Is Hussey's Centre Point An Example Of What’s Wrong With London’s Affordable Housing System?
London Deputy Mayor for Planning, Regeneration and Skills Jules Pipe has cited Almacantar’s redevelopment of Centre Point into luxury flats as an example of why London’s affordable housing policy needs to change.
Last week Centre Point hit the headlines after Mike Hussey’s firm said it had stood down the sales agents marketing the 82 apartments because the offers currently coming in were too low.
On the status of the project Hussey told Estates Gazette: “Having sold 50% of the apartments, cleared the construction debt and fully leased the retail component, we see no point in chasing a market that is increasingly detached from reality.”
At Bisnow’s London State of the Market event three days later Pipe told the audience that situations such as this highlighted why London Mayor Sadiq Khan and his team had changed London’s policy toward affordable housing, and the viability assessments used to determine the level of affordable that should be provided as part of new schemes.
"I don't know what the affordable housing element of Centre Point was, but the fact that they can leave half the flats unsold quite comfortably and say, 'It's alright, we've paid for our development costs and the purchase of the site,' then that raises serious questions about the level of affordability that development could have provided," Pipe said.
"Maybe it was the maximum, but I would be interested in looking further into [what] the figures really were and get our viability team to take a look at it, as they do now with all referrable schemes."
When asked to comment, Hussey hit back at Pipe's analysis.
"I am not sure the naivety of his statement deserves a response," he said in an email. "Unless Mr Pipe has bought his house with 100% debt, he should be able to appreciate that development projects require very significant levels of equity as well as debt. On that basic assumption, it is easy for most people to work out that the “other 50%” of sales should be paying back the original equity and paying profit for the risk of the capital at large. It is also reasonable for an equity provider to look at the reduced potential returns from continuing sales in the current market conditions and choose to wait for a time when the prospects of hitting the target returns are greater.
"Mr Pipe has failed to consider that it’s not just the debt that must be repaid (at a high coupon because it is development): original equity must be paid back, too, at a target return. The developer takes all costs (including time delays) and sales risk and provides the original capital."
Hussey also said government policy had altered the landscape for London residential developers, and pointed to his previous track record and the specifics of the agreement with Camden council as evidence that Centre Point had not underprovided affordable housing.
"The developer cannot control Central Government tax policies that adversely impact sales (and were introduced and applied half-way through construction) nor the local government’s timetables," he said.
"At Centre Point, we offered considerably more affordable housing in a local site, owned by Camden, but they opted for expensive on-site provision (remembering Centre Point is a listed building) with public realm donations.
"I am the last central London developer they should be targeting regarding affordable housing. All my schemes have delivered actual affordable units, not just a cheque. Centre Point and Marble Arch will deliver occupied affordable units before the main schemes complete, as was the case in my schemes in Westminster in the past.
"I would be delighted to share profits, if local authorities would share project risk for the prospect of more affordable units. I haven’t met one, yet, that would take the risk.
"It strikes me that Jules Pipe was going down the politicians’ usual route of a cheap headline, with no substance to his argument."
Almancantar built 13 socially rented flats in a separate building to the main residential tower, meaning the scheme provided 13.5% affordable units. It also paid a £6M contribution to Camden council.
Planning permission for the scheme was denied once in 2012, on the basis that Camden did not like plans for a new piazza that were part of an original submission, and the way that affected affordable housing provision. Planning was then granted for revised plans in 2013.
The level of affordable housing was agreed after Almacantar submitted a viability assessment to Camden outlining what level of affordable housing it felt it could provide and still make an acceptable profit.
Under the mayor’s new policy, if developers agree to provide 35% affordable housing then they receive fast-track planning consent without the need for a viability assessment.
If they want to provide less than 35% then they have to provide a detailed viability assessment which the mayor’s office has said it will scrutinise far more robustly than the previous regime. A specific viability assessment team have been appointed to undertake this task.
Almancantar bought Centre Point out of administration for £120M in 2010, and the construction cost is around £350M, based on the contract awarded to Brookfield Multiplex in 2014. The penthouse was on sale for £55M and the cheapest one-bedroom flat cost £1.8M.
That the tower is half empty is an ironic echo of the fact that the 1960s-built office tower spent much of its existence empty, and was never fully let. Its developer, Harry Hyams, was accused of deliberately leaving it empty because its capital value was higher empty than let, something he denied until his death in 2015.