William Eichler 16 May 2017

Haringey's £2bn regeneration plans

Haringey's £2bn regeneration plans

Haringey council is proposing one of the country’s largest regeneration projects. Designed to deliver thousands of new homes and jobs, those behind it also hope it will help alleviate the housing crisis and develop one of London’s poorest areas.

It is not uncontroversial. The new scheme - the Haringey Development Vehicle (HDV) - will be a joint venture between the authority and a private investor and will involve tearing down a number of estates and replacing them with new accommodation and more ‘mixed communities’.

This has led to critics accusing the council of everything from privatisation to social cleansing, to the wanton destruction of established communities.

The north London borough is one of the most deprived authorities in the country. In 2015 it ranked 30th out of 326 English councils on the Index of Multiple Deprivation. On the same index, 12 of Haringey's 19 wards were marked as being within the most deprived 20% in England. One ward, Northumberland Park, is among the 2-3% most deprived in the country.

Beyond the immediate needs of the borough, there is the wider question of the housing crisis, felt most acutely in the capital. As is well known, due to a number of factors - planning permission delays, land banking, depleted social housing stocks etc. - home ownership is an impossible dream for many. And renting is not cheap either.

For these reasons - and despite the criticisms - the Labour-led council is pushing on with the regeneration scheme.

The HDV will be a private entity run as a 50:50 partnership – a joint venture, essentially - between the council and a private investor, named in February 2017 as the developers Lendlease.

The council plans to put £2bn worth of public assets into it and this will be matched pound-for-pound by the investor. The idea is it will deliver economic growth via new housing, town centre redevelopment and enhanced use of the borough’s commercial portfolio.

On paper it’s a win-win arrangement. The council has, as the HDV business case puts it, a ‘substantial and diverse property portfolio’; but it doesn’t have the funds to spend on any major regeneration projects. Property companies, on the other hand, are cash and expertise rich, but they need land on which they can put their extensive resources to work. It’s an ideal match in theory.

For Haringey’s leader, Labour’s Claire Kober, the HDV is the best vehicle for delivering housing and economic development. ‘We need to deliver more homes in this borough in order to play our part in addressing the unprecedented housing crisis that London faces and at the same time we are determined to grow our local economy,’ she says.

This will potentially be good for the council in the new funding regime which will see, after 2020, local authorities relying solely on business rates and council tax. It is also necessary, Cllr Kober stresses, to provide jobs and opportunities for Haringey’s residents; connecting them ‘to the growth opportunities of London is fundamentally important,’ as she puts it.

This is, in the words of Haringey’s chief executive Nick Walkley, a ‘Herculean’ task given the current squeeze on local authority finances. Since 2010, the borough has lost funding of around £160m with roughly £70m of further cuts on the horizon.

‘The leader has said very clearly that, despite the grim financial outlook, she is not prepared to manage decline,’ Mr Walkley wrote in the 2015-18 corporate plan. ‘That is a very bold statement given the Herculean battle facing local government over the next three years and beyond.’

It is in this spirit, that Cllr Kober emphasises the importance of ‘scale’. ‘My priority really was always about delivering new homes and regeneration opportunities at scale,’ she says.

In 2015 the council undertook a cross-party review on the future of the council’s 17,000 homes. The Future of Housing proposed that an overarching vehicle was the ‘most appropriate option’ for delivering estate regeneration in the borough.

It said such a vehicle would bring in additional financial support while allowing the council to retain long term control of development and land. The review also noted an overarching vehicle would offer an income stream that can be spent on the provision of affordable and social rented housing. Most importantly, it concluded, unlike conventional development models, ‘it delivers a long-term return for the council.’

This last point is particularly important to Cllr Kober. In the past the council has lost out by selling off land and foregoing any future profits that can be extracted from its development. They ‘crudely parcel up a bit of land and sell it off to a developer who both takes the risk but also takes the upside’. That, she insisted, was unsatisfactory: ‘One off payment, little control and most fundamentally the community and services don't see the upside of that development.’

The use of an overarching vehicle means the council should benefit over the long term from a steady stream of income once costs have been recuperated by the investment partner, and the 50:50 relationship means the council’s voice will be as strong as the investor’s, with three council representatives on the board and three representatives of the investor: equal share of the profits, equal control over the decision making process.

The council’s overview and scrutiny committee is sceptical however. Its report into the HDV, published January 2017, one month before Lendlease was announced as the investing partner, described the whole project as having ‘unacceptably high risks’, particularly when considered in the context of the political and economic uncertainty unleashed by the Brexit vote - a political earthquake that occurred after the business case for the HDV was approved by the council.

Cllr Kober is not put off. ‘Of course,’ she explains, ‘you go into any new venture and there’s an element of risk. But in terms of this arrangement we’re looking at a limited liability partnership and we have done - and will continue to undertake - all the risk assessment that you would assume.’

An arguably more serious concern, though, relates to the paucity of evidence available for the success or otherwise of development vehicles in general. First of all there have only been 20 such vehicles authorised between 2002 and 2013. Secondly, because they are private entities access to information is more difficult than if they were public bodies (a fact which brings up serious transparency issues - addressed below).

