Poplar HARCA's submission to the GLA Housing Committee's Knock It Down or Do It Up? was submitted in July 2014 and published with the rest of the report in February 2015.
pp.12-18 DEMOLITION AND REFURBISHMENT OF LONDON’S SOCIAL HOUSING ESTATES
Response on behalf of Poplar Harca - July 2014
1) What is the purpose of regeneration programmes and who benefits?
The main purpose of regeneration programmes is to address the specific characteristics of estates and areas where there are significant levels of deprivation. These characteristics are typically
Poor quality housing stock sited in uninspiring and badly maintained environments A predominance of socially rented properties – essentially mono tenure High levels of worklessness and dependency on benefits High levels of over crowding Poor educational attainment High incidences of ill health caused by poverty, poor diet, obesity, alcohol and drug abuse, overcrowding etc.. Higher than average levels of crime and anti social behaviour ( ASB) Low levels of aspiration Poor amenities ( local shops, play areas, community facilities, health centres)
Our considerable experience of regeneration in Tower Hamlets in East London has taught us that these issues must be tackled holistically, but most importantly that the community has to be involved. Regeneration is not just about changing the physical environment; it is about creating resilient communities who feel that they have control over their own destinies. A resilient, sustainable community will comprise of a true mix of people living in a genuine mix of tenures. Whilst the physical changes to bring about this mix can often be achieved quite quickly, longer term “community building” support programmes will need to run in parallel with the building/development programme. For example, these may focus on creating employment and training opportunities, providing intensive support for troubled families, running youth outreach services or teaching English as a second language.
The benefits of a successful regeneration are widespread and ripple far beyond the local community. A resilient community moves from a state of dependency to a state of positive net contribution, reducing the burden on the state and tax payer.
2) Which factors are considered in the decision to refurbish or demolish and rebuild
The decision making process on whether to refurbish or demolish and rebuild is frequently complex, but in truth largely driven by financial viability, the quality of the existing stock, the support of the local community and the ability of the local area to re-house tenants affected by a decant programme.
The financial viability of a proposed regeneration scheme is influenced by a range of factors, the most important of which are:-
The number of lease holders (RTBs) living in the properties – Lease holders have to be bought ought if demolition is to proceed. This can be a very heavy upfront burden on a regeneration business plan. A leaseholder buyback programme also requires the support of Compulsory Purchase Orders (CPO), which can be slow and politically difficult to achieve. The ability to increase densities, particularly in respect of the introduction of market sale properties to provide cross subsidy to the scheme. The availability of development loan finance at reasonable rates of interest The availability of grant and other subsidies The borrowing “headroom” capacity of the RSL, particularly noting that demolition of existing properties adversely affects the asset cover and interest cover covenants in the short term until new build properties can be securitised and let. The local private residential market and the sales values that can be achieved The historic debt that is attributed to the stock to be demolished and how this and the rent loss impacts on the business plan of the RSL.
The quality of the existing stock can be assessed against a range of criteria, which may include:-
How easy is the stock to let and does it generally match local housing needs What is the mix of units What are the maintenance and management costs for the stock How much investment is required to bring the stock up to Decent Homes plus standards What is the realistic future lifespan of the stock Does the local community like the stock. Does it carry a stigma. Can the stock be refurbished to modern energy standards Is the local environment and green space well used and providing a genuine amenity to the local community, or just a featureless dog toilet for the few Do cars and parking facilities dominate Is there sufficient provision for play ( for all ages of children) Are local shops and businesses thriving or are they boarded up and empty? Do they serve the local community well. Is there a history of high crime and ASB in the area and can Secure by Design principles be incorporated into the existing environment Are there proper community facilities to provide a place for people to meet and partake in social activities Are there nearby schools, health centres and other public facilities Is there easy access to public transport
The support of the local community is fundamental to implementing a regeneration programme. Whilst it is very unlikely that the support will be unanimous, securing the enthusiasm and support of key community leaders, influencers and champions will make progress much easier. It is important that capacity building programmes are run with the local community from the outset, so that people are able to participate fully in decision making processes and fell genuinely empowered throughout the regeneration programme. Because regeneration is a long term process, the expectations of the community have to be carefully managed, to ensure that the vision survives throughout the inevitable economic cycles.
A decision to demolish will require a complex and time consuming decant programme. In an area like Tower Hamlets, which already has 22,000 people on the housing waiting list, it is often very difficult to find alternative accommodation for affected tenants. Where there are specific and very special needs, say for a large family with a severely disabled child, it can often be a lengthy and difficult process to find a suitable alternative property.
