A new era?

Last month I threw out a challenge to the largest housing associations  in London to step in and try to buy the New Era estate from the dastardly Westbrook Partners. I wrote, “…this single act  would tell the nation about the positive work of housing associations (and) could do more to raise the role and profile of your sector than a year’s worth of expenditure on corporate public relations.” This was met with a stony silence, although it is now clear that a potential deal was available because Westbrook have sold the estate to another housing provider, Dolphin Living, part of the Dolphin Square Foundation. This has been hailed by the press as a triumph for Russell Brand and the residents. According to Brand, Westbrook have “decided to sell to a a housing association facility.” Even the Guardian stated that the new owner is “dedicated to providing affordable homes for low and middle income Londoners.”

Although it is a registered charity and a member of the N.H.F. the Dolphin Square Foundation is not a social landlord. Its model is based upon intermediate rents and tenants will not have any of the protections enjoyed by social housing tenants. The “affordable rents” for its first scheme in Westminster (39 flats)  have weekly rents “from” £190 for a studio, £250 for a one-bed, £360 for a two-bed and £399 for a three-bed. Eight of the flats are let at market rents “of up to £600 a week, providing vital income for the Foundation” so it is clear that the “affordable” rents are to some extent subsidised by market rents. Dolphin’s blurb states that their “affordable rents” are “on average, 28 per cent cheaper than privately rented flats”. 

A more recent scheme in Lambeth has weekly rents of “from” £150 for a studio, £220 for a one-bed, £275 for a two-bed and £340 for a three-bed. By contrast, the average weekly rents being paid by New Era tenants are £133, £150 and £163 per week for one, two and three bed flats respectively, which are around a third of local market rents.

So Dolphin’s rent model leads to significantly higher rents than the New Era rents, amounting to almost £200 a week more for a three-bed flat, assuming Hoxton rents are similar to Lambeth’s. Dolphin also operate minimum and maximum income thresholds and their literature states that “You must also be able to demonstrate your ability to afford the rental amount without recourse to housing benefit”.

It’s also worth noting that the Dolphin Square Foundation and Westbrook have a previous connection. It’s a long-winded saga but the short version is as follows: In 2005 Westbrook acquired a 27-year lease on Dolphin Square, an estate of 1,250 flats next to the Thames in Westminster. The estate has a troubled, dodgy history, with many politicans and senior figures paying absurdly low rents for decades past. It is now at the centre of allegations about Westminster paedophile rings. Westbrook paid Westminster Council £190 million for the lease and then spent £24 million on paying off subsidised tenants. They then set about trying to acquire the freehold from Friends Life using the Leasehold Reform Act. Westbrook  created 625 Jersey-based companies to take ownership of two flats each and, after losing in the High Court, they won in the Court of Appeal and took freehold ownership of the estate for a price of £111 million. Westminster set up the Dolphin Square Foundation with the proceeds from this sale and have gifted £124 million to date. Dolphin’s blurb states, “We seek to provide an aspirational affordable housing product, primarily for the intermediate rental market in Central London, and to hold all our schemes in the long run. We are committed to providing homes for people who are a vital part of London’s economy and who are being priced out of the capital.”

With regard to New Era, Dolphin says it will “develop a rent policy that is demonstrably fair”, and claims that it “decides rents on the basis of Londoners’ earnings rather than market values”. Although the residents have been offered a rent freeze in the short term, I think it is clear that within eighteen months new tenancies will be let at much higher rents and Dolphin will no doubt wish to move to these higher rents for existing residents in due course. If the Westminster model is followed then a proportion of the flats will be let at full market rents. If this is the case, then the New Era Estate’s “long history of providing affordable housing” will come to an end within a few years.

The fundamental problems are twofold. First, the estate has suffered from a lack of investment for many years. The new owners are unlikely to invest in the estate without seeing a return on rental yields. Secondly, the rents have been set at historically low levels (for the private sector). The only way these could have been preserved is if a social housing provider had stepped in, using a social rent model. This has not happened and I think the celebrations at New Era and in the press are going to be short-lived.