Why Southwark was wrong to reject Berkeley’s 1,060-home scheme

There are times when a single news item summarises perfectly what is wrong with planning and delivery of homes in this country. The recent decision of Southwark Council to refuse consent to a Berkeley Homes application to build 1,060 homes in the borough is one such time.

The application was based on the number of homes for social and intermediate rent being reduced from 40% to 12% to make the scheme viable. The borough, which had already reduced the height of the scheme from 44 storeys to 36, argued that 12% was not enough to justify the build. 

Berkeley Homes, which for many years built more homes in London than anyone else, had based its argument on fundamental economics. So, who was right?  

One thing most people in our industry understand is build costs. The biggest housebuilders buy their bricks for less than a single home self-builder can and will squeeze better margins out of most of their suppliers, but the costs of a scheme such as this are substantial and easily identifiable. 

Berkeley Homes is not a charity. It is a successful public company with an obligation to deliver returns for its shareholders. So, when it builds, it builds to deliver a return for its owners and when a local authority sets hurdles that take away any certainty of profit, Berkeley Homes will not continue. 

The result is not the delivery of fewer homes. It is the delivery of no homes at all. Given that 12% of 1,060 is 127, the borough could have taken 127 people off their housing lists and the remainder of the apartments would have been occupied by tenants who would have invested in their new homes, bringing revenue for local shops and eateries and generally helping in a small but not insignificant way to improve the borough. 

What is worrying is that the borough is unrepentant. They presumably believe that their decision is in the best interests of those on their burgeoning housing waiting lists who will now have to wait until goodness knows when for a developer with a magic wand.

I don’t believe in fairies. I don’t think that makes me a bad person, just a boring realist. Until local councillors and Lord Khan, who is one of the worst offenders, start facing up to commercial reality, we will continue to see the utter failure of housing delivery in the one place in the country it is needed most. 

This is an issue Angela Rayner, back in her old job at MHCLG, could very usefully address because, while London might be subject to the highest building costs in the country and the highest demand for housing, this is an issue that councils everywhere are occasionally faced with. 

We already have the red book to guide viability. There should be a way of establishing fundamental conditions for viability, which start from two basic propositions. The developer margin should be realistic and not excessive, while the proportion of offset in whatever format required by a consenting authority should be set in the context of an established percentage of profit. 

There will be schemes where 35% affordable is achievable and on rare occasions even more. But the old maxim ‘don’t let perfect be the enemy of good’ is the one that should be marked, learned and inwardly digested by every member of every planning committee in the country, not just in Southwark.