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Adelaide Wharf, North London - First Base

The initiative

The first project in English Partnerships鈥� London-Wide Initiative (LWI) has taken a while to emerge, but its arrival in the shape of Adelaide Wharf (pictured) in Shoreditch couldn鈥檛 be more timely. With the government and EP promoting local housing companies as a delivery route for more new homes, LWI鈥檚 exploration of how such an asset-backed vehicle works could be the shape of things to come.

Launched three years ago, LWI was designed to generate more accessible homes for key workers and explore different approaches to delivery. EP bought 15 sites for the programme and selected three development teams to build some 4,500 homes on them. Of those, 1,500 will be discounted homes for sale. The other developer teams are Key London Alliance (a consortium including Barratt Homes and Inspace) and Countryside Properties.

Under the deal between EP and its development teams, EP minimises developer risk by buying sites and retains the freehold on them. The development team takes a long lease on the completed scheme. With lower risk and certainty of the number of units the programme brings, the development team can get the best out of the supply chain, build technology and processes, and design.

Unlike most other shared equity schemes, LWI purchasers buy their share of the property 鈥� which must be about 50% 鈥� but pay no rent on EP鈥檚. Buyers must be key workers.

First Base is offering its LWI homes under its own branded deal, called Homehold. Under Homehold, the homes will remain affordable in perpetuity. Ben Denton, First Base鈥檚 director of investment and management, says: 鈥淲hen we looked at shared ownership we found that much of it was not very affordable, so we created a form of tenure where the buyer has no rent to pay on the proportion they don鈥檛 buy and the buyer鈥檚 share of the profit increases with their time in the property.鈥� When the buyer sells, they share a proportion of the uplift in value with the landowner.

Project

As well as being a first for the LWI, Adelaide Wharf is also one of the first projects by First Base, a new developer and one that is applying the thinking of commercial development to the residential sector.

The scheme comprises 147 units, 30% of which are three- and four-bedroom family units. Half of the homes are affordable, with 41 LWI homes and the remainder for social rent. The scheme also has 700m2 of commercial space, which like the housing has been approached differently. Conscious that much commercial space in residential schemes struggles to find occupants, the developer has done a deal with the Shoreditch Trust that will provide affordable managed workspace.

The social rented units are grouped together at the request of the housing association, but LWI and private homes are pepperpotted. All homes, however, have the same design, with large balconies, open-plan living space and pod bathrooms. Every resident, irrespective of tenure, walks into the development through the same hallways and looks on to the same courtyard.

All apartments are developed to the Housing Corporation鈥檚 Scheme Development Standards on space and the scheme has the top Excellent rating in the EcoHomes environmental performance system. The first residents will move in early in November following an 18-month build programme. Working with EP and First Base are architect Allford Hall Monaghan Morris, contractor Bovis Lend Lease, structural engineer Adams Kara Taylor, mechanical engineer Waterman 黑洞社区 Services and cost consultant Faithful & Gould. The registered social landlord for the scheme is Family Mosaic.

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This is similar to the local housing company model. It is about thinking of what you get out of the deal, rather than just getting the cash

Steve Oakes, EP

Each of the three development teams was given one LWI site with planning permission, with the intention of speeding delivery. Denton says: 鈥淚n practice, the approvals were not right for what we wanted to achieve. We had, in effect, to start again.鈥� The benefit of EP鈥檚 land ownership was soon made apparent. Steve Oakes, LWI project director with the agency, explains: 鈥淲hen you get a high land value and a big Section 106 agreement, the quality of the scheme can get diluted. Here EP underwrites the costs up to the writing of the development agreement so that gives the partners the opportunity to spend with confidence on quality and design.鈥�

Before building, First Base researched design, construction and marketing. It prototyped unit sizes to make sure furniture would fit. The steel-frame pod bathrooms were designed for flexibility so their fittings can be changed easily, as they would in a conventionally built home. The developer is aiming for its homes to be defect-free, a key advance in an industry dogged by snagging problems. That鈥檚 not all. The company will continue to drive improvement on each project, having measured outcomes on this project as a benchmark.

For the developer the challenges of this first scheme have come from its demands, as Denton explains: 鈥淭here was the timeframe, so everyone has had to work together. There was also the introduction of the high environmental standards. And this was the first time we had all worked as a team. In practice, it has all gone incredibly well. But the challenge for us is that this is just one project.鈥�

First Base will be responsible for the scheme鈥檚 maintenance and again is aiming high. Denton says: 鈥淲e are trying to introduce e-maintenance systems so that we can provide a more responsive maintenance service. This is not about providing the plumber who then doesn鈥檛 turn up when you expect him. The challenge is to deliver great management to provide the services that make you feel good about living there.鈥�

LWI homes sold at between 45% and 55% of open market value, a one-bed apartment being priced at 拢122,000, within reach for workers on an annual salary of 拢25,000. A one-bed market sale home is priced at 拢198,000.

