55-Morning Lane, Hackney - Development Proposal (2022)

INTRODUCTION AND SITE ANALYSIS

4

SITE ANALYSIS AND CONSTRAINTS Summary of site: The development site is located on Morning Lane, a B road located in East Hackney. The site is in the Homerton ward and holds a Tesco Superstore and adjacent car park site. The site was bought for £60 million by Hackney Council and a deal was acquired with the developers behind the 'Fashion Hub' which is now an empty site with no apparent uses.

Hackney Council has created two development options per the Hackney Local Plan: 1. 'A Phased Approach for Mixed-Use Development' This option looks into redeveloping the car park site into a site for commercial, residential and retail uses with a new Tesco site . The scheme opts into producing 'genuinely affordable housing'.

2. 'A Comprehensive Approach for Mixed-Use Development A development of the whole site with the Tesco being closed down with the same proposed commercial, retail and residential uses.

Site Constraints: Upon visiting the site, it was clear to see the area provided many local amenities whilst not being able to operate with the amount of congestion present. We Archeological Priority Area hope through our development proposal, we can Critical Drainage Area alleviate some of the constraints of our site. These Local Shopping Centre include the lack of permeability across the site and Local Open Space (St. John congested main road which is adjacent to the Morning Churchyard Gardens is also a SINC) Lane Site. The new shopping centre based on the Major Town Centre 'Narrow Way' is also a factor into how the site operates and whether this can be pedestrianised further to allow Primary Shopping Frontages for a more coherent urban form.

Primary Industrial Area

Legend:

Conservation Area:

The Morning Lane Site is located within a large conservation area which will influence any design proposals put forward. The two main areas include Clapton Square and Town Hall Square.

Clapton Square: This area is predominantly made up of St John's Church and St John's Gardens along with terraced listed buildings which are protected by the Act of Parliament.

Town Hall Square: This area was defined as a conservation area in 1995 and serves as a link between Mare Street and Clapton Square. It holds many cultural institutions including Hackney Town Hall and Hackney Empire along with Central Hall and Library.

Sources: Hackney Local Plan Hackney Council MOPS website

5

OVERVIEW Changing Levels of Deprivation As with many parts of London, Hackney has experienced significant changes over the past ten years. Most notably, this relates to the influx of a new, wealthier community driven by the tech industries clustered around Shoreditch and the proximity of the area to the City. This has resulted in an increase in social polarisation in terms of income, and fears from long-term residents about displacement due to the increasing house prices and ongoing gentrification.

The accompanying maps show the changing levels of deprivation in the area, showing the extreme social differences within the area. As of 2019 the neighbourhood (Hackney 017A) was amongst the 30% most deprived parts of the country.

Left (households not in any deprivation index) - Higher levels of red correspond to fewer houses not in any deprivation index.

- Hackney Central has relatively few families which do not experience any level of deprivation

Right (households in 4 deprivation indexes) - Higher levels of red show higher levels of multiple deprivation.

- Around Hackney Central there are more households in 4 levels of deprivation

9

CARE INFRASTRUCTURE

This map highlights the different types of care infrastructure present in the surrounding Hackney Central area. This indicates the need for more infrastructure within and around the Morning Lane site to serve local needs and to meet the responses from the MOPS survey.

10

OVERVIEW AND EXISTING CONDITIONS HACKNEY CENTRAL

HACKNEY’S GREEN AND OPEN SPACES

Hackney Central is comprised of 3 significant character areas: ● Hackney Central - Focused along Mare Street and the Narrow Way with busy streets and quiet routes leading off to the east and west. The area contains a significant concentration of employment uses focused between Mare Street and the railway line. ● London Fields - A neighbourhood focused around London Fields open space with creative employment spaces to the east of the railway tracks and within the arches. ● Victoria Park and Well Street - Older residential neighbourhoods along the northern edge of Victoria Park with an attractive historic character.

55 MORNING LANE

EXISTING CONDITIONS

KEY FACTS: • 25 parks in Hackney have been awarded Green Flag status (as of 2018).

• Approximately three quarters of Hackney residents do not have access to a private garden.

• There are 395 hectares of open space in the Borough.

• Hackney Marshes supports up to 82 football, rugby and cricket pitches.

• Air quality in Hackney is a concern with all indicators being significantly above threshold levels. Significant parts of the Borough are Air Quality Management Areas (AQMA).

• There are similar concerns for water quality in the borough’s waterways with the rivers being graded poor to fair in terms of chemical and biological pollutants. In the east of the Borough, there is a high risk of flooding that poses a threat to existing properties and is a constraint to future development in the area.

MOPS Green Spaces Responses: Hackney Central Conversation is a Council supported platform. The comments logged here further reflect MOPS findings of the importance of green spaces.

• •

The cluster of green (positive) responses west of Mare St are for the Garden of Earthly Delights; a community garden. Most of these positive responses cite the lack of green space in Hackney Central.

Source: LP33 Interactive map, hackney.gov.uk Hackney Central Conversation Hackney Parks and Green Spaces Strategy (2021)

•

Trees and green spaces among the top desires for residents – in relation to community and public spaces.

Responses for green and community spaces were often integrated into a broad communal vision.

Some responses were focused on the aesthetic value more so than the community value.

16

OVERVIEW AND EXISTING CONDITIONS Borough of Hackney Statistics: Employed: 73.1% Unemployed: 2.6% Median Annual Gross Pay: £34,507 London’s unemployment rate is 5.4%, and the UK’s rate is 4.1%.

