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