Borough claims £40m homes windfall - Nine Elms Boom
03-18-2014
By Nick Johnstone
Embassy Gardens development soars in price per square foot
A flagship Conservative borough is to receive a £40 million affordable housing windfall from a private residential developer due to rocketing property values on an iconic London scheme.
Ballymore Group is paying the sum to Wandsworth Council after its Embassy Gardens scheme in Nine Elms smashed through an £850 per square foot price threshold set out in the original section 106 deal, agreed with the council two years ago.
The south London council included in the agreement a so-called ‘review mechanism’, allowing it to claw back a percentage of Ballymore’s sales proceeds retrospectively if values rose.
At the time, prices for new homes in that geographical area were averaging £750 to £800 per square foot. In today’s booming London residential market, they already exceed £1,000 per square foot in Nine Elms.
Under the terms of the agreement, Ballymore was required to pay 40 per cent of any surplus sales income to the council if values went above the £850 per square foot benchmark. That amount was capped at £40 million.
Planning documents from a committee meeting on 20 February, where Ballymore received detailed consent for phase two of its 2.6 million square foot scheme, reveal the developer is paying the full £40 million, reaching the mechanism’s limit.
The use of review mechanisms is becoming increasingly common among London councils, because viability assessments are deemed out-of-date once schemes are being completed and the homes sold. They are designed to help local residents capture some of the benefits of rapid gentrification. But they are controversial with developers, which argue local authorities get to enjoy the ‘upside’ of a new residential development without sharing any of the ‘downside’ risk.
Wandsworth Council said this week it was in the early stages of planning around 58 new affordable rent homes in Nine Elms and that the additional £40 million could see that programme expanded further.