London’s employment rate is 74.7%, and the UK’s rate is 75.5%.

Hackney

London

Mean Annual Pay Gross- Total

35,259

43,059

Mean Annual Pay Gross- Male

41,415

52,638

Mean Annual Pay Gross - Female

29,317

32,208

Existing Grocery Stores

Percent Employed Ages 16-74

The site area has an employment rate of 60-65%, with highly variable rates adjacent. The site area has an unemployment rate of 8-10%, with high levels of unemployment to the south.

Sainsburys Local

Percent Unemployed Ages 16-74

Iceland Site

Supermarket Accessibility

Sainsburys Local Tesco Superstore Bohemia Place Market

Broadway Market

Seasonal market with food that specializes in clothing, particularly vintage clothes. The markets has previously hosted vegan and blackowned events. They aim to have at least 25% of traders be local.

A historic market with food, clothing, vintage shops and more. Many local residents feel it is an expensive market.

It is predominately composed of food stalls and shops. The market is located south of the site, next to the canal.

Lidl is 16 min walk from site and the Tesco Superstore is 12 min walk from site.

Ridley Road Market Ridley Road Market markets itself as a multicultural, international spot to get local food. The market is located in Dalston.

This section covers the background of economic factors in the area. The employment rates help to gauge the need for more workspaces and employment opportunities that need to be introduced in the area. The links to deprivation must be considered alongside the high unemployment rates. This also raises questions around accessible and cheap grocery stores and whether these are accessible to locals and the implications this has on the development proposal to ensure this need is addressed.

22

DEVELOPMENT PROPOSAL

24

SITE STRATEGIES

Permeability

Density (10 floors)

Common Space

Density (15 floors)

Tesco and Carpark

Upper Open Space

27

ASSESSMENT FRAMEWORK - FINANCIAL VIABILITY

34

ASSESSMENT ASSUMPTIONS Traditional Viability Assessment Assumptions:

Revised Viability Assessment Assumptions:

• Developers will take a 15-20% profit • Socially rented/Affordable housing units will comprise 50% of the housing stock, with the other 50% remaining market-rate housing • Depreciation in the value of the property assets would need to be accounted for in calculation long-term revenue and return on investment.

• Mixed Tenure: In many developments, it is expected that there will be a mix of both social and market-rate housing, as well as a mix of units for rent and units for sale.

Combining socially rented units with market-rate units for sale presents a potential conflict in use and in residents’ expectations.

• Council will be developers, so will not take a percentage of profit.

• More than 50% of the available housing stock will be affordable/socially rented.

• Depreciation will not be accounted for in the assessment, given the assumption of proper maintenance (as part of the included maintenance costs). Depreciation is also a difficult concept to quantify as it is unknown how the property will keep or retain its value, especially in such an inflated housing market.

• The estimated revenue from commercial and housing rents is based upon 100% occupancy, with no accounting for turnover or lapses in leases. This will obviously not be realistic for an actual development, but for the purposes of this assessment will serve to give an idea of the maximum potential revenue.

• Tenure: This development proposal comprises 100% rented housing, with ownership retained by Hackney Council as a freehold property.

Unknowns in the Assessment Process: • Requirements for affordable housing can depend on each scheme, the best or optimal amount of affordable housing is up for debate.

• Grants which are offered, such as the GLA Affordable Homes grant, be uncertainty and affect both short-term and long-term council housing targets.

• Extensive site assessments are needed to fully understand the housing needs of the area as broad assumptions must be made where it may not be relevant.

• Development costs are an uncertainty as these can fluctuate and depend on the development context. The costing of the development done here is based largely upon figures from other development projects which may not be representative of the area, (i.e. more or less expensive areas), may not be comprehensive with all construction elements, or be otherwise generalized.

• Assumptions have also been made regarding Section 106 Agreements which can also change what developments and/or schemes can be funded directly from CIL/Section 106 Agreements.

• What counts as genuinely affordable housing? Following London and Hackney guidance on what is ‘affordable’ gives an official answer, but its is unknown how much that accurately reflects the reality of residents. More research should be done to understand and question current conceptions of ‘affordable housing,’ but that is beyond the scope of this viability assessment.

From the Affordable Homes Programme 2021-2026 - Funding Guidance (these numbers guided our assumptions for the development option)

36

HOUSING PRICES Overall Statistics: Average House Price in UK: £274,712 (December 2021) UK House Price Index: 144.08 (December 2021) Average House Price in London: 681,907 (Rightmove 2020) House prices rose 10.8% between 2020 and 2021.

Hackney Statistics:¹ Average House Price: £542,000 Average monthly rent of 2-bedroom property: £1,800 Current Real Estate Market: Rightmove Taking a sampling of units currently available (March 2022) on the market gives an up-todate impression of market rate housing in the area. All prices examined in this section are located within a ½ mile radius of Hackney Central Station.

Studio1 bedroom2 bedroom3 bedroom4 bedroom-

Renting: £905-1,190 £1,250-2,475 £1,770-2,925 £2,650-6,000 £4,500

For Sale: £285,000 £195,000-650,000 £325,000-1,000,000 £400,000-1,100,000 £725,000-2,350,000

Median Annual Gross Pay: £34,507 Affordable Rate: £11,502 / year £959/month Affordable sales price, using Median Annual Gross Pay as base: 1/3 income x 30-year mortgage = Affordable Sales Price £11,502 x 30 = £345,060

Hackney’s ‘Genuinely Affordable Housing’: Hackney defines genuinely affordable housing as paying 1/3 of income on housing costs (Hackney Council, What is Affordable Housing?). Hackney differentiates between ‘Social rent’ and ‘Affordable rent,’ where ‘social rent’ is deemed genuinely affordable, while ‘affordable rent’ is not as ‘affordable rent’ is often set near 80% of market rate. ‘Sub-market,’ or intermediate, rents can be anywhere between genuinely affordable rent (1/3 of income) and market rate, and thus are not likely to qualify as genuinely affordable. Between 20102018, 62% of council-built homes were genuinely affordable. The Council maintains a goal of providing more than half of new units as genuinely affordable.

