DD2445 Canada Water SIF and Affordable Housing Grant

British Land’s Canada Water masterplan comprises 53 acres of brownfield land in the London Borough of Southwark (LB Southwark). The masterplan comprises plans to redevelop the Surrey Quays shopping centre and low rise, out of town style commercial units plus the former Evening Standard Printworks to create a new town centre. Subject to detailed planning consent, the scheme will deliver: a minimum of 2,000 homes at 35% affordable, up to 400,000 sqm (GEA) of office and retail space, as well as significant improvements to public realm and a new leisure centre. This will support approximately 20,000 new jobs.

On 30th September 2019, LB Southwark’s Planning Committee recommended approval for the British Land Masterplan application, after five years of extensive consultation and engagement with the community. A partnership was created last year between Southwark Council and British Land after they entered into a Master Development Agreement.

The Mayor, the London boroughs and the City of London Corporation (collectively referred to as ‘London government’), with the agreement of the then Secretary of State for Communities and Local Government, established a London Business Rates Pool (‘the pool’) for 2018-19. The Mayor’s agreement to the GLA’s participation in the pool was set out in MD2217.

In the memorandum of understanding with the other pool members and the government, the Mayor set out his intention to use his share of the net financial benefit of pooling on strategic investment in the capital. To do this, the Mayor has established a £112 million Strategic Investment Fund (SIF) using the GLA’s forecast share of the growth in income.

The Mayor approved 13 bids for SIF investment for £90.89m (through MD2363) in September 2018, including £17.5m for the Canada Water project to improve the viability of the project and enable the delivery of the Masterplan objectives. This assessment was undertaken by the GLA’s Regeneration and Economic Development Unit.

In addition, to assist with viability, it is proposed that British Land are allocated £21.6m of Affordable Housing Grant (AHG). Together, the SIF funding and AHG is expected to enable the delivery of 700 affordable housing starts by March 2022 (including 220 nil grant units). In accordance with MD2282 and the Mayoral Decision-Making in the Greater London Authority framework, a Director Decision is required if the decision in respect of the Affordable Homes Programme relates to a bespoke agreement, which is the case here.

The Housing and Land Directorate are responsible for contracting and monitoring the delivery of the project.

The outline permission for the masterplan sets out minimum and maximum parameters for delivery of 2,000 (an increase from the initial 1,500) to 4,000 homes and up to 400,000 sqm (GEA) of commercial space. The affordable housing offer is 35% of the first 2,000 homes at a 70:30 tenure split weighted in favour of London Affordable Rent. The remainder will consist of intermediate housing products. An affordable housing viability review mechanism has been included in the section 106 agreement to further increase the scheme’s affordable housing offer.

Strategic Investment Fund

It has been estimated that the business rate revenue for the illustrative masterplan is £46.2 million per annum (for more information see Appendix 1). This application was approved by the Mayor under MD 2363 in September 2018.

British Land applied for £17.5m of SIF to accelerate the delivery of commercial space to develop the area’s economic sustainability; including supporting a viability gap arising from upfront costs associated with the relocation of a large Tesco store and transport requirements. Following further due diligence, including analysis to ensure compliance with State aid rules, it is proposed that the SIF funding is provided to assist with delivery of the affordable housing units on the site. This should enable British Land to invest more of its other financial resources into the up-front infrastructure costs, allowing it to deliver the against the Masterplan objectives. To further fulfil the objectives of the Strategic Investment Fund, the grant agreement will require British Land to use its reasonable endeavours to deliver at least 400,000 square meters of workspace and create at least 20,000 new paid positions of employment in connection with or resulting from the development of the wider site.

It is proposed that British Land receive the SIF funding at start on site for each plot at a grant rate of £36,458 per affordable home to meet the timescales for drawdown for the SIF programme. All SIF monies must be drawn down by March 2022.

Affordable Housing Grant

The original tenure mix proposed by British Land focussed the affordable offer on intermediate products, which was not compliant with LB Southwark policy. British Land therefore also requested affordable housing grant (AHG) from the GLA to support provision of London Affordable Rent and Shared Ownership, subject to viability assessment. The proposed AHG allocation is £21.6m. This will deliver 700 affordable housing starts by March 2022 (including 220 nil grant units) at a 70:30 tenure split weighted in favour or London Affordable Rent. The units and grant liability will transfer at a pre-agreed price to a Registered Provider (which may be LB Southwark) on completion.

Contracting

The GLA will enter into a single bespoke consortium contract (covering both AHG and SIF grant streams) with BL CW Holdings Limited, a British Land group company who will remain the lead consortium member, together with other companies which are expected to hold leases of the individual plots, to deliver the affordable homes.

The grant agreement will secure investments from both the AHG and SIF to a total of £39,100,000, equivalent to 3% of total scheme costs.

Under section 149 of the Equality Act 2010 (the “Equality Act”), as a public authority, the GLA must have ‘due regard’ to the need to eliminate unlawful discrimination, harassment and victimisation, and to advance equality of opportunity and foster good relations between people who share a protected characteristic and those who do not. Protected characteristics under the Equality Act comprise age, disability, gender re-assignment, pregnancy and maternity, race, religion or belief, sex, sexual orientation and marriage or civil partnership status.

