Some truths about property developers

[Tim Lund]

There's a long and interesting piece on the Guardian web site headlined

The truth about property developers: how they are exploiting planning authorities and ruining our cities

From my reworking of this in the subject here, you'll gather I don't go along with all of it, but I'm not in the mood to rehash old arguments ATM. But this does interest me:

In all cases, how developers prove what they can afford to pay for comes down to the dark art of “viability”. The silver bullet of planning applications, the viability appraisal explains, through impenetrable pages of spreadsheets and fastidious appendixes, exactly how a project stacks up financially. It states, in carefully worded sub-clauses, just why it would be impossible for affordable housing to be provided, why the towers must of course be this height, why no ground-floor corner shop or surgery can be included, why workspace is out of the question; indeed, why it is inconceivable for the scheme to be configured in any other form. Presented as a precise science, viability is nothing of the sort; it is a form of bureaucratic alchemy, figures fiddled with spreadsheet spells that can be made to conjure any outcome desired.

...

Immune from public scrutiny, viability assessments have rightly come under fire for clouding the accountability and transparency of what should be a statutory public process. Their confidentiality is closely guarded, in order to preserve developers’ trade secrets, but where the sale of public assets is concerned, there is increasing pressure for the books to be opened.

One such case recently ended in victory for housing campaigners, when after two years of fighting, which culminated at a tribunal, Southwark Council was ordered to disclose the viability assessment produced by Lend Lease over its controversial redevelopment of the Heygate Estate. The 15-year project is seeing more than 1,200 mainly social-rented homes on the post-war estate replaced with over 2,300 units, only 25% of which will be classed as affordable, with just 79 flats for social rent. Many leaseholders were subject to compulsory purchase orders so low they have been forced to move to the far reaches of outer London, their decent-sized two-bed flats valued at under £150,000, while the new homes of “Elephant Park” will be sold for prices reaching £420,000 for a one-bed apartment.

The figures explaining why this was the only feasible way to develop the site were safely locked away in the viability appraisal, which Southwark fought tooth and nail to keep secret. The borough has been particularly keen to keep financial details under wraps since it accidentally disclosed it had sold the entire nine-hectare site for just £50m, having spent £44m on moving residents out – while estimating its gross development value at £990m.

“Without some commercially sensitive information remaining private, developers could simply refuse to work with councils, leaving boroughs without the housing and regeneration we all need,” says a spokeswoman for Southwark Council.

I've italicised the last bit, because, while it may apply now in individual cases, it clearly would not be true if all developers were obliged to disclose the details of their viability assessments. London is a highly attractive location for this sort of investment, and creating an open and level playing field would not deter it. Maybe some people think it would, and would welcome the fact - well, I'm not going to argue about that either.

Obviously going through monster spreadsheets is not for everyone, although I find a certain satisfaction in doing so*, and the malicious pleasure of finding the mistakes they are almost bound to contain. I'm sure that in this area and others, they become part of a system of professional obfuscation, which systematic transparency could penetrate. The professionals involved, however, probably would not welcome it, first because they risk looking like idiots or worse, and even worse, they'd not be able to justify exorbitant fees.

I'd suggest parallels with Ben Goldacre's excellent All Trails campaign, to force pharmaceutical companies to publish the results of all trials commissioned. It's not that what pharmaceutical do on balance is bad - they do produce wonderful, life saving drugs - but they'll also behave selfishly if they can get away with it. Same goes for property developers; we need them, and the good modern developments they can put up. But they too will do bad things - doesn't make them inherently evil though.

* It doesn't have to be done manually - cool bits of VBA can automate the process immensely.

[mosy]

I reckon that such numbers-based transparency raises questions like:

1) Would it make a difference if a decision has been taken to spend £n and thus the project becomes a runaway train to be achieved regardless? That seems to be how public projects are finally achieved, whether housing or defence - i.e. no turning back. (Edit, I forgot the best of all, computer systems which go to the bitter end before being immediately scrapped.)

2) Would such spreadsheets mean employing even more highly paid consultants to analyse them, and I mean truly analyse them to see what's there and what isn't or what is inflated/hidden (as well as overtly necessary contingencies)?

I recall years ago someone at board level asking "What's the point of analysing everything to the nth degree if we know we're going to go with it anyway? So what would be the purpose in house building developments - to change the design and improve the offering for the same outlay? (Dream on?) Or simply to say that everything had been analysed so the "proceed" decision could be justified?

It was highlighted in some parliamentary thingy or other last week that there's just so little inhouse knowledge now, given so much outsourcing. Assessment of such viability appraisal documents even if made available would probably make most people's eyes blur. I'd be happy to dig into them - but not out of the goodness of my heart, nor for min wage as if scrutiny is to be useful, it's a bit more than just making sure computer figures add up

[Tim Lund]

I reckon that such numbers-based transparency raises questions like:

1) Would it make a difference if a decision has been taken to spend £n and thus the project becomes a runaway train to be achieved regardless? That seems to be how public projects are finally achieved, whether housing or defence - i.e. no turning back. (Edit, I forgot the best of all, computer systems which go to the bitter end before being immediately scrapped.)

It's not about that situation, but about trying to get some honest numbers before the train sets off.

2) Would such spreadsheets mean employing even more highly paid consultants to analyse them, and I mean truly analyse them to see what's there and what isn't or what is inflated/hidden (as well as overtly necessary contingencies)?

Good question.

If arguments are set out fully, and can be compared with each other, some kind of consensus will emerge about how they can best be done, which will lead to standard formats, so making checking easier. At the moment, I suspect, everyone tries to do things their own way, and the people who have to assess competing bids are completely overwhelmed.

There would still be people getting paid for doing this work, but there would be effective competition between them, driving down costs, and benefiting those who can do the work most clearly and comprehensibly.

I recall years ago someone at board level asking "What's the point of analysing everything to the nth degree if we know we're going to go with it anyway? So what would be the purpose in house building developments - to change the design and improve the offering for the same outlay? (Dream on?) Or simply to say that everything had been analysed so the "proceed" decision could be justified?

It was highlighted in some parliamentary thingy or other last week that there's just so little inhouse knowledge now, given so much outsourcing. Assessment of such viability appraisal documents even if made available would probably make most people's eyes blur. I'd be happy to dig into them - but not out of the goodness of my heart, nor for min wage as if scrutiny is to be useful, it's a bit more than just making sure computer figures add up

Yes - you need to know what numbers in a spreadsheet mean, but that is also something some effective competition would promote.