Market-Rate Pricing:

1 bedroom2 bedroom3 bedroom4 bedroom-

Average Size: 40 m² 70 m² 80 m² 100 m²

Estimated Sale Price: 400,000 500,000 600,000 800,000

Sale Price in m² £10,000 £7,143 £7,500 £10,000

E8 Land Registry Sales 02/03/2021– 02/03/2022 (Not new build) Terraced

Flat/ Maisonette

Detached

Semi Detached

Other

All

Count

55

198

2

7

23

285

Max

3,000,000

2,530,000

2,620,000

1,420,000

4,900,000

4,900,000

Min

455,000

137,500

1,350,000

737,000

1,000

1,000

Mean

1,259,088

525,726

1,985,000

1,211,071

1,457,130

769,492

Median

1,170,00

490,000

1,283,000

1,280,000

501,000

-

The site is split between the E8 and E9 postcodes.

E9 Land Registry Sales 02/03/2021– 02/03/2022 (Not new build) Terraced

Flat/Maisonette

Other

All

Count

55

165

12

232

Max

1,900,000

1,050,000

2,600,000

2,600,000

Min

480,000

140,000

100

100

Mean

1,042,346

465,828

559,894

607,368

Median

970,000

426,000

300,000

490,000

40

COMMERCIAL PRICES 2021 Estimates ¹ Hackney & London Fields:

Grade A Rents £35-42.50 /sq. ft. £376.74-457.47 / sq. m.

Grade B Rents £25-32.50 /sq. ft. £269.1-349.83 /sq. m.

Rightmove Commercial Rents: Accurate as of March 2022, within ½ mile of Hackney Central Station (per month).

31A Chatham Place 7-9 Chatham Place 290 Mare Street 280 Mare Street 426 Reading Lane Arch Institute Place Arches Richmond Road 199-205 Richmond Road 274 Richmond Road Median: Average:

£27/sq. ft. £22/sq. ft. £27.51/sq. ft. £60/sq. ft. £35/sq. ft. £22/sq. ft. £33.60/sq. ft. £112.47/sq. ft. £35/sq. ft. £33.60/sq. ft. £41.62/sq. ft.

£290.63/sq. m. £236.80/sq. m. £296.12/sq. m. £645.84/sq. m. £376.74/sq. m.. £236.80/sq. m. £361.67/sq. m. £1,210.63/sq. m. £376.74/sq. m. £361.67/sq. m £448/sq. m.

Affordable Workspaces: Hackney policy has expressed a continued need for affordable workspace. According to Hackney Local Plan 2033, affordable workspace should account for at least 10% of new employment workspace (Hackney Local Plan 2033, LP 29). The Local Plan defines affordable workspace as anything less than 60% of market-rate in most of Hackney, and anything less than 40% of market-rate in Shoreditch.

Taking Hackney’s requirements for affordable workspace, we will here define affordable workspace at 50% of market-rate commercial space.

Affordable Workspace in Hackney Central: Average Commercial Rent: £448/sq. m.

Affordable Commercial Rent = Average rent x 0.5 £448/sq. m. x 0.5 = £224/sq. m.

Average Commercial Sales: £6,254.65/sq. m.

Affordable Commercial Sales = Average sale price x 0.5 £6,254.65/sq. m x 0.5 = £3,127.33/ sq. m.

Rightmove Commercial Sales: Accurate as of March 2022, within 1 mile of Hackney Central Station.

2A Belsham Street Darnley Road 4-14 Spurstowe Terrace Spurstowe Terrace Chatsworth Road 114 Chatsworth Road Mentmore Terrace Shore Road 47-49 Tudor Road 69-73 Dalston Road Median: Average:

£500/sq. ft. £909/sq. ft. £500.84/sq. ft. £462.11/sq. ft. £575/sq. ft. £549/sq. ft. £835.32/sq. ft. £525/sq. ft. £507.94/sq. ft. £446.50/sq. ft.

£5,382/sq. m. £9,785/sq. m. £5,391/sq. m. £4,974.15/sq. m. £6,189.30/sq. m. £5,909.44/sq. m. £8,991.39/sq. m. £5,651.10/sq. m. £5,467.47/sq. m. £4,806.13/sq. m.

£525/sq. ft. £581.07/sq. ft.

£5,651.10/sq. m. £6,254.65/sq. m.

¹Oktra. “The Cost of Office Space in London 2021.”

Retail vs. Housing Prices: Retail units are cheaper to build than housing units as they do not require finishing or many artifacts to be completed (see pages on cost). Although cheaper to build, the rental price is around 10 times higher for retail than for residential. Comparing an affordable rental average of 25 GBP/sqm per month in a housing unit versus around 224 GBP/sqm per month for retail.

This difference in rental revenue is something that might push developers to try and get as many retail units at commercial or affordable value as they can and reduce housing units. In this scenarios, developments such as the Fashion Hub seem very profitable on paper even if they have some empty units year around.

