Viability

Is the public interest best served by keeping a commercially sensitive document confidential, or by its public disclosure?

Paul Coleman reports.

Heygate Estate in summer 2012 (© London Intelligence)

Heygate Estate in summer 2012 (© London Intelligence)

In walks the Judge. 

We all stand.

But this isn’t a trial.

Even so, Judge Nicholas Warren, helped by his two lay tribunal members, faces an important decision.

Is the public interest best served by preserving the confidentiality of commercially sensitive information, or by public disclosure?

Judge Warren, along with lay tribunal members Pieter de Waal and Henry Fitzhugh, could decide to maintain the status quo and preserve the confidentiality of key information within a regeneration document.

Alternatively, major implications could arise for local authorities and developers engaged in large regeneration schemes – if Judge Warren and colleagues decide the ‘disputed information’ in this case should be publicly disclosed, either partially or in full.

Viability Assessment

It’s 18 February 2014. Judge Warren concludes the six-day hearing in central London – which also included sessions when the tribunal considered the disputed information behind closed doors.

The judge says the Information Rights First Tier tribunal will reach its decision within four weeks.

The tribunal had convened to hear the south London borough of Southwark appeal against a July 2013 order, issued by the Information Commissioner, that the Council publicly disclose a ‘Viability Assessment’ submitted to it – in confidence – by developer Lend Lease.

The Information Commissioner is an independent body that adjudicates on public information rights.

Lend Lease used the confidential Viability Assessment to formulate the commercially viable percentage of ‘affordable housing’ in one of the UK’s largest regeneration schemes – the Heygate Estate in the Elephant and Castle area, close to the City of London and the West End.

Headed ‘Strictly Private and Confidential’, and prominently watermarked, the Viability Assessment includes an overall report and 22 Appendices.

The last Appendix contains the ‘disputed information’, including a financial model that underpins a key Lend Lease calculation. This claims it would be economically unviable for the developer to provide 35% of the Heygate scheme’s new homes as ‘affordable housing’.

Southwark Council, appealing under Section 57 of the Freedom of Information Act, argues full disclosure of the Viability Assessment would harm the public interest by undermining the ongoing regeneration of the Elephant and Castle.

Southwark also claim public disclosure would have national implications, by stemming the “free flow of sensitive commercial information” between developers and local authorities needed to progress vital regeneration schemes.

Lend Lease, in response to the Council’s appeal, state: “Some parts of the Viability Assessment have already been disclosed by the Council. Disclosure of the remainder would not confer any significant public benefit, but would seriously damage the commercial interests of Lend Lease, and would endanger the viability of the (Heygate) project.”

Gerry Facenna, representing the Information Commissioner, tells the tribunal that the public interest is served by full disclosure of the Viability Assessment – as it is a key framework document for the Heygate’s regeneration, a scheme that will affect the lives of thousands of people for decades.

UK and European freedom of information laws, Facenna contends, strongly presume such documents should be disclosed. He says disclosure enables the public to fully participate in local democratic decision-making.

Southwark Council leader Peter John says: “What is quite clear is that any future negotiations with developers could be seriously jeopardized if the tribunal upholds the ICO’s decision. People wrongly assume there is something to hide.

John adds: “I am alarmed by the idea of our freedom to negotiate being restricted – as developers shy from putting all their options on the table for the world to see. The implications for regeneration projects across the country are potentially enormous.”

Background to appeal

In 2010, Southwark Council and Lend Lease sign a regeneration agreement for the Heygate. The Council states that, within the Elephant and Castle Opportunity Area, ‘the Southwark Plan policy requires at least 35% of all new housing to be provided as affordable with a tenure mix of 50% social rent and 50% intermediate’.

The Council negotiates a contractual obligation for Lend Lease to provide a minimum 25% level of affordable housing, if the developer can show 35% is not commercially viable. The Council states: ‘This minimum threshold will need to be met, however, it is hoped that a full policy of commitment of 35% will be delivered.’

Local campaigners demand Southwark stick to its 35% affordable housing policy. In May 2012, one campaigner, Heygate resident Adrian Glasspool, formally asks to see Lend Lease’s Viability Assessment – especially the financial model underpinning Lend Lease’s calculation that 35% affordable housing would be economically unviable.

Specialists from the District Valuer Services later endorse Lend Lease’s Viability Assessment. On the strength of this endorsement, in January 2013, Southwark Council grant Lend Lease planning permission for a Heygate redevelopment scheme.

Lend Lease propose to build 2,535 new homes on the land occupied by the now almost empty Heygate council estate. But, on the strength of its Viability Assessment, Lend Lease will only have to aim to provide affordable housing at a lower rate of 25%.

Campaigners are now keener to inspect the Viability Assessment, especially the inputs and assumptions used by Lend Lease to conclude a higher level of affordable housing is economically unviable.

Initially, Southwark Council refuse disclosure on grounds this would expose commercially sensitive information about the Council’s negotiations with Lend Lease – and endanger the economic and social benefits promised by the Regeneration Agreement signed in July 2010.

In May 2013, during the course of an investigation by the Information Commissioner, Southwark agree to publicly disclose part of the Viability Assessment.

But the Information Commissioner orders Southwark to publicly disclose the entire Viability Assessment on grounds that, on balance, disclosure best serves the public interest – and outweighs any possible harm to the Council’s regeneration plans or to Lend Lease’s commercial interests.

Land deal

The Viability Assessment is the second major public information episode involving the regeneration of the Heygate Estate. Earlier, an unwittingly un-redacted version of the Regeneration Agreement disclosed the Council had sold the 22-acre site to Lend Lease for approximately £50 million.

Local objectors to the Heygate scheme say this previously confidential sale price for prime development land in central London represents a bad deal for the people of Southwark but a bargain for Lend Lease.

Heygate residents

Completed in 1974, the Heygate Estate once housed more than 3,000 people in more than 1,200 households. Of these households, just over 1,000 lived in Council-rented flats and maisonettes.

Most of the Heygate’s 1,200 residents were decanted and rehoused by 2010, many to other parts of the borough and others dispersed to other boroughs and towns. Some leaseholders were bought out or evicted after Southwark Council issued Compulsory Purchase Orders on their homes.

All Heygate homes are now undergoing phased demolition. High fencing now surrounds the estate.

New homes

The vast majority of the 2,535 new homes promised during the next decade will be privately sold, mostly at values competitive with Prime Central London market prices. The first buyers are expected to move in at the end of 2015.

The 1,000 council homes will be replaced with 268 under immediate or shared ownership. Another 533 will be offered as ‘Affordable Rent’, (charged at up to 50% of the local market rent).

Only 71 will be offered as ‘social rent’, equivalent to the former subsidised council rents.

Regeneration

Southwark Council and Lend Lease say the regeneration of the Heygate Estate will create new homes, thousands of jobs and will deliver long overdue economic growth to the Elephant and Castle area.

Campaigners say the Lend Lease/Southwark Council scheme perpetuates a ‘net loss’ of subsidised rent council homes. ‘Affordable Rent’ homes will not be affordable for local people on average and lower incomes.

Regeneration, campaigners say, will further decimate the neighbourhood and break up established social networks.

© Paul Coleman, London Intelligence, February 2014