that they wish to see social rented accommodation provided at nil cost to the public purse. Alternatively they offer only limited amounts of grant.

  Gallagher Estates accepts that funds are limited and that developers cannot realistically expect full grant on each and every unit they provide as affordable housing. However, there is a risk that without any grant, and with increased affordable housing requirements, companies will be deterred from developing land, and the pace and scale of housing development required may be inhibited. This would hinder the achievement of Government housing growth targets.

  Where grant is available for affordable homes, the current resourcing regime places an understandable emphasis and priority on those on housing benefit. This means that there are substantial numbers of low-income employed people who cannot afford to purchase or rent a home, whilst also being ineligible for social housing based on needs criteria. Gallagher Estates welcomes the Government's key worker initiative, which is going to some way to addressing this issue. However, there are still many workers, not defined as "key", who are important to the effective working of local economies, but cannot afford a decent home.

  Also, in the company's experience, there is a tendency for some Local Authorities to simply require social rented housing allocation into new schemes, without regard to the relevance of a particular site to meet this need. There is a considerable need, therefore, for Local Authority Officers and Members to have a clearer understanding and requirement to only make such demands where there is a well considered and agreed approach in the interests of creating a sustainable new development.

A potential solution

  In order to address the above issues, Gallagher Estates is suggesting a new approach to the delivery of affordable housing, which would ensure the viability of schemes for developers and promote real mixed and balanced communities.

  Where grant is not available for subsidised social rented housing, our aim is to deliver a new form of affordable rented housing, which lower income working households can afford without having to resort to housing benefit.

  These houses would be provided at rents which are below market rents, but are not constrained by the National Housing Federations 25 per cent of net income rent levels. Rents would be set at a level that working households on lower incomes could afford. We believe that the lower quartile of individual earnings is an appropriate benchmark, as this represents the mid point of all workers who earn less than average wages. Overall, we have used an average net income of £250 per week for modelling this concept, supplemented by a second income, sufficient to keep the household out of Housing Benefit dependency. In this case, the second earner would require a weekly income of £70. We believe that a significant number of households fall within these financial parameters and will thus be able to avail themselves of an increased supply of affordable housing.

  Together with owner-occupation in its various forms and grant funded subsidised housing, this scheme should help provide sufficient low-cost housing to meet the Government's objectives of providing a mix and balance of housing types and promoting social inclusion.

  Gallagher Estates recommends that the Committee consider this model, and the scope for recommending to Local Authorities that it be included within their definitions of affordable housing where grant is not available.

  In addition, there is a strong need to encourage private and institutional finance into the sector to match public sector funding. However, investors, ie Banks, Funds and Institutions, will only invest if there is reversion to market dwellings at a future stage, for example, 10, 15, 20 years' time. This means dwellings remain affordable for that length of time.

  However, this is in conflict with Local Authority demands for perpetuity. Therefore, for as long as Local Authorities adopt this stance, the wealth of potential funding into delivering affordable housing will not be forthcoming. As ever, it is a mix of some in perpetuity and some on more flexible terms that is required to maximise availability of funds.

  More widely, the Committee may wish to investigate Local Authorities' use of Supplementary Planning Guidance on affordable housing, to ensure that it encompasses areas of the low-cost market other than subsidised housing and that the requirements placed on developers are not overly onerous.

OWNER OCCUPATION FOR THOSE ON LOW INCOME

  Gallagher Estates has experience of providing owner-occupier schemes for those on low incomes, and believes that they have an important role to play in creating mixed communities. However, we believe there are a number of issues which need addressing.

Shared Ownership

  In our experience shared ownership tends to be an under provided form of tenure as again, Local Authorities tend to use their resources to prioritise homeless households which have special problems and needs and who, by definition, are least able to participate in such tenure arrangements. As recommended above, the Committee may wish to explore how Local Authorities can be further incentivised to move away from requiring developers to solely provide subsidised rented housing, and instead to provide a real mix of low-cost home options.

  Gallagher Estates welcomes Government initiatives in the CSR to provide further low cost homes for purchase for key workers. However, we have noted that key worker housing tends to be based around shared ownership or interest free equity loans for existing houses, not new homes. For example, the Starter Home Initiative seems to be heavily biased in favour of existing housing. Understandably, this is due the current urgent need of employers to recruit personnel now. This does not, however, add to new supply, which further exacerbates housing shortage, inevitably leading to rises in house prices.

  Additionally, while the requirement for key worker homes is obviously crucial, a working household with the same income, in a different occupation may not qualify for these low cost home ownership schemes. These are issues which the Committee may wish to explore further.

GALLAGHER ESTATES' ROLE IN TACKLING HOUSING MARKET RENEWAL

  Gallagher Estates are taking a keen interest in the Government's housing market renewal agenda. We believe that private sector involvement in the various pathfinder projects will be of fundamental importance to their success, as it can provide substantial resources, a long-term perspective, and relevant project management expertise. The experience of Gallagher Estates in master planning community development in the South of England, its wider brownfield and regeneration experience in urban areas, as well as its willingness to invest in the long term, are highly relevant to this agenda.

GALLAGHER ESTATES' ROLE IN PROMOTING QUALITY DESIGN

  Gallagher Estates believes that quality design, be it in terms of the layout of a scheme, the provision of basic infrastructure or the design of individual buildings, is of paramount importance to the creation of successful communities. As a master developer, our role is to establish, through consultation with all stakeholders, strategic design guidance for a project. This is then articulated through the planning process and development agreements against which builders are required to perform. Through these agreements we can ensure a high quality of housing design, in terms of aesthetic, environmental and sustainability requirements.

  Gallagher Estates works on the basis that quality of design is not just about house building and basic infrastructure. Housing growth is obviously vital for the future prosperity of the UK, but without considering issues such as transport, health, environmental impact, leisure and education, new developments will flounder and be unsustainable. Whether in the growth areas of the South, or in areas requiring renewal, an all-encompassing and long term approach to design is needed to ensure communities are sustainable.

  This is why the company embraces initiatives such as Local Agenda 21, producing papers such as the Sustainability Toolkit, which describes over 100 sustainability measures intended to be undertaken in our New Towns. It is also why we promote integrated transport systems for our developments. This includes the promotion of a new railway station, a light rapid transit transport system, a new motorway junction on the M1 and a move away from reliance on the car. We believe that such practices should be encouraged by Local Authorities throughout the country, and that Government Departments such as the ODPM, the DofT and DEFRA should continue to work in a joined up manner to ensure a holistic and efficient approach to the development of new communities.



 
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