Billionaire Duke Sees Lawmakers Torpedo London Property Plan
(Bloomberg) -- The Duke of Westminster may be the U.K.’s richest landowner, but even he can be undone by London planning law.
Hugh Richard Louis Grosvenor’s proposal for a 500 million-pound ($645 million) rental development near the iconic Tower Bridge was rejected by a group of local councillors late Wednesday. The stumbling block: not enough affordable housing for the city’s poorest residents.
The Duke’s property company Grosvenor Group Ltd. proposed building about 1,300 units aimed at Londoners without the means to buy a home and too much income to qualify for social housing. It’s a world away from the luxury apartments the family name is associated with in the upmarket neighborhoods of Belgravia and Mayfair. Yet the move landed the duke, 28, in the middle of a national debate about affordable housing.
It’s not a problem the duke or his ancestors have recently faced. Their wealth can be traced back to the late 1600s, when Sir Thomas Grosvenor received 500 acres of swamp and orchard to the west of the City of London as a dowry from the parents of his 12-year-old bride. The family would go on to build in the area, designing a residential district that is now one of the most exclusive in the world, with the eponymous Grosvenor Square at its center.
The rejection of Grosvenor’s proposal highlights growing tension between developers and lawmakers over the chronic shortage of affordable housing in the capital as average Londoners struggle to buy homes despite a slowdown in the property market. The average house price in the capital is more than 13 times the median annual household salary in the capital, according to data from Hometrack.
Grosvenor promised discounted rents on about 27 percent of the units, far below the 35 percent minimum that Southwark council sets for developers. Grosvenor said it would take 20 years to break even on the investment, and that the number of affordable homes was the most they could offer while ensuring the scheme remained economically viable. The firm said it could offer more affordable housing if the development cost less than anticipated to build and run.
The number of affordable homes was “too far off the mark,” according to Martin Seaton, chair of the Southwark planning committee. The local lawmaker said he had “grave doubts” over the veracity of figures that were submitted by Grosvenor in support of its application.
The developer had hoped to convince the council of the “wider benefits” of the project, even after an independent planning commission recommended that the plans be rejected, Simon Harding-Roots, executive director at Grosvenor Britain & Ireland, said after the vote. The firm is “very disappointed,” he said.
Mayor of London Sadiq Khan has the power to overturn the decision. Affordable housing is a priority for the mayor, and it’s sure to be one of the key themes in next year’s election. Khan announced last month that he is looking to develop a mechanism for controlling private rents in the capital.
“We have got to make sure that the rents that private tenants pay are affordable” Khan told Bloomberg TV on Tuesday. The mayor said he wanted to develop a model that encourages landlords to make properties available at prices tenant can afford.
Southwark Council has recently been pushing for more affordable homes from developers. Last year, it approved a Qatari-backed venture to knock down a shopping center and build almost 1,000 rental homes in the Elephant and Castle district only after extracting a commitment to increase the number of affordable units.
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