Otterpool Park: a new paradigm for council development?

A report from University College London in 2021 found that 83 per cent of councils in England owned a housing company, compared with 78 per cent in 2019 and 58 per cent in 2017.

 

On the Otterpool Park site, a proposed 10,000 homes would be built, along with six schools, a network of community hubs, and shops. The project expects to create 9,000 jobs in the area.

 

The affordable housing provision has been set at 22 per cent of total housing, with a proposal – but no guarantee – that social rented units will make up around a third of this. FHDC typically has a local plan provision of 30 per cent affordable housing on all new developments, but a council decision saw this reduced by eight per cent and accepted by the LHC.

 

The project has received objections from locals and nearby Hythe Town Council because of concerns over the provision of affordable housing, among other functional elements such as transport. Social Housing approached FHDC for comment on the development and criticisms it has received, but it said it was unable to provide one.

 

A financial viability assessment (FVA) of 8,500 homes in the garden town, carried out in June 2020 by real estate advisory firm Gerald Eve, stated that the project was deliverable.

 

Affordable breakdown

 

The split of affordable housing is projected to be 35 per cent affordable rent and 35 per cent social rent, with the remaining 30 per cent open for shared ownership.

 

The FVA found that the plot revenue of the site would be £340 per square foot for a market sale unit, and £187 per square foot on an affordable or social rented unit.

 

Andy Jarrett, director of planning at Otterpool Park, tells Social Housing that once the site is ready for development, small parcels of land will be sold to house builders to build homes, with the FVA suggesting 75 units per plot.

 

Mr Jarrett says that the LHC was established to drive a sense of “commerciality” to the projects and build the infrastructure.

 

“You can only go so far relying on planning powers. Here we will have the opportunity to achieve better design control”

 

Following a £100m loan from FHDC, the Otterpool Park LLP was established, with £25m used to acquire land and the remaining £75m to get the site ready for development.

 

Mr Jarrett says: “Our main roles are really: one, to complete the land assembly, which we have pretty much done; two, to secure planning and other permissions; and three, to then invest in the infrastructure to the point at which we can then sell off serviced parcels of land to house builders – and that’s where we recoup our investment.

 

“Of the loan facility from the council, we have a remaining £75m towards the remaining land assembly, setting up the LLP itself and the first phase of the infrastructure.

 

“Then we draw down receipts from selling off parcels so that money is recycled and it brings forward the rest of the infrastructure.”

 

Mr Jarrett says that the latest business plan from the LHC indicated that the council would see £190m of revenue on its investment, once the project is complete.

 

“It’s not money that is just going to come out at the end of the scheme,” Mr Jarrett says. “Obviously the council would draw some of it down, essentially as shares. A lot of it will be recycled into the project. The remainder could then be invested in other community activities across the district outside of the project itself.

 

“It’s a very significant sum achieved over, say, 25 to 30 years. It’s obviously impossible to be clear on what sort of build-out rate is likely; we’re anticipating in the early years we’ll get up to about 350 completions a year, and I think you could probably expect it to accelerate a bit beyond that in future years.”

 

“We can push beyond building regulations and try to achieve a greener solution”

 

The planning application is currently going through a consultation process, but Mr Jarrett expects house builders to be on site by 2024.

 

At each stage of development, the Otterpool Park LLP will make a new business plan to draw funds from the council’s loan.

 

Mr Jarrett says: “There will be a number of agreements with the council which will enable us [to progress]. One will be to draw down land, because at the moment they retain the land that’s been acquired. And in order to draw that down and to draw down significant funds, we need to make a case to them, almost a business case at each stage.”

 

Speaking of the positive aspects of the LHC, Mr Jarrett says that it gives the council control beyond what it could normally have. “You can only go so far relying on planning powers,” he says. “I think here we will have the opportunity to achieve better design control.

 

“We can aim to set our own agenda in terms of sustainability. We can push beyond building regulations and try to achieve a greener solution; all those things come through control.

 

“What we need to demonstrate all the time is that we can make the project work commercially, but there’s time yet to think about how any excess sort of revenue is used elsewhere in the district. There’s no plan for that yet.”

Government funding

 

One of the landowners working in conjunction with the council is Homes England.

 

Documents acquired by Social Housing through HM Land Registry show that it purchased 60 hectares of land in the designated area for £9m (including VAT) in 2018. Homes England said at the time that the land purchase formed part of the agency’s determination to “expand the delivery of affordable new homes and connect ambitious partners”, and was an investment in the government’s agenda to promote garden towns.

 

What was formerly the Ministry of Housing, Communities and Local Government (now the Department for Levelling Up, Housing and Communities) also announced a £1.25m cash injection in Otterpool Park in 2019 through its Garden Communities project fund, to be administered by Homes England.

 

“At the moment we’re working with [Homes England] as we would work with any other landowner, Mr Jarrett says. “But we are sort of in discussions with them about how we might develop that further.

 

“But at the moment, the current commitment has been made beyond [Homes England’s] investment in the land.”

 

A Homes England spokesperson says: “Due to potential commercial sensitivity, we are unable to comment on any further investment by Homes England on land at Otterpool Park or elsewhere. We are not currently working in formal partnership with OLLP.”

 

Asked about the negative impact that LHCs have had on some councils’ finances in other parts of the country, Mr Jarrett says that the soundness of the Otterpool Park project is grounded in the value capture of the land.

 

“I think for us, the soundness of what we’re doing is really based in the original sort of purchases that we’ve made; there’s land value capture, which ensures that we’re in a pretty good starting position,” he says.

 

“From our own perspective, we view it as a commercial project and we’re satisfied that we’ve bought well, that the market’s good, that we’ve costed it properly. Therefore, we feel confident that we’ve got a solid foundation.

In terms of the scale, I think it brings huge benefits, personally. What is so beneficial to starting from a new site is that you can introduce a whole range of infrastructure that you couldn’t possibly [achieve with] retrofit.

 

“There’s a whole range of things, like the way the transport system works, that you can introduce and plan from day one, which you couldn’t if you were trying to bolt on to an existing town. It’s taken significant pressure off other local towns, which otherwise would have, I think, struggled to add significant numbers of homes to them.”

 

The government’s target of delivering 300,000 homes a year will require increased council involvement as well as imaginative forms of delivery – and an LHC model and garden towns present just that. FHDC’s ability to deliver on it through its Otterpool company will be watched closely.