In practice, the decision to demolish and rebuild will only be taken if there is a realistic chance of phasing a delivery programme so that most tenants can be re-housed in a single move. The decision would also require the support of other local providers, as they would often be called upon to re- house some of the displaced tenants in their stock. In Tower Hamlets this generally works well through the Common Housing Register. However, we often find that new supply does not necessarily synchronise with decant requirements.
3) How are tenants and leaseholders involved or consulted and at which stages
For a regeneration scheme to be successful it is imperative that the community is involved from the outset. Before any design work is carried out, there must be genuine engagement with the local community to document and understand the dynamics of that community, their problems and their aspirations.
It is also critical that engagement occurs with all sections of the community, not just the vocal minority. In practice this is very challenging, particularly with harder to reach groups. However, with a range of events and tools, an evidence backed picture of that community will emerge which will help feed in to the refurbish or demolish decision. We use a range of tools to undertake this consultation, which include
Face to face interviews with tenants and leaseholders Drop in events in local centres Consultation events with local activity clubs, societies & schools Research with other key stakeholders – police, health workers, teachers, shop keepers etc.. Smart phone & digital surveys such as “Commonplace”.
As ideas start to develop and consultants are engaged, then a range of workshop type events can be organised to help ensure that the solutions adopted meet the needs of the majority of the community. It should be noted that there will always be dissent. Many people are fearful of change, even though this change may be for the better. In many ways, the resilience of a community can be measured in its ability to accept and cope with change and at the outset of a large regeneration scheme, the resilience of the community is often low.
It is also important to use high quality modern tools and visual aids to help the community envisage and understand proposals as they develop. This is inevitably expensive, but always pays off in the end. Consultation with leaseholders can be very challenging. Leaseholders fall in to two main categories:-
Resident leaseholders – ex RTB tenants, often elderly and living on state pensions. These leaseholders are usually asset rich but cash poor and struggle to meet service charges or major works recharges. Commercial landlords – they may be the original RTB tenants, later purchasers or professional property investors, but now they let their properties to make a commercial return. They are usually opposed to any proposal that will result in either a surrender of their lease or a large re-charge bill.
Section 20 of the Landlord and Tenant Act places a statutory obligation on the freeholder to consult and issue notices in a particular way. This often conflicts with the softer more inclusive approach to consultation and engagement that works better for the wider community. If a demolition option is being taken forward, then it will inevitably require the backing of a CPO to ensure that all leases can be secured. The very nature of the CPO process is that it requires political support and can therefore be very confrontational.
In practice, the leaseholder engagement process has to be a measured mixture of carrot and stick.
In a demolition scenario there have to be sufficient incentives built in to the buy back process to ensure that the use of CPO powers is the very last resort. For resident leaseholders, we provide a number of incentivised relocation packages, including outright purchase, lease swap and shared equity. Valuations are enhanced to encourage early settlement and reasonable legal and relocation costs are met. For commercial landlords we offer an enhanced valuation and to cover reasonable legal and relocation costs.
In a refurbishment scenario where leaseholders may be facing a significant recharge, we will assist resident leaseholders by offering a variety of payment plans. In an extreme case, we will even place a charge on a property to recover our debt when the property is finally sold or the leaseholder dies.
For commercial leaseholders we expect payment in full once the invoice for the works is issued.
4) How does the regeneration work and, in particular, what are the key problems for estate residents during the process? How are these best managed and resolved?
Successful regeneration is inevitably a lengthy process, that begins slowly and gathers pace as change starts to take effect. Physical change is the first and most obvious sign of regeneration, but creating a sustainable and resilient community is not just about physical change. Regeneration is also about attracting investment in to communities that otherwise would not have been there; employment opportunities, new health and education facilities, new transport links, new retail and community offerings etc..The benefits should be tangible and measurable, for example, an increase in educational attainment at key stages, a reduction in ASB, less dependency on benefits, fewer residents in fuel poverty.
However, the challenges that residents face, particularly during the physical transformation stages, can be considerable:-
Moving or losing their home Construction noise and disruption Demolition blight for leaseholders in later phases Community fragmentation and change An influx of new residents in to the area
The decant process is without doubt the most disruptive part of any demolish and rebuild regeneration scheme. Decant programmes have to be run very sensitively, with a flexible range of options for both tenants and resident leaseholders to ensure that their needs are met. Every family’s circumstances and needs will be unique and the package on offer must recognise this. Decant programmes always take longer than planned, so sufficient time should be allowed in any programme. Where possible, a right to return should be offered so that long standing communities are not broken up. Many local ties go back generations and these should be preserved wherever possible. This might sometimes require double decants, so the financial package must be tailored to recognise the significant disruption this can cause.