The homes were marketed with the kind of event usually reserved for big spenders and both affordable and market buyers bought via the same sales brochure and marketing suite. First Base and EP did their homework, mystery shopping at other key-worker schemes and discovering that sales advisers had little idea of what shared equity meant. Given the product and the marketing approach, it is perhaps not surprising that all 41 units sold on launch morning.

The scheme has been a sales success and it has demonstrated a business model that could soon be re-applied. EP鈥檚 Oakes says. 鈥淭his is more of a joint-venture approach to delivering housing. Local authorities are interested in LWI 鈥� they鈥檙e often disappointed when they sell land because the developed result fails to live up to their expectations.鈥�

The structure of the LWI model would have to be altered slightly to fit council operational parameters, he points out, adding: 鈥淭his is a model that could give them control 鈥� it is about outcomes rather than outputs. But there is a price to pay for that; often local authorities are demanding on the Section 106.鈥�

Debut@Buckshaw Village, Chorley - Redrow Homes

The initiative

The Debut brand of one and two-bedroom homes for first-time buyers has been a sales success, but planning policy change has thrown its future into doubt. The Debut package was launched just over two years ago following some serious investment by the housebuilder; the company spent almost a year developing its low-cost market housing model. Over the last financial year, the housebuilder produced 500 Debut homes.

The brand aims to provide homes that are affordable, practical and have more style than the average basic starter home. Redrow created the designs itself, incorporating such features as inverted accommodation (bedrooms downstairs and living space upstairs), timber-style cladding and communal gardens. Debut homes are generally constructed from lightweight steel frame sourced from Framing Solutions, Redrow鈥檚 joint venture company with Corus. Homes are developed in schemes of about 75-125 units.

Debut is not restricted to first-time buyers, but investors are prohibited from buying. By selling the homes on a 125-year lease, Redrow believes it is able to block investor buyers effectively. Paul Pedley, deputy chairman of Redrow Homes, says: 鈥淚f they did buy, they would be breaking the terms of the lease and that would be serious. We have had a couple of investors try, but as far as we know they have backed out before the sale has gone through.鈥�

It is ironic that the problem with PPS3 has arisen at a time when Gordon Brown has put affordable housing at the top of the agenda

Paul Pedley, Redrow Homes

The marketing package is tailored to buyers on a limited budget. It includes a central service charge covering gas, electricity, buildings insurance and external maintenance. The housebuilder also markets homes with a financial incentive it calls Easi-buy, which allows buyers to defer 10% of the initial purchase price for up to 10 years. Buyers can pay the interest-free deferred sum in lump sums or monthly repayments.

The project

Two phases of Debut homes have so far been developed at Buckshaw Village, near Chorley. They are a small part of the 2,000-home, 拢400m mixed-use development being created on a former Royal Ordnance Factory site by Redrow alongside Barratt. Phase 1 of the Debut homes comprised 71 units and the second phase comprised 107 units.

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At Buckshaw Village and elsewhere, Debut has proved highly successful for the simplest of reasons, Pedley says: 鈥淭here is huge demand for a quality first-time buyer product. It is not true that the first-time buyer wants to buy a home at the age of 32. They are buying later because they cannot afford to buy earlier.鈥�

Debut homes are significantly cheaper than the housebuilder鈥檚 conventional homes, even when the two stand side by side on the same site. A two-bedroom apartment at Buckshaw Village costs 拢134,995 to 拢139,995.

A two-bedroom Debut home costs 拢101,995. 鈥淲e鈥檙e quite careful on pricing,鈥� says Pedley. 鈥淧rices are typically in the upper fifty to a hundred thousand pound range. We are thinking of people earning perhaps 拢15,000 to 拢17,500. We find if we go past a sales price of 拢120,000, it is out of their reach.鈥�

With so many homes under its belt, Redrow has now established the Debut formula. At Buckshaw Village, the housebuilder slightly tweaked the design to fit the Buckshaw style. Pedley says: 鈥淲e make sure Debut integrates, but retains its distinctive looks.鈥� The steel frame is erected in a well-rehearsed procedure but the technology continues to evolve. Framing Solutions has just devised Big Frame, effectively larger-sized steel frame panels with insulation and wall ties fitted in the factory.

鈥淲e are developers, not manufacturers. As we are building more homes we are learning,鈥� says Pedley. 鈥淭he use of lightweight steel frame on Debut has demonstrated that you can apply modern concepts to the building of a house 鈥� and do so cost effectively.鈥�

The challenge to the brand鈥檚 future comes from a new PPS. The economic model for Debut, as for many other private sector low-cost market housing ventures, relies on local planning authorities being willing to accept these low-cost homes as affordable housing. Housebuilders have always found it more difficult to win that argument in the south

of England, but Redrow says it has become more of a battle following the introduction of PPS3 in April. PPS3 set a new definition of affordable housing, which excludes low-cost market housing.

Since the PPS came into force, the supply of sites has slowed and the company has announced that it is putting its share in Framing Solutions up for sale. Pedley says: 鈥淲e are having to spend a lot more time in negotiations and in one instance in the South-west we had to go to appeal, which we won.鈥� The company hopes to continue to develop Debut homes, with perhaps more to come at Buckshaw Village, but not in the numbers it wants.