Is this the end of build and bugger off?

Gloucester may not look much like Nirvana but on an inner city site, until last September the home of Gloucester College, English Partnerships wants to create a little slice of New Labour heaven: a well managed and socially mixed neighbourhood all delivered by the private sector.

One factor in particular distinguishes the scheme, renamed Greyfriars after the ruined abbey that occupies one end of the 2.5ha site, from EP’s other projects. Edward Ware Homes, the agency’s developer, will be expected to retain a long-term stake in the project. “They won’t be just building and exiting the project, they will be staying on board – like it or not,” says David Warburton, area director for the South-west.

The Bristol-based housebuilder will manage and maintain the 400-home scheme for at least a decade. Housebuilders are used to making arrangements for some of the services that Ware will be expected to provide, such as maintaining common parts. But some of the services go above and beyond the call of duty, such as maintaining the roads and running recycling facilities. And EP doesn’t just expect its preferred developer to provide a model community, but to make sure the neighbours are happy too. The management contract extends to promoting community cohesion. “We want to ensure that we don’t end up with disparate communities. This will create the social glue,” says Warburton.

To pay for all of this, Ware and its registered social landlord partner, Somer Housing Group, will pay at least £50,000 in seedcorn funding for the site’s management company. In the long run, EP expects the arrangements to be financed from service charges.

To make the potential hassle worthwhile, Edward Ware Homes will retain the commercial and private rented housing elements of the mixed-use scheme. After 10 years, the entire scheme will be revalued, at which point the housebuilder will be able to sell its stake. EP wants to show housebuilders that there is a commercial interest in long-term engagement.

The scheme is worth watching because it could be the shape of things to come under the new Homes and Communities Agency. The Housing Corporation is treating the sums it has invested in the project as an investment rather than a grant, marking a departure for the housing quango.

The whole package is a very long way from what Yolande Barnes, head of mixed use research at Savills, describes as the “build and bugger off” model of housebuilding. But does it make sense for housebuilders to follow Edward Ware’s example and discard decades of commercially tried and trusted practice?

Until relatively recently, housebuilding was a much simpler affair. Private developers tended to build mono-tenure estates. If building in a tough neighbourhood, fears about security could be addressed by sticking up a big fence and turning the estate into a gated community. But in these days of mixed communities, segregated solutions don’t wash with planners. And social E E housing can no longer be kept at arm’s length because every scheme of any size must include its fair share of social housing.

Commercial factors are also encouraging developers to look at long-term management. From urban extensions to estate regeneration projects, an increasing share of new residential development will be delivered in schemes containing thousands of homes, which take years to deliver.

“The old model doesn’t work on bigger sites. There is a need for long-term involvement,” says Barnes. “With huge regeneration schemes and new towns like Ebbsfleet, you are not going to be able to leave because you are still going to be building 20 years later.”

Barnes says many owners of large sites have become dissatisfied with what was being built on the land that they sold off, especially when they have ended up as poorly managed buy-to-let developments. “They found that developers were devaluing the rest of their land because they built quick and dirty.”

The long-term view

Some developers are already taking a long-term view. The security vans buzzing around Woolwich Arsenal are a visible emblem of the Berkeley Homes’s commitment to the massive regeneration project. And Crest Nicholson has set new standards in terms of upkeep at its Atwood Green council estate regeneration project on the outskirts of Birmingham city centre.

Similar models can work on greenfield sites too, such as the one at Great Notley Garden Village, near Braintree, where Countryside Properties set up a community trust to keep the new development up to scratch.

‘Landowners found that developers were devaluing the rest of their land because they built quick and dirty’

Yolande Barnes, Savills

Countryside chairman Alan Cherry says that homes sold in the village achieved a 20% premium compared to similar sized housing elsewhere in the area. “Getting the premium we did showed the distinct advantage over what else was available in the market,” he says. Linden Homes can tell a similar story at its showpiece Caterham Barracks development.

Martin Leyland, managing director of Barratt Developments-owned David Wilson Estates, believes that housebuilders can generate value by offering something not always available in the traditional market – a safe, secure environment.

By building large urban extensions, such as the ones David Wilson is hoping to achieve in Northampton, developers have the opportunity of creating environments as free as possible of problems such as antisocial behaviour. They can, for example, provide neighbourhood wardens as part of the management package. “There’s no doubt that people want to live in a first-class environment. There’s evidence that people are not just looking for a home, they are looking for a neighbourhood,” says Dr Nicholas Falk, managing director of planning consultancy URBED.

Falk is completing research on the management of mixed communities for English Partnerships. High-quality management is “critical” for high-density schemes, he says. “However great the design of the place, it will run down in the short term because of problems of maintaining housing and public areas. People from different backgrounds can live together quite happily provided that the place is maintained and managed.”

The sticking point is who pays. “You have to make sure that people pay the ongoing cost of maintaining places to a certain minimum standard,” says Falk.

“People don’t mind paying as long as they get value for money,” says Cherry, who says that the residents of the company’s Greenwich Millennium Village scheme in east London typically pay £1,400 per year in service charges.

Chris Brown, chief executive of Igloo Regeneration, cheerfully admits that the intensive management on offer at his fund’s Round Foundry scheme in Leeds probably means that tenants pay a lot more than they would otherwise. Igloo provides 24-hour security, without which, Brown says, crime would rocket. But he acknowledges an inherent problem with service charges: “Very often you are paying for services that are already being provided but not well by the local authority.”

Ruth Campbell, a consultant and lecturer in housing management, is unconvinced that many residents will cough up. “Families living on private estates don’t understand why they have to pay a service charge in the first place.”

The rise of commonhold

Another major sticking point is the government’s leasehold enfranchisement legislation. Giving leaseholders more freedom to sack their freeholder removed a powerful tool, used by companies such as Grosvenor, for driving up the quality of their portfolio. Under old-style leases, freeholders were able to include clauses stipulating that properties were well managed. “Leasehold enfranchisement has removed that option,” claims Barnes.“Leasehold enfranchisement has removed that option,” claims Barnes.

Some developers and agencies are exploring the possibilities offered by commonhold. For example, Crest is proposing to use commonhold as the tenure for its Millennium Community at Oakgrove in Milton Keynes. This mechanism could also be used to bind residents into locally generated renewable power contracts, increasing the scheme’s overall sustainability. But only a handful of households have taken up the commonhold option since it was introduced, raising a question mark over how popular such a product would prove.

And many might wonder, given the current housing market slowdown, whether this is the right time to ask consumers to pay more, especially when build costs are rising due to rising environmental standards.

Cherry insists that a downturn is exactly the time when quality will out. “With the slowdown in the housing market, we are still selling. The approach you should take is that you are going to have to sell in a buyers’ market. You can sell anything when things are booming.”