41

SCENARIO 1 REVENUE: 50/50 SPLIT REVENUE FROM RENTING WITH 50/50 AFFORDABLE/MARKET SPLIT FROM HOUSING RENT VALUES

2022

Total Units

Affordable Rent/month

Total Affordable Rent/year

Market Rent/mont h

Total Market Rent/year

Total/annu m

1 Bed

50

£863

£258,900

£1,500

£450,000

£708,900

2 Bed

60

£959

£345,240

£2,150

£774,000

£111,9240

3 Bed

220

£1,055

£139,2600

£3,000

£396,0000

£535,2600

4 Bed

120

£1,151

Rent Calculations

£82,8720

£3,800

£273,6000

£356,4720

Total (for 1 year):

£10,745,460

Under London’s Living Rent, the rent for a 3-bedroom unit should be no more than 10% above the rent for a 2-bedroom unit. The rent for a 4-bedroom unit should be no more than 20% above the rent for a 2-bedroom unit. The rent for a 1-bedroom unit should be 10% below the rent of a 2-bedroom unit. The rent for a 2-bedroom property is set at 1/3 of local median household incomes (Mayor of London). Hackney’s median annual income of £34,507 will be used as the basis for calculations of affordable rent. Market rent prices are taken from current market research.

Year

Total Housing Rent

10-Year, 20-Year, and 30-Year Revenue, Assuming a 2% Inflation Rate

2022

£10,745,460

2023

£10,960,369

2024

£11,179,577

Taking the 50/50 Affordable/Market-Rate Rent split for the development at a 10-year timescale, we can estimate that that the proposal will generate £130,758,444 in revenue from housing alone.

2025

£11,403,168

2026

£11,631,231

2027

£11,863,856

2028

£12,101,133

2029

£12,343,156

2030

£12,590,019

2031

£12,841,819

2032

£13,098,656

Total:

£130,758,444

Using the same approach and 2% inflation rate, we can estimate further out to a 20-year and 30-year timescale. This will turn the following revenue: 10-year - £130,758,444 20-year - £277,053,603 30-year - £455,386,585

REVENUE FROM RENTING WITH 50/50 AFFORDABLE/MARKET SPLIT FROM 2022 COMMERCIAL RENT VALUES Following the same scenario as housing, commercial space will be split 50/50 between marketrate rented floorspace and affordable rented floorspace. The total commercial floorspace generated by the development proposal is 9,810 sq. m., leaving 7,775 sq. m. of floorspace for both market-rate rent and affordable rent generation.

Floorspace (in sq. m.)

Monthly Rent/ sq. m.

Rent/Month

Revenue/Year

Market-Rate

4,905

£448

£2,197,440

£26,369,280

Affordable

4,905

£224

£1,098,720

£13,184,640

Total (for 1 year): £39,553,920

10-Year, 20-Year, and 30-Year Profits, Assuming a 2% Inflation Rate Taking the 50/50 Affordable/Market-Rate Rent split for the development at a 10-year timescale, we can estimate that that the proposal will generate £481,320,396 in revenue from commercial space alone.

Using the same approach and 2% inflation rate, we can estimate further out to a 20-year and 30-year timescale.

This will turn the following revenue: 10-year - £481,320,396 20-year - £1,019,831,266 30-year - £1,676,273,011

TOTAL REVENUE: Adding total Commercial Rents with total Housing Rents creates the total revenue of the development for each timescale in this scenario.

1-year – £50,299,380 10-year – £612,078,840 20-year – £1,296,884,860 30-year – £2,131,659,596

Year

Total Commercial Rent

2022

£39,553,920

2023

£40,344,998

2024

£41,151,898

2025

£41,974,936

2026

£42,814,435

2027

£43,670,724

2028

£44,544,138

2029

£45,435,021

2030

£46,343,721

2031

£47,270,596

2032

£48,216,008

Total:

£481,320,396

42

SCENARIO 2 REVENUE: 100% AFFORDABLE REVENUE FROM RENTING WITH 100% AFFORDABLE RENT FROM 2022 HOUSING VALUES Total Units

Affordable Rent/month

Total Affordable Rent/year

1 Bed

50

£863

£517,800

2 Bed

60

£959

£690,480

Year

Total Rent

2022

5,650,920

2023

5,763,938

2024

5,879,217

2025

5,996,802

3 Bed

220

£1,055

£2,785,200

2026

6,116,738

4 Bed

120

£1,151

£1,657,440

2027

6,239,072

2028

6,363,854

Total (for 1 year):

£5,650,920

2029

6,491,131

2030

6,620,953

10-Year, 20-Year, and 30-Year Revenue, Assuming a 2% Inflation Rate

2031

6,753,372

2032

5,650,920

Taking the 100% affordable rent rate for the development at a 10-year timescale, we can estimate that that the proposal will generate £8,764,437 in revenue from housing alone.

Total:

£8,764,437

Using the same approach and 2% inflation rate, we can estimate further out to a 20-year and 30-year timescale.

This will turn the following revenue: 10-year - £8,764,437 20-year - £145,699,463 30-year - £239,482,830

REVENUE FROM RENTING WITH 100% AFFORDABLE RENT FROM 2022 COMMERCIAL RENT VALUES Following the same scenario as housing, commercial space will be 100% affordable rented floorspace. The total commercial floorspace generated by the development proposal is 9,810 sq. m. The exception to this scenario is Tesco, who we have assumed will be paying market-rate rents. Beyond the expected Tesco floorspace, everything else will be calculated according to affordable rates per square meter.