Delivery of additional affordable homes in London is likely to help many of those with protected equality characteristics, as many of these groups are disproportionately represented among those in need of affordable housing. This is in part because they are more likely to experience homelessness or overcrowding, or to have low incomes that make it difficult for them to afford market housing. By enabling the development of new affordable accommodation, this project is likely to advance equality of opportunity for those with protected characteristics.

The allocation of the funding in this report implements the Mayor’s policies under his London Housing Strategy (LHS). An equality impact assessment of that strategy was undertaken which found that “…LHS policies are likely to have broadly positive benefits in relation to social and economic sustainability objectives such as improving health, reducing inequalities, increasing accessibility, and economic development…”

The Mayor’s Equality, Diversity and Inclusion Strategy was issued in May 2018. The first chapter of this document is entitled “A Great Place to Live”. Priority outcome 1.1 in the vision refers to delivering affordable, accessible and decent homes. This project will help deliver new affordable housing. This in turn helps to implement the requirements for new housing set out in the London Plan.

In order to access funding, British Land will be required to enter into a grant agreement with the GLA, which will place an obligation on British Land to have and comply with a policy covering equal opportunities designed to ensure that discrimination prohibited by the Equality Act 2010 is avoided at all times. British Land will also provide a copy of that policy and evidence of the actual implementation of that policy upon request by the GLA.

The GLA’s assessment is that this initiative will not have an adverse effect on any groups with a protected characteristic and will assist in fostering good relationships between groups.

Risks

Links to Mayoral strategies and priorities

The Intend to Publish (ItP) London Plan (2019) provides an integrated policy framework across housing, social, economic, cultural, environmental and transport policies.

The Plan is underpinned by the concept of Good Growth - growth that is socially and economically inclusive and environmentally sustainable. The draft London Plan is informed by six Good Growth objectives: GG1 Building strong and inclusive communities; GG2 Making the best use of land; GG3 Creating a healthy city; GG4 Delivering the homes Londoners need; GG5 Growing a good economy; and GG6 Increasing efficiency and resilience.

The ItP London Plan also identifies Canada Water as one of London’s opportunity areas with significant capacity for development. The British Land Masterplan responds to both the aspirations identified in the opportunity area the Good Growth objectives, by providing jobs, homes, offices, shops, public spaces and facilities within Canada Water. 4.2.4 The Mayor’s London Housing Strategy sets out policies and proposals determining how to deliver good growth priority GG4 – Delivering the homes Londoners need. This includes building homes for Londoners; delivering genuinely affordable homes; and high quality homes and inclusive neighbourhoods. The £17.5m SIF and £21.6m AHG is expected to support the delivery of 700 affordable homes (including 220 nil grant) and a new town centre.

Declarations of Interest

There are no conflicts of interest to declare for the officers involved in the drafting or clearance of this Decision form.

This decision requests approval for grant expenditure of up to: -

(i) £17.5m from the Strategic Investment Fund (MD2363), and
(ii) £21.6m from the Affordable Homes Programme 2016-22 to British Land to enable the delivery of 700 affordable homes at the Canada Water site.

Both streams of capital expenditure will be incurred over 2020-21 and 2021-22.

The provision of financial assistance (including grant funding) to part fund the delivery of affordable housing is permissible under sections 30(1) and 34 of the Greater London Authority Act 1999 (the GLA Act), if the GLA considers that doing this will further one or more of the GLA’s principal purposes of: promoting economic and social development in Greater London, and improving the environment in Greater London. The foregoing sections of this report indicate that it is open to the Director to take the view that the provision of this grant to British Land will promote economic and social development in Greater London.

In determining whether or how to exercise the power conferred by section 30(1) of the GLA Act, the GLA must:

(i) have regard to the effect that these decisions will have on the health of persons in Greater London, health inequalities between persons living in Greater London, the achievement of sustainable development in the United Kingdom and climate change and its consequences (sections 30(3-5) of the GLA Act);

(ii) pay due regard to the principle that there should be equality of opportunity for all people (section 33 of the GLA Act); and

(iii) have due regard to the Public Sector Equality Duty; namely the need to eliminate discrimination, harassment, victimisation and any other conduct prohibited by the Equality Act 2010, and to advance equality of opportunity between persons who share a relevant protected characteristic (race, disability, gender, age, sexual orientation, religion or belief, pregnancy and maternity and gender reassignment) and persons who do not share it and foster good relations between persons who share a relevant protected characteristic and persons who do not share it (section 149 of the Equality Act 2010).

In this respect, regard should be had to section 3 above.

Officers must ensure that all necessary and appropriate steps are taken, and a suitable funding agreement entered into with BL CW Holdings Limited and the other consortium members, to formalise the provision of the grant funding, including requirements regarding state aid compliance, before committing to the same.

Further comments in respect of the terms of the proposed grant agreement are set out in Part 2 of this report.