Lambeth uses ‘offsite’ Section 106 deal with developer to kick-start housing company and new RP

The deal involves 70 homes for social rent being built as part of a Section 106 contribution on a separate site to the multimillion-pound Southbank mixed-use development at the 5.25-acre old Shell Centre on the Thames.

Lollard Street in Kennington represents the first social homes by Canary Wharf Group and Qatari Diar. It consists of 89 residences, a nursery and children’s centre, and communal gardens. It includes one 16-storey tower block, one seven-storey tower block, four four-storey blocks and 15 three-storey townhouses.

The joint venture company, Braeburn Estates, said it has delivered “one and a half times as much affordable housing in total” by taking part of the Section 106 on a separate but nearby regeneration site in the south London borough. Braeburn is also delivering 98 extra care and intermediate rent apartments on the Shell site.

The new social housing at Lollard Street will be leased by the council to its housing company, Homes for Lambeth (HfL), and subsequently to the company’s new non-profit registered provider, HfL Homes, which was registered with the Regulator of Social Housing this month (January 2019).

A Lambeth Council report said the new housing company has no income to fund the purchase of the homes, so the local authority had opted to allocate the homes in exchange for £8.1m of share capital, which is what the land and property has been valued at. The council remains the landowner.

It said HfL can use the net income from the Lollard Street properties as working capital to the wider company to “reduce their reliance on loans from the council and increase its ability to develop other schemes and meet council objectives around increasing the supply of affordable housing”.

“By allocating the properties to Homes for Lambeth in exchange for share capital, the council puts Homes for Lambeth on a much sounder financial footing in its initial years and reduces the need to make additional loans to the company,” it added.

Lambeth and Braeburn said the approach means more “genuinely affordable” homes will be built, and the “available developer subsidy being 100 per cent allocated to construction costs”.

There are also sufficient funds to complete a new purpose-built school building and play space.
Braeburn Estates assumed all the construction risks, while absorbing the full construction and regeneration costs.

The 70 homes at social rents are all funded through Section 106 contributions from the developer.

On completion of the homes, HfL Homes will retain ownership and management responsibility for them.

The council took on build costs of 19 homes for sale, at a price to be agreed before exchange of the development agreement and proceeds invested in building more council homes via HfL.