Amid the election hullabaloo, it’s not surprising that some stories get lost or at least do not receive the attention they deserve.

One such is the ongoing saga of the Chelsea Barracks. Admittedly, it’s not immediately of national interest - although the former military buildings are a well-known landmark in the capital - but the goings on there should strike a chord with anyone concerned about the lack of social housing in this country.

A legal dispute between the original partners on the redevelopment, Qatari Diar and the brothers Nick and Christian Candy, has now kicked-off in earnest. To recap, their arrangement fell apart when plans received a ferocious backlash from nearby residents and the dramatic intervention of the Prince of Wales. The Qataris withdrew their application and the architect Lord Rogers and his scheme were sent packing.

When the case, which started on Monday, unfolds fully in London’s High Court, the circumstances of Prince Charles’s involvement will come under close scrutiny. The Qataris maintain that the plans were withdrawn as a result of an indication from London mayor Boris Johnson that they would be rejected. However, the Candys claim the real reason was the behind-the-scenes intervention of the prince.

Inflated prices

What interests me, however, is the way the deal was structured and what has happened to the proposals relating to the affordable housing provision since. First, there is the jaw-dropping sum that was paid for the 12.8 acres in Chelsea, near the River Thames. Only as recently as 2001, the barracks were worth £58.5 million.

Then, along came the property boom, so that by the time the guards left, the site was valued at £250 million. What happened next was incredible: an auction held by the Ministry of Defence, the owner of the land, saw the price soar, to £995 million.

How this figure was reached says much about the bubble that was the top end of the London housing market - one in which affordable housing played a large part.

The rule of thumb among developers is one-third, one-third, one-third - so that’s one-third for the land, one-third for construction and one-third profit. Under the plans submitted to Westminster Council, 638 flats were to be erected in steel and glass blocks. The then mayor of London, Ken Livingstone, had decreed that half of these must be ear-marked for social tenants and public sector key workers.

Developers will say they make next to nothing on these affordable apartments - the bulk of the profits was to come from the 319 luxury units.

So in effect the Qataris paid £3 million per flat. The word was they were looking at around £3,000 a square foot, with the plans indicating a total residential floor area of 1.2 million square feet - or £11.25 million per unit.

That £11.25 million may appear ludicrous but if you factor in £3 million for the land, £5 million for building costs and fees and £3 million profit then you reach £11 million or so - not far off the one-third rule.

The difficulty with all this of course is the task of selling a flat for north of £10 million. Top-end agents would do well to off-load one a month at that level - even in a market that was saturated with demand. Put simply, there just isn’t the volume of buyers who can part with that amount of cash.

Back to square one

As a result of objections from Prince Charles and others, the Qataris (the Candy brothers had departed) had to go back to the drawing board.

They have come back with a 90-bedroom five-star hotel. And this time, more than half of the affordable accommodation will be built not at Chelsea Barracks but at an adjoining site. There will now be about 500 properties, of which half will be destined for private sale. Of the other half, some 120 flats will be built in blocks at Chelsea Barracks. But 130 will go into a development at Grosvenor Waterside on the other side of Ebury Bridge Road, which the Qataris are buying.

By reducing the number of units at Chelsea Barracks, the architects have been able to introduce leafy squares, walkways and houses that fit in with the surrounding period buildings. The giant blocks that so upset the prince have gone.

They’ve also made the project more reasonable financially. The hotel will soak up a considerable portion of the cost of the development. They must now sell 250 flats as opposed to 319. And the cost of those properties can fall to well below £11 million, for which there are plenty of Asian, Russian and Middle Eastern purchasers.

Pushed aside

All this is well and good but there is a downside. Half the social tenants and key public workers have been shifted off elsewhere. They will not benefit from living in Chelsea Barracks and the mix of residents will not be the same. Instead, they find themselves shunted into their own development at Grosvenor Waterside.

It’s hard to envisage them as anything other than second-class citizens, moved around to suit the ability of the developers to get their plans accepted and to conform with their financial projections. They’re commodities, in other words, to be played with at will.

This is a pity. Social housing should not only be a question of money but also of improving the socio-mix, so that the disadvantaged and teachers, police officers, nurses are able to live alongside and socialise with, wealthy investment bankers, lawyers, accountants and business types.

Qatari Diar has gone from creating an exciting, mixed residential complex right in the centre of London to one that is mixed but nowhere near as much as originally intended. Worse still, I fear the site at Ebury Bridge Road for key workers and social tenants could, in time, become ‘a ghetto’ in the socially exclusive area of Chelsea. Yes, they will get their affordable housing but offsite, around the corner in many cases. And that is not the same.

Chris Blackhurst is City editor of the London Evening Standard

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