A property developer forecasting a profit of tens of millions of pounds from a luxury apartment complex on London’s “Billionaires Row”, has claimed it cannot afford to subsidise a single affordable home there.
In a move that has caused anger in a borough blighted by an affordable housing crisis, Harrison Varma argued its plan to build 109 “high-end” homes with an indoor pool, gym, spa and underground parking on The Bishops Avenue in north London, left no money for cheaper housing.
In planning documents, the firm’s consultants estimated the scheme would make £37m in profit from £213m in revenue on a road considered one of Britain’s most expensive addresses, where oligarchs from the former Soviet states, Saudi royalty and Nigerian oil barons have bought palatial mansions. The new homes will cost about £2m each on average.
The case will focus attention on highly complex negotiations between developers and councils over private housebuilders’ payments towards affordable housing. For the last three years about 50% of all affordable homes in England have been funded by such developer deals. Yet social housebuilding fell 12% in the year to April 2021, according to official figures released on Thursday that show just under 6,000 homes let for the cheapest “social rents” were completed in England.
Analysis by the housing charity Shelter showed just one social home was built in England for every 195 households on waiting lists. About 46,000 other “affordable” homes were built, but these include shared ownership properties and housing that costs 80% of market rent.
On the scheme at The Bishops Avenue, Conservative-controlled Barnet council agreed with the developer’s financial viability assessment that it “cannot viably support the provision of any affordable housing”.
The borough’s Labour opposition leader, Barry Rawlings, has accused the council of being “utterly negligent”.
“We’re in the middle of a housing crisis with nearly 2,500 families trapped in temporary accommodation [in Barnet],” said Rawlings. “If the council had done its job properly and negotiated the maximum possible … it would have funded enough affordable homes to re-house most if not all of these families.”
The council later accepted a £1.1m payment from Harrison Varma – sufficient to buy four two-bedroom apartments in cheaper parts of the borough. The deal comes despite a council target that all new developments of over 10 homes must include 40% affordable units.
Anil Varma, co-owner of the development firm, defended the arrangement saying that given the cost of land and the returns expected by private investors (profits of 17.5% are forecast for the scheme on The Bishops Avenue), affordable housing was not viable.
He accepted that affordable housing was desperately needed but said: “If you don’t get a deal with investors you don’t get anything built.” He added that over the course of the project the rate of return worked out at about 5% a year.
The viability assessment argued that the £2m luxury flats would make “a valuable contribution toward housing provision” in Barnet. However the median annual salary in the borough is just under £30,000.
The Bishops Avenue is popular with foreign buyers and investors and many plots stand empty or derelict after being left unused for years.
But Varma said that if affordable housing was mandatory without viability assessments on such high-value sites “people who own the land won’t sell it, they will sit on it”.
He said the scheme would make a “phenomenal” contribution to the economy, including £26m in stamp duty receipts, 25% tax on any profit made, 265 construction jobs for two years and a community infrastructure levy of over £3m
He said he was not avoiding any affordable housing obligations, that the calculations were scrutinised by the council’s own experts and were published. “We are not developers making vast amounts of money,” he said, pointing out he had previously made substantial losses.
A spokesperson for Barnet said providing affordable housing was integral to its housing plan.
“In the past 10 years, 3,500 affordable homes have been built in Barnet as part of housing schemes,” they said. “We are on track to offer 800 more new affordable homes for rent by 2024.”
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