Eddie Smith Savills Market Spotlight

Affordability battle putting councils under ‘tremendous pressure’

Greater Manchester’s leaders are coming under increased pressure to provide affordable housing for local residents as the agenda of Mayor Andy Burnham reshapes the political landscape, according to Eddie Smith, strategic director for development at Manchester City Council.

Speaking this morning at a commercial and residential property market outlook event organised by Savills at Manchester Art Gallery, Smith said the leadership of Greater Manchester is going through a “fundamental shift” following the election of the new mayor, with Burnham having affordable housing and tackling homelessness high on his priority list. Adapting to this policy shift has “caused a few wrinkles”.

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The council director said rewriting the spatial framework, due to be published after the May local elections next year, presented significant issues around whether to build on green belt. “Fundability of development” on brownfield land poses a major issue to delivery of affordable stock.

Smith also blamed the politics of the “Twittersphere”, illustrating the point with an example of the council stating in its affordable housing framework published late last year that there are 68,000 council houses in the city, but “according to the Twittersphere that is fake news.”

He said the Twittersphere painted Manchester as being as expensive as “Kensington and Chelsea which it’s not, but affordability is an issue” even though “every piece of data says this is an affordable city”. Public lobbying on social media is “having an impact on politicians”, he warned developers in the room.

Smith also highlighted that addressing affordability would not “be solved by section 106”, the conditions and levies imposed on developers at the time of granting planning permission.

“The message needs to be heard, particularly by landowners in the city, because we are under tremendous pressure [to solve the affordability problem],” he added.

The city council’s affordability framework has undergone a rigorous review by officers and members over the type of housing that should be developed, Smith arguing that more than just social rented is needed.

There will be a student accommodation strategy published by the city council in the New Year, although he added “don’t expect a radical shift” in policy.

On the housing offer for elderly residents, Smith said he was “staggered” a project aimed specifically at the older population had not been brought to the market yet in the city, and hoped that would change.

Asked by an audience member about the challenges ahead, Smith said Manchester “is going to run out of land… at some point in around 10 to 15 years, which might seem a strange thing to say but that’s the biggest challenge”. The rest of Greater Manchester needs to “get its act together” to meet demand for commercial and residential space at the same time.

Smith added there would be a review of the Local Plan, approved in 2012, seeking to protect the commercial core. The council, Smith said, “don’t like permitted development [rights] which have eroded the office space” through conversions into residential. City centre land owned by the council would be reserved for jobs wherever possible. The urban logistics market and sites for large “digital talent” occupiers are also being considered.

After 30 years “turning round the city” north of Portland Street, the council is now switching its focus to “fix” the area South of Portland Street in the next 15 years, including North Campus, the former UMIST base, where the University of Manchester has a “huge responsibility to get it right”, as well as Corridor Manchester around Oxford Road, and Piccadilly station.

He went on to talk about the changing leadership in the city, including the departure of chief executive Sir Howard Bernstein on 31 March. Smith said Bernstein was “still providing his support on key initiatives with key partners in the city.” Following Bernstein’s retirement from the council, responsibility for leading on development passed to Smith. Other priorities on his desk include delivering HS2 stations at Piccadilly and the airport, improving digital infrastructure and transport connectivity.

Savills Report Market OutlookPresenters from Savills said property demand from businesses and residents in Manchester has grown steadily and looks set to continue, but commercial and residential property supply must diversify and bring forward more property across all use classes if it is to meet growing demand.

The firm’s ‘Spotlight on Manchester: where are the gaps?’ report backs up the affordability outcry suggesting that residential development is disproportionately focused at the more expensive end of the market, and therefore out of reach for aspiring first-time buyers, with average new build values currently sitting at £375/sq ft, with examples of £500/sq ft threshold being broken in prime locations. This means that developers are competing for a smaller pool of occupiers and could see increased opportunities in the mainstream market, where there is more scope for take up.

Rob Haslam, planning director at Savills Manchester, said: “If Manchester wants to meet its growth aspirations, it needs a broader range of developments to appeal to its varied demographic. There are 7,000 new homes in the pipeline for Manchester over the next two years, but Greater Manchester’s housing need is 11,254 per year with a little over a quarter of that concentrated in the city centre.”

The report also highlights that changes to planning policy could mean that developers may be able to build purpose-built student accommodation schemes in select zones across the city, helping it to maintain its high graduate retention rate, which is higher than most other regional cities, currently standing at 51%, which will in turn boost the city’s attractiveness to employers.

According to the report, the number of people in Manchester aged over 65 is set to grow twice as fast as the total population over the next 10 years, hitting 61,000 by 2027. With an increasing trend towards the older generation moving back to cities to be closer to amenities, building suitable accommodation will free up family homes in the suburbs.

Adam Mirley, development director at Savills Manchester, added: “Housing delivery has grown in the city recently but it’s still not enough, with a shortfall of more than 1,000 homes in 2016-17. Much of the residential pipeline comprises city centre flats, but future supply needs to be more varied in line with the city’s wide-ranging population. This, coupled with a growing economy means that Manchester needs to continue to accelerate development to help support its fiscal evolution. Whilst higher price points may present a challenge in some cases, we see that the biggest opportunity moving forward is for mid-market residential developments.”

In terms of the office market, 71% of recent demand has been for space at less than £25/sq ft, yet only 59% of the available space in Manchester and Salford is at that price point. James Evans, head of Savills Manchester, said: “Demand for Grade A office stock is so high that it’s spilling into secondary stock and pushing up rents there. This is expected to drive future demand for serviced offices and light touch refurbishments in the short term. Longer term, we expect to see the core office market expand into areas previously seen as fringe such as Oxford Road, Irwell Corridor and the Ancoats area.”

The ever-changing ‘need for speed’ by consumers means that in Manchester’s industrial sector, demand for instant gratification by way of shorter delivery times – down to an hour from click to your door in many cases – will see distributors and retailers get more creative in their hunt for small scale distribution locations, taking space in office basements and off-pitch retail units.

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It’s gratifying to see the old order being challenged on some of their long held assumptions. Eddie Smith’s disparaging comments about the “twittersphere” indicate something of a closed-mindedness and arrogance that comes with a lack of challenge in the upper echelons of the city council. I suspect they need to revisit their datasets and metrics.

The city may have 68,000 council properties but what is the turnover of those properties? Where are they and other allegedly affordable housing areas located and what are the indirect costs associated with poor amenities, accessibility, services and other area characteristics?

MCC have misinterpreted the data as telling them they need vastly more high value housing. Actually, what we need are much more good quality mixed income / affordable neighbourhoods – with the emphasis on quality. Outside of a clutch of very expensive apartments and very limited suburban neighbourhoods, Manchester’s residential offer is dire.

This is a legacy lack of robust and proactive planning at MCC (again!) and lack of investment.

By Reality

There is no chance of solving the affordability issue all the while that developers can produce viability statements to prove that provision would not be profitable enough – often based on spurious assumptions and inflated land value assessments – and while councils are turning into property developers and going for the most profitable option in order to supplement reduced finances for services. Who is ever going to develop affordable housing under this scenario?

By John westbrook

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