Floorspace (in sq. m.)

Monthly Rent/ sq. m.

Rent/Month

Revenue/Year

Tesco (at Market-Rate)

4,496

£448

£2014208

£24,170,496

Affordable

5,314

£224

£1190336

£14,284,032

Total (for 1 year):

£38,454,528

10-Year, 20-Year, and 30-Year Revenue, Assuming a 2% Inflation Rate Taking the 100% affordable rent rate for the development at a 10-year timescale, we can estimate that that the proposal will generate £467,942,208 in revenue from commercial space alone.

Using the same approach and 2% inflation rate, we can estimate further out to a 20-year and 30-year timescale. This will turn the following profits:

10-year - £467,942,208 20-year - £991,485,293 30-year - £1,629,681,392 TOTAL REVENUE: Adding total Commercial Rents with total Housing Rents creates the total revenue of the development for each timescale in this scenario.

Year

Total Rent

2022

£38,454,528

2023

£39,223,618

2024

£40,008,090

2025

£40,808,252

2026

£41,624,417

2027

£42,456,906

2028

£43,306,044

2029

£44,172,165

2030

£45,055,608

2031

£45,956,720

2032

£46,875,855

Total:

£467,942,208

1-year – £47,218,965 10-year – £476,706,645 20-year – £1,137,184,756 30-year – £1,869,164,222

43

ADDITIONAL FUNDING COMMUNITY INFRASTRUCTURE LEVY (CIL) • Hackney Council charges CIL alongside the Mayor CIL to all potential development.

• The CIL will be able to provide much needed community infrastructure into this development site.

• The Mayor of London is also providing additional CIL for Crossrail development which will be applicable to this site as Hackney Central is a central location for the proposed transport link.

• The Gross Internal Area must be at least 100 m2 for it to be eligible for CIL • The Mayoral CIL is charged at £35 per m2 across the Borough • The Morning Lane Site is located within Residential Zones A and B which charges at £190 per m2 and £25 per m2 respectively.

CIL CALCULATION FOR PROPOSED DEVELOPMENT

PUBLIC LOANS WORK BOARD • Lending facility managed by the UK Debt Management Office • Borrowing fund for LPAs for development projects.

• Council can borrow as much money but must be paid back in revenue and to ensure repayment of debt is affordable and manageable.

• Hackney Council took out a loan of £55 million for the Tesco Morning Lane site which was funded by the Public Loans Work Board.

GLA GRANTS • London Borough of Hackney has requested £17.5million for affordable housing grants to be provided.

• The GLA will be providing grants to up to 53 housing suppliers as part of the Affordable Homes Programme.

• £3.4bn has been allocated by the GLA to produce affordable housing. Over 57% will be for socially rented housing.

• This grant scheme will allow funding for LPAs, housing associations and other organisations which have funding status with the GLA. • Assumption of £70,000 to be granted for each affordable housing unit.¹ Scenario 1: 50/50 leads to: £70,000 x 225 = £15,750,00 Scenario 2: 100% leads to: £70,000 x 450 = £31,500,000

Regulation 123 List: This list covers all the developments that Hackney Council intends to spend CIL monies towards.

These include pedestrian and public realm improvements, and our proposed vision focuses on the area becoming more permeable and accessible to new and current users.

Total CIL: £11,755,125

HACKNEY COMMUNITY FUND The Hackney Community Fund which launched in 2022 allows local organisations and groups to apply for up to £100,000 of funding and grants.

SECTION 106 AGREEMENTS • Section 106 Agreements work alongside CIL and this SPD agreement was adopted by the council in 2020. This will help to ensure there is funding for affordable housing as part of the CIL and Section 106 process.

• This can also help to create the underground car park as developments must be car free as pushed by the London Plan.

• Affordable housing will be considered as an 'in kind contribution' as these are nonmonetary contributions.

• Section 106 Agreements for 'in kind contributions' must be agreed prior to the development and the developers and Council will liaise to ensure the right amount of affordable housing is implemented.

The grant is made up of levies from other developments within the Borough and helps to encourage local community projects. This may allow for improvements or ideas on how community infrastructure surrounding the Tesco can be implemented. ¹ The same assumption of 70,000 in funding per unit of affordable housing was used in the South Kilburn Estate Community Plan, p. 67. The same assumption is made in the Alton Action Report, p. 151.

44

VIABILITY ASSESSMENT CONCLUSION GDC

=

Construction Costs

+

Planning Permissions

+

CIL

+

Land Value

£157,355,125

=

£85,500,000

+

£100,000

+

£11,755,125

+

£60,000,000

GDV

=

Housing Revenue

+

Commercial Revenue

+

Subsidies/ Grants

Scenario 1:

£66,049,380

=

£10,745,460

+

£39,553,920

+

£15,750,000

Scenario 2:

£78,718,965

=

£8,764,437

+

£38,454,528

+

£31,500,000

Conclusion: It is evident that this will be a viable development. The development will not generate profit in the first year, but on a longer time scale it will. The profit margins differ between the two scenarios by over £100 million over the course of 10 years. In the short run, the 100% affordable scenario provides more profit because of the onetime GLA affordable housing grant. However, in the long run it is clear that both scenarios will be viable and profitable, even if the fully affordable scenario is somewhat less so.