Finally, this model of regeneration is by its nature a long and complex project (15-20 years is the proposed length of time for the HDV) and so performance and impact assessments are difficult to measure or are not available. The scrutiny committee were only able to look at two evaluative studies of multiple vehicles and one of a single vehicle - and they were ‘equivocal’ as to the effectiveness of the model.

‘Whilst such data is both useful and informative,’ they concluded, ‘the panel is of the view that the scale of such evaluative evidence does not constitute a sound evidence base through which to pursue LABVs [Local Asset Backed Vehicles, or Development Vehicles].’

The next concern raised by the scrutiny committee is the unprecedented scale of the proposed HDV. Of the 20 vehicles set up in the decade beginning 2002, the largest was the Slough Regeneration Vehicle, which was only worth £1bn. There were 14 worth less than £500m and three in excess of £500. Nothing has come close to Haringey’s proposed £2bn vehicle.

When taken together with the lack of precedent or sound evidence base, and the uncertain political and economic future of a post-Brexit Britain, such an investment can seem, in the words of Vaughan West, a regional organiser with the union GMB, like ‘gambling with the family silver’.

Mr Vaughan’s phrasing - ‘the family silver’ - is a reference to Harold Macmillan’s accusation that Margaret Thatcher’s privatisation programme equated to flogging the state’s valuables. And this is what many accuse Cllr Kober of doing - an accusation she adamantly denies.

‘If I'm being honest,’ she tells me, ‘I struggle to understand the charge that this is somehow privatisation. We’re not proposing to sell to private developers. We’re proposing to set up a new vehicle that the council would retain 50% control of and a blocking veto, and take 50% share of the proceeds…I just don't understand how that translates to privatisation.’

This is true enough. But the question of the role the private sector plays in delivering public goods cannot be easily dismissed. Yes, it’s easy to score political points by throwing around such terms as ‘privatisation’; but the reality is that while the interests of the public and private sectors sometimes intersect, at bottom their primary goals are very different: the former must deliver multiple goods to a diverse population regardless of what it gets back and the latter is geared to delivering profits to shareholders.

The scrutiny committee report recognises this contradiction, albeit in diplomatic language. It acknowledges the HDV ‘will bring together a diverse range of highly skilled public and private partners’ but it notes these partners ‘may have different objectives and bring competing cultures to the newly formed entity’. It concludes the panel were concerned a ‘lack of understanding of one another’s priorities and ethos could endanger the partnership relationship that underpins the HDV.’

GMB’s Mr Vaughan is less diplomatic: ‘Once they’re acting as members of that joint venture company as directors, they will not be acting as democratically elected representatives of the community,’ he says of the council representatives on the HDV’s board. ‘The interests of the company will have to come before any other interests.’

Relating to this is the issue of democratic control. The 50:50 partnership means – as Cllr Kober reminds me – that the council will retain a blocking veto on any undertaking carried out by the joint venture. But in practice things may be very different.

On paper the two sides may have equal control, but they will not be equally matched; a large multi-national corporation will have access to a much wider range of economic, business and legal support than the council, dramatically disadvantaging the latter in any disagreement.

The scrutiny committee found this to be the case when it visited another council to hold discussions on the development vehicle in operation there. The committee concluded that judging by the evidence presented the private investor ‘did not consider the council as informed as itself on business-related matters and in this sense not “an equal partner.” The panel felt ‘this perceived view of the public sector could undermine the development vehicle relationship and present a significant risk to the council.’

Cllr Kober rejects any suggestion of a democratic deficit. She points out that before any site is transferred into the HDV, the council would carry out an independent evaulation of the site and so there would be complete democratic control over what public assets enter the vehicle. ‘So actually,’ she says, ‘while on the one hand you say its an overarching vehicle and therefore you're moving things away from the council, there’s still quite a degree of council engagement. The cabinet’s really kind of setting the pace.’

This does not, however, answer the question of the control Haringey’s residents will have over their public assets after they have been handed over to a development vehicle where the council is outgunned by a private investor.

I came away from our interview equally unsure as to how transparent the joint venture would be. Cllr Kober pointed out that because each site must undergo rigorous oversight before entering the HDV then all the usual documents – business cases etc. – would be published.

‘Beyond that,’ she continues, ‘we would want to be open and transparent and publish as much as we could while recognising there are some decisions that would be taken that would essentially be commercially confidential.’ ‘In broad terms,’ she adds, ‘while all of these details are to be ironed out we will bring our commitment to transparency and accountability to the vehicle.’

The fact that the scrutiny committee failed to dig up much information on other development vehicles because they were ‘private entities’ and not ‘public bodies’ suggests a lack of transparency could well be a problem.

And the asymmetrical nature of the relationship between a cash-starved council and a multi-national corporation could mean the process of ‘ironing out’ questions of accountability and transparency might not be to the benefit of the council – or the public.

These criticisms aside, however, there remains the fundamental question: What is the alternative? Haringey has 3,000 homeless families to provide for and little cash thanks to Government cuts, so if they don’t turn to the private sector then where else are they to turn?

As Cllr Kober says: ‘What I would like to understand from opponents, if they’re absolutely not prepared to accept private sector involvement, then what are they prepared to compromise on?’

 
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