Construction noise and disruption can be greatly reduced if detailed and careful pre-planning work is carried out. The selection and management of the correct contractor / developer is also critical. They should be experienced in regeneration work and have considerable knowledge of resident liaison and interface. The community / contractor interface should be formalised through regular reports, newsletters, complaint procedures and meetings. Residents should be invited to assist in traffic and security plans from the outset, as they know their estates better than anyone. Communities should also expect to receive tangible benefits from the Companies that are working on larger schemes, such as apprenticeships and training opportunities for local young people, work placements for the unemployed and local labour programmes for local people and SMEs.
To limit disruption and to ensure that the community can see progress, construction should only take place on one defined section at any one time and works should complete properly before the contractor moves on to start the next section.
Last but not least, significant milestones and achievements should be celebrated by the whole community.
5) What more could the Mayor do to support effective regeneration whilst maintaining mixed communities.
The first and most important thing that the Mayor must do if estate regeneration is to continue is to stop the Right to Buy scheme in London immediately. If this does not happen, the financial viability of demolish and rebuild regeneration will be severely threatened and the likelihood is that whole swathes of low density, poorly designed estates will be effectively sterilised. Many of these estates in inner London are currently at low densities of 300 to 400 habitable rooms per hectare (hrh) and could comfortably support densities of 600 to 900 hrh. These estates could make a significant contribution to London’s future housing needs. There are many excellent examples of regeneration projects where densities have been increased significantly, but the quality of the local environment and amenities have also improved significantly, creating genuinely beautiful places for people to live. ( St Andrews Hospital, Bow. Aberfeldy Estate, Poplar. Ocean Estate, Stepney. Woodberry Down, Hackney).
Time for this move is running out fast. The current discount of circa £102,000 has created a tidal wave of RTB applications.
Secondly, the Mayor could assist by equity cash flowing the extraordinary up front costs of major estate regeneration. These mainly comprise master planning and leaseholder buyback costs. Early phases of regeneration programmes are often cash negative because of these costs and private developers are reluctant to inject the amount of equity required to get schemes going. Banks are also reluctant to provide development capital for these purposes. Equity provided by the Mayor could be recycled throughout the scheme and returned with interest when the scheme becomes cash positive.
Finally, large scale demolish and rebuild schemes rely on compulsory purchase orders to secure vacant possession. Local politics often delays the making of these orders, which blights regeneration schemes with additional costs and avoidable delays. Support from the Mayor through the use of the GLAs CPO making powers for key regeneration schemes could help unlock difficult local politics and bring forward significant amounts of new housing.
1) What triggers the decision to consider refurbishing or renewing in the first place – is it always about the condition of the building.
See item 2) previously. The condition of the building and its net present value ( NPV) is the greatest influence on any decision. However, there are a lot of other factors that will influence that decision.
2) What guarantees are you able to make regarding rent levels and security of tenure for tenants.
Secure tenants preserve their tenancy rights, including a right to a social rent, when they are decanted. However, an issue we often face is that tenants who are under occupying when they are decanted, often have to move to a smaller property because they do not qualify for a property of the size they used to have. Parking rights do not always transfer as well, which often causes problems.
3) Have you undertaken carbon lifecycle or footprint analysis for any renewal projects.
Not in any detailed way.
4) How are options made public and consulted on
See item 3) previously.
5) Is it best to provide a preferred option or develop a number of options for consultation purposes
This is very difficult to answer as it is so scheme specific. However, if one is going to present a suite of very different options, then the starting point must be that they are all financially viable.
Generally, it is better to establish early if demolition or refurbishment is preferred. If early community engagement has been carried out carefully, the right alternative will usually become apparent. Thereafter, it is important that the community has a genuine input into designs going forward. It is sensible to steer a community gently, but avoid presenting “done deals” or “fait accomplis”
6) What process do you use to to reconcile any conflicts between what estate residents might want and what represents sound asset management strategy from the provider’s viewpoint.
We have an established resident majority governance structure, which makes it clear that residents on estate boards have influence but that the final decision on any major capital investment programme is made by the Main Board ( also with a resident majority). Being honest from the outset and presenting residents with the facts in simple, unjargonistic language always helps. As previously explained, tenant and leaseholder interests often seem to conflict, so this is a problem that we have to face on a regular basis.
7) Is stock transfer still valuable in terms of funding regeneration
Yes. It still provides the best access route to the capital markets for long term regeneration funding.
8) Do you plan to bid for the new £150 million regeneration fund.
We would like to, but we are concerned that the funds will be distributed as secured loans. As we are already quite highly geared, this will have an effect on our existing loan covenants. We would prefer to see an option for the fund to be distributed as equity into regeneration schemes, particularly to support high upfront costs such as master planning or leaseholder buybacks. This equity could be recycled throughout the life of the project and returned with interest once the project becomes cash positive.