Looking at the development on the 10-year time scale gives a more accurate understanding of the viability of a development, as it is expected that costs be recuperated over the course of many years, not just the first. 7,599,600

10 x GDV*

=>

GDC

+

10 x Maintenance*

Scenario 1:

£627,828,840

=>

£157,355,125

+

£25,151,116

Scenario 2:

£508,206,645

=>

£157,355,125

+

£25,151,116

£157,355,125 + £25,151,116 = £182,506,241

£627,828,840

>

£508,206,645

>

£182,506,241

£508,206,645

-

£182,506,241

=

£325,700,404

Scenario 1:

Total Profits £627,828,840

-

£182,506,241

=

£445,322,599

Scenario 2:

*For the calculation for the 10-year GDV and maintenance costs, a 2% inflation rate has been factored into the summative amounts. Given that the cost of maintenance and management was estimated to be £2,066,867 for one year, a 2% inflation rate was compounded upon when adding up the estimated costs for the next 10 years. The same principle goes for the GDV calculation. However, the GDC will not change as it is considered a one-time cost for development.

Critical Reflection: However, it is critical to remember this is all estimated and is not a comprehensive financial viability assessment as almost all figures are estimated off previous projects, in different years, in different parts of London. The estimated GDV is on the optimistic side, assuming maximum capacity and continued high market rates, as well as full GLA funding. The estimated GDC is on the low side as the development costs are not able to account for the true complexities of construction. The real viability calculations of such a development would undoubtedly be different, but this assessment nevertheless provides rough figures and estimates of its viability.

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LIMITATIONS OF FINANCIAL VIABILITY ASSESSMENT Timescale Acknowledgement and Limitations Profit and cost calculations are done from a standpoint of beginning in 2022.

Realistically, prices would be calculated on a different timescale, one in which construction would begin much later that 2022, accounting for the time needed to register planning permission, gathering finances and loans, and all other aspects required before construction can begin.

The same assumption goes for calculating residential and commercial profits.

These profits are done using 2022 as the basis but renting or selling of units would of course not actually take place for many years in the future, until construction is completed.

Recognizing these limitations, this financial viability assessment nevertheless provides estimates grounded in current economic trends.

Affordable Housing Assumption Limitations The affordable rents used in this viability assessment were based off Hackney’s and London’s policy guidance. This assessment does not call into question whether this policy guidance is truly reflective of the lived reality of those living across Hackney and London who require affordable housing.

Assumptions about what affordable housing truly means and how it should be calculated are discussions that should be held and would change the viability calculations in this assessment.

Presumably, affordable housing rents should be generally agreed upon to be lower than what is stated, and thus would lower the predicted GDV of the development.

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SOCIAL VALUE

47

SOCIAL VALUE Financial viability assessments only partially cover the value created from development options. We therefore suggest that the financial viability assessment be viewed in tangent with an analysis of social value. In line with recommendations from Just Space (2016), a Social Impact Assessment (SIA) can be co-produced with residents in order to ensure that local knowledge and community priorities are kept at the core of the process. In line with the UK Green Building Council, we understand social value to be “the economic, environmental and social benefits that are experienced by people” (UKGBC 2019). Where possible, this entails assigning a financial figure to social value in order to ensure its inclusion on the balance sheet.

Additionally, the New Economics Foundation (NEF) has clearly laid out a framework for assessing Social Return on Investment (SROI). Despite being initially developed for use by the third sector, SROI is equally applicable to public sector bodies attempting to juggle multiple forms of value creation. In particular, it is a helpful tool to ensure organizational transparency and the active involvement of stakeholders – something which thus far has been limited in the 55 Morning Lane proposals. This could be implemented alongside the SIA in order to form a rounded approach to social value creation. Moreover, maximizing social value feeds into the GLA’s ‘good growth’ strategy (GLA 2022; Public Practice 2021).

Whilst it is beyond the scope of this project to undertake a full SIA or SROI analysis, it is recommended that the council undertakes these assessments to quantify and prove the social value created within different development options. By monetising social indicators, it is hoped that the central importance of social value will be retained throughout discussions between the council and prospective developers. In line with the Social Value Planning Taskforce (2021), we recommend that the council requires the new developer to submit a Social Value Statement which: • Is co-produced by the community • Uses the council's power of defining procurement and tenures to enhance social value • Links to the council's health and wellbeing strategy • Developers social value commitments should be contractualised to ensure realisation and build trust The column on the right is a non-exhaustive indicative list of social values, some of which can be monetised. This suggests a broader definition of value intended to be considered alongside the viability assessment. Some social value such as co-design processes, work experience offers or apprenticeships are more easily quantified than others, such as social connections, wellbeing and work-life balance (Public Practice 2021; Social Value UK 2022). Likewise, the focus on children’s wellbeing and experience of the city is challenging to quantify, despite being a key facet in the ‘Designing a City for all Londoners’ strategy (GLA 2022). In doing so, it moves away from a narrow focus on financial value and addresses broader social value. Quantifying social value presents a means by which developers can be accountable to their stakeholders, and by extension enable innovation by designing to reflect social value (Social Value UK 2022). By incorporating social value alongside viability, the development proposal hopes to maximize the benefits created by the scheme.

Subjective (cultural values, environmental perception, personal beliefs, ideologies) • • • • •

Neighbourhood attachment Sense of community Feelings of safety and security Wellbeing Neighbourhood aesthetics Relational (Social interaction, governance, power identity, connections between people)

• • • • •

Proximity to family and friends Self determination Civic engagement Social cohesion and social capital Community relationships and security

Material (food, bodies, shelter, physical environment, income, assets) • • • • •

Improved living conditions Health benefits Increased residential space diversifying local economy Improved children’s play facilities Financial benefits to residents through high quality development (e.g. insulations reducing heating bills).

