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Letter to the Minister for Planning regarding the Government’s Vacant Building Credit

Brandon Lewis MP
Minister for Planning
DCLG
Eland House, Bressenden Place.

London SW1

February 4th 2014

Dear Brandon.

We write to express our support for the view expressed by Westminster City Council, the Westminster Property Owners Association and many others, regarding the Government's Vacant Building Credit.

The supply of affordable homes is already severely constrained in Westminster. In addition to direct costs (such as homelessness) arising from the shortage of accommodation, the lack of affordable homes for sale and rent risks intensifying an already challenging problem of social and economic polarisation. As the Ramidus report on ‘Prime Value' housing, prepared for Westminster Council last year, set out:

"Westminster has long been an expensive place in which to own a home and there is no reason to expect this to change; in fact our analysis shows clearly that the affordability gap is widening. Westminster is becoming progressively less affordable and its social structure more polarised."

Westminster Council have submitted examples to DCLG of where the Vacant Buildings credit will lead to the loss of affordable homes/a contribution to the affordable housing fund. These include:

20 Grosvenor Square

Where:

" the proposed scheme for a residential development of 21,537sqm of residential floorspace (36 flats) generated a requirement for a financial contribution of £29.9 million to the Council's affordable housing fund. Following lengthy discussions between the applicant, the Council and an independent viability consultant, the applicant agreed in early January to pay a contribution of approx. £17.5 million. The application was reported to Committee on 13 January where officers were obliged to advise members that, notwithstanding the applicants offer, taking into account the Vacant Building Credit the requirement would reduce to

 

approx. £8.5million (using the methodology indicated by the recent CLG advice the figure would be £8,507,778).

As such we are losing approx. £9 million of the contribution which the developer had agreed to pay and which had been tested as being viable"

18-25 Park Crescent

Where

" the proposed scheme for a residential development of 25,715sqm of residential floorspace (71 units) generated a requirement for a financial contribution of £26.7 million to the Council's affordable housing fund. Following viability discussions, Committee resolved in December 2014 to accept the applicant's revised offer of a contribution of £18.65 million on the basis of the independent valuer's advice that this was the maximum viable contribution. Applying the Vacant Building Credit, the requirement would now be reduced to approx. £8.1 million.

As such, £10.6 million of the contribution offered by the applicants, and tested as being viable, would now be lost"

And:

1 Palace Street and 1-3 Buckingham Gate

Where:

"The proposed scheme for a residential development of 22,811sqm of residential floorspace (72 flats) generated a requirement for a financial contribution of £21.8 million to the Council's affordable housing fund. It was agreed between the applicant's consultants and the independent viability consultant appointed by the Council that the maximum contribution that would be viable is £9.1 million, and Committee resolved to grant permission on this basis on 11 November 2014.

Since the Committee resolution, officers have negotiated the S106 agreement and it is ready to be signed, however the applicants are now refusing to complete the agreement due to the introduction of the Vacant Building Credit, which means that the full agreed contribution of £9.1 million to the affordable housing fund will be lost"

The three schemes outlined above will result in a combined loss of £28.7 million to Westminster's affordable housing fund, and there are many other examples emerging. They are large scale schemes in high value areas which have been tested for viability and where the developer is still getting a reasonable return. It would appear that these types of scheme were not the intended target of the new policy but are caught by it due to the lack of clarity on the scale of schemes involved.

 

We also have major concerns about the potential for developers to sit on vacant properties or to make them vacant by paying tenants to forgo their leases in order to benefit from the policy (in high value areas such as Westminster many developers can afford to do this in order to avoid providing affordable housing). This will have knock-on implications such as pushing small businesses or temporary uses such as community facilities out of buildings where they are currently on short leases/low rents while developers are gaining permission for redevelopment schemes.

We would be happy to meet with you to discuss our concerns and urge you to reconsider this policy as a matter of urgency. Thank you for your consideration.

Yours sincerely,


Karen Buck MP
Mark Field MP

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