Regeneration is all about strategy
"One of the great frustrations with regeneration,"
says Sara Bailey, head of real estate and regeneration specialist at Trowers
& Hamlins, "is that there is an overriding strategic objective to be
met, and yet so many different perspectives, various needs which need to be
factored in, a range of drivers for the parties involved."
The objective Bailey refers to is the strategic regeneration of some of the UK’s most run-down housing, often, but not always, on large, so-called ‘sink’ estates, either still run by local authorities or by housing associations created specifically for the purpose.
Central, of course, to the regeneration of large portfolios of housing is the political and economic climate around low-cost housing provision, and the move to more mixed schemes in general across UK real estate.
"There is a huge need for housing, and a great need to regenerate many of the older estates, but there isn’t the funding, or the political appetite, to build new, entirely social developments," says Bailey.
The government’s recent white paper concentrates primarily on housebuilding, with the focus on getting local authorities to release land for building rather than transforming their existing stock, but the Trowers team sees reason for optimism in how the private sector is responding to the opportunities offered by large-scale regeneration schemes.
"Today’s philosophy – you look at Argent’s scheme in King’s Cross, and the Olympic legacy development in Stratford – is that of placemaking. This not only requires a diverse range of physical facilities and proper thinking about open spaces but also requires a whole different way of thinking from the outset. A different approach to risk on the part of all parties, or it’s just not going to get done."
Bailey feels the government may have been missing a trick in not addressing regeneration directly in its white paper.
"The white paper makes it plain that the government thinks not enough units are being built, but many of the old estates present a great opportunity to use public sector land in prime locations to create developments of greater housing density. These would not only address the undersupply issue but provide very fertile ground for commercial development as part of a mixed scheme, which can make it much easier to get things going," she says. But she cautions that the needs of individual tenants – and leaseholders – are one of the key considerations in any regeneration of existing stock.
"Obviously it’s not as simple as just removing all the people from an estate, knocking it down and building a new one," she says.
"We are talking about people’s homes, and very often they don’t want to just leave them, regardless of what the benefits of regeneration might be or might seem to be to developers or local authorities."
"You might get a guy who has been in his flat for 40 years who doesn’t want a new one, with a new heating system or a new kitchen. It might seem completely irrational to an outside party, but people get very attached to their homes, and trying to impose change on them is often the least productive, most time-consuming and most expensive way to proceed."
Mick Donnellan, real estate partner, feels more creativity needs to go into the process at the outset, when all too easily the main focus becomes the removal of the current occupants so that development can start.
"It has become more difficult in some ways," he says. "Because of Right To Buy, many of the occupants are leaseholders, not tenants, and that means buying them out. Compulsory Purchase Orders (CPOs) are, of course, a last resort, but at only a 10% uplift on current market value, it’s not that interesting for many. "
"Many people find that even if they were given that money, they couldn’t afford to re-buy into the new scheme anyway, so it’s not surprising they’ll dig their heels in rather than move."
"Developers – and other parties with skin in the game – are coming up with new ways around that, for instance offering the possibility of residents returning to the new development with a part-equity deal on a new flat."
Sara Bailey agrees, "those engaged in planning the regeneration include: funders who obviously have a vested interest in their capital being engaged quickly and getting returns as soon as possible; developers who need to get on with it so as not to tie up cash and construction resources; and local authorities and housing providers who desperately need to develop new housing units to free up their own stock. Beyond any local benefits a major regeneration project might deliver, all these parties need to realise that there are people at the other end of their planning process, and people with a number of legal mechanisms at their disposal, if they want to derail or delay things. And delays mean increased costs."
"Getting around this is about thinking strategically at the outset, not getting fixated on your own commercial objectives but understanding what the other parties to the development are looking to achieve, so that the 'sell' to occupiers – whether tenants or leaseholders – is optimal."
"We find that where we are able to get involved at the strategic level, our experience of what is happening at the ground floor can be invaluable. This is all about spotting the pitfalls and elephant traps before you fall into them, about understanding that these are people’s homes that we are talking about but that needs to be balanced with the need to create new home."