Non-exhaustive indication of social, relational and material value not accounted for in the viability assessment.

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SOCIAL VALUE OPPORTUNITIES It is possible to outline multiple forms of value which go beyond the viability assessment. The following opportunities for social value creation can be identified. Whilst some could be quantified by undertaking a SIA and SROI analysis, others such as “sense of community” as less tangible but equally important to the success of the development and have therefore been included within this report.

Themes

Opportunities

Housing tenure and health

• • •

Maintenance and repair

• • •

Green space and biodiversity

• •

Community and social spaces

• •

Neighbourhood networks, social relations

• • •

Provide secure housing for people failed by the market, enhancing community cohesion by providing increased equality of opportunity Health benefits through addressing overcrowding and sub-standard living conditions. This creates indirect benefits for the council and NHS as “prevention is better than cure”.

Opportunity to support tenure mix rather than segregated housing Higher quality living conditions result in a decrease in outgoing costs for residents, for example through lower heating bills Address fuel poverty through quality insulation High quality build reduces chances of unexpected maintenance costs in future, therefore benefitting the council in the long term Opportunity to address lack of green space in the area through provision of open space within courtyards, providing associated health and wellbeing benefits Reduce amount of tarmacked carpark in favour of porous surfaces

Improve community infrastructure such as childcare facilities, doctors and GPs. This directly addresses the lack of infrastructure to support Hackney’s growing young person population Improve accessible green space benefitting residents and families using the Tesco

Increased housing leads to higher footfall in the area, supporting diverse local economy and new ground floor mixed use developments Social and council housing ensures apartments are filled, rather than speculative developments which often sit empty.

Increased residential population addresses council waiting list and adds to sense of community

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GREEN INFRASTRUCTURE The provision of shared courtyards within the development increases the amount of green space accessible to the community, improving the quality of the built environment. The diagram below shows the surrounding green infrastructure, illustrating the necessity of the green courtyards to serve the new community.

Floor plan showing communal green courtyards

Connection between green courtyards and surrounding green space.

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SOCIAL VALUE CONCLUSIONS The development option presents an opportunity to create value which goes beyond solely financial value. Instead, value can be understood in broader, more social manner. The following table shows how social value is incorporated within the proposed design.

Social value

How this is delivered by development proposal

Care

The ground floor of the development is partially designated for care infrastructure. This includes childcare, medical care, and social care infrastructure. Following NEF’s 2018 and 2020 reports on social care and childcare respectively, we include care as a key facet of our infrastructure provision.

Community

Following the demographic analysis undertaken in the ‘Planning Context and Community Voices’ section (pg. 10), it was clearly identified that the Hackney Central and Homerton Wards experience high levels of multiple deprivation and that there is growing social polarisation in terms of income and opportunity, a significantly growing young population and a shortage of family housing.

As such, the existing community has taken first priority in our design. This has been done through the provision of community infrastructure, such as halls and self-organising spaces, and by prioritising 3 and 4 bed family units and proposing two development options: one with a 50:50 split, and one with 100% affordable housing.

Ownership

The development option re-emphasises the long-term value of the council retaining the land. This aids community security and creates social value by counterbalancing the rise in land prices due to speculative market-driven investment, giving the council more power in protecting the wellbeing of its community.

Quality of living

Central to the design is the understanding that high-quality build is excellent value-for-money in the long term. High quality design and building standards have the potential to impact physical and mental health, resident's financial security due to reduced living costs such as heating bills, and the council’s costs through ongoing maintenance and repair responsibilities.

Prioritising the quality of the build from the offset therefore has the opportunity to create both social value through an improved quality of life, and financial value due to high-quality and robust development.

Business opportunities

By dedicating the ground floor partially to retail space, the development creates the opportunity to support local businesses which keep money within the community. This can be achieved by contracting to ensure that a percentage of the retail units have to be rented out to local businesses. In doing so, the infrastructure supports a more localised and resilient economy.

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REFLECTIONS AND RECOMMENDATIONS

54

RECOMMENDATIONS TO HACKNEY COUNCIL Recommendations

Summary

Community-Oriented Infrastructure

Our proposal will ensure community infrastructure is prioritised among active frontages and within the housing developments to foster a sense of cohesion. (See page 50 for more.)

Family Housing

From our site analysis, family housing is an important need for the community and will offer predominantly 3/4 bedroom apartments.

(See page 30 for more.)

Streetscapes

With permeable courtyards and active frontages, this will ensure the area facilitates a sense of community and neighbourhood feeling for residents. (See page 31 for more).

Social Value Opportunities

It is critical to account for social value alongside financial viability in order to create a truly successful place. We suggest that Hackney Council undertakes a SROI assessment in collaboration with the community to determine the potential social benefits from the development. (See pages 48 – 50 for more).

Funding Options

By taking on the role of the developer, Hackney Council can cut costs by not taking a profit and being responsible for the construction and management of the development. The Council should also take advantage of GLA funding to support increasing the amount of affordable housing built. (See page 44 for more.)

Options for 50/50 and 100% Affordable Housing

Affordable housing in excess of 50% of development is possible and profitable on a longer time scale. Affordable housing as more than 50% of development is strongly recommended. (See page 45 for more.)

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REFLECTIONS ON THE COLLABORATIVE PLANNING PROCESS Opportunities for this process: • •

•

• • •

• •

•

The need for other perspectives to be considered.

Apply a more varied approach to the planning process. This means not following set guidelines towards new developments but adopting new ways developments can be implemented.

Creating new spaces cannot just rely on the expertise of planners and designers, they must integrate place users into the process.

Understanding new perspectives allows biases to be addressed and confronted.

Working on a smaller site can be easier to manage different demands for the site from local authorities to local communities.

Working with many stakeholders, in particular local planners and local communities allows the role of the planner to be re-calibrated.

This means that the planner can step outside the political and bureaucratic aspects of their role and relate back to the community they will impact through the planning and design process.

Transferring knowledge is an important aspect of the planning process which can be broadened through collaborating with other stakeholders.

Knowledge is not divided along professional lines into “expert” and ”civilian”. Instead, successful development is dependent on sensitive and respectful approaches to knowledge production and communication.

Understanding the financing of large-scale projects has been incredibly insightful which has only been realised through undertaking a collaborative process.

Limitations for this process: • • •

• • •

•

It is important to understand that it is unrealistic to incorporate all stakeholder's visions for the site.

Working solely for one organisation can create an isolated planning process without considering other aspects in planning.

The role of the planner becomes blurred for example when leafleting for MOPS, representing the organisation can move away from the role the planner serves to the planning process.

Working with MOPS can be limiting as their survey did not cover all the issues at hand so it was necessary to look to other sources for the required information.

Working with an organisation is an evolving process and does not have its own set of guidelines.

Working with local communities can be challenging as within the community context there are also many conflicting perspectives and can be difficult to assess the over-arching needs for the area and the people.

Community groups may not have a clear vision for what they hope the development to become, so it is necessary to work with other stakeholders to determine what their aspirations for the site are.

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APPENDIX 1 PLANNING BRIEF CONSIDERATIONS FOR A BRIEF PROPOSAL 1. Number of units and size We propose this development to implement 450 housing units of mainly family sized units. 220 units will be for 3-bedroom units and 120 units for 4-bedroom units. The overall sqm footage for housing is 35800m2.

The family sized housing will take up most of the space at 29600m2. This is to reflect on the need for more housing for the influx of new residents and to manage the demand for more family sized units for Hackney's young population.

2. Tenure split The tenure split has been considered through two scenarios. One for 100% affordable housing and the other for a 50/50 split between affordable and market housing. The need for more socially rented housing has been put forward to offer options to Hackney Council to highlight the viability of both schemes to turn a profit. Social rent has been considered as 1/3 of rent going towards housing costs and current figures used are based on current market assumptions.

3. Keeping the Tesco and Parking and making a flexible space From the evidence gathered including the MOPS survey, the Tesco store is an integral part of the community, for the planning Brief it will be retained. As large supermarkets and carparks are on decline in city centres, we recommend that this space is built on a designed to retrofit basis (see page 32).

The Tesco store will take up 4496m2 on the ground floor, but developers must ensure to avoid inactive frontages and try to cover the perimeter with small scale retail or community facilities that will benefit from being there. The parking is suggested to be built overground on top of the Tesco because, in case of retrofitting, this will be a more valuable space than an underground venue.

The developer will need to show how they are addressing design to retrofit and avoiding unactive frontages in their brief.

4. Permeability To allow for increased permeability in the site to its surroundings, pedestrian streets divide the courtyard block. Developers need to present a family friendly street profile for this core spaces.

5. Height, FAR The maximum height permitted in the development will be 15 floors, same as the development to the south. This height can only be implemented in point towers and not in long blocks to allow light to go into the housing units.

It is recommended that the highest towers are placed towards Morning lane, as the profile of the street is wider than what can be created in relation to the rail line or interior streets.

The FAR for this development is 4.5, in order to reach the amount and quality of public space in the development it is recommended to be kept within 5% of the recommendation.

6. Public space Public space will be incorporated within both the housing developments and other spaces on the site. Upper open space will be included within housing plots to ensure access to green open space is accessible for residents. Inter-connected streetscapes also allow for a sense of community to flourish.

Developments will be asked how their public space networks enhance family living, promote walkability and provide space for community activities.

They will also need to make the roof of the Tesco`s big box into a community and public space.

7. Affordable working and commercial spaces Developers will need to provide 50/50 split between affordable taking 50% of the market rate and market workspaces. They will need to show a price range for renting in a 10year period for the council to approve.

8. Social facilities Our proposal has considered the social value this development will have on existing and new residents in Hackney. From community health facilities to childcare infrastructure, our development envisions a site to meet the needs of all its users.

Developers will need to provide space for social infrastructure with access from the ground floor. Social facilities will be asked to take 30% of the ground floor, reducing the total of commercial space but not changing the 50/50 split.

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BIBLIOGRAPHY

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APPENDIX 1 LEAFLETING AN UNFORGETABLE EXPERIENCE "…. Experiencing leafleting first hand really helped us to understand the local community. We chatted with lots of people, and families as they went to do their shopping. It was amazing to have this personal and informal experience...."

- Jasvir. "… I was surprised to see that some people still did not know about what was happening on the Tesco. Most of them were really interested to know that they could have a say on what was going to be developed......"

- Begoña "… It was really great to spend time with MOPs and the community, and really get a feel for what people were saying on the ground. It really helped to put faces to the stories we were hearing, and imagine who we were designing for......"

- Milly

59

APPENDIX 2 CONSTRUCTION COSTS

60

APPENDIX 2 CONSTRUCTION COSTS

61