Why are 50 ‘rental’ flats in Corby's Station Quarter being sold for £125k and upwards?
Corby was deemed 'too risky' an investment
They were touted as one of Corby's solutions to its overburdened private rental market.
One hundred and fifty new flats for genuinely low private rental prices, overseen by an experienced management firm, a spit away from the train station and a short walk away from the town centre.
With thousands of our young workers living in unsuitable HMOs on estates around the town, the apartments being built in three blocks on an eyesore, brownfield site next to the station were considered to be a good start to try to tackle the town's ever-growing need for small flats for young singletons or couples.
Which is one of the reasons why, despite concerns raised at the time, the flats - Corby's biggest ever rental apartments scheme - were given planning permission by Corby Council in May 2018.
So it came as a surprise to people living close-by when the flats were suddenly advertised for sale off-plan at the end of last month with local agent Connells, priced at £125,000 for a one-bed apartment and £175,000 for a two-bed flat.
Today, the Northants Telegraph can reveal the saga behind the stalled development after the site's owner told our reporter how even the Government department that had sold them the land in the first place now deems the project too risky to finance through its own £1bn Housing Delivery Fund.
The site at Station Road had once been owned by Corby Motors and other businesses but had been scooped up by the English Partnerships as part of a large triangular plot between Cottingham Road and Oakley Road in order to develop the entire piece of land into a Station Quarter for Corby. At one point the council had considered forcing a sale of the Stagecoach garage by compulsory purchase to ensure the site could be developed as a whole.
Back in 2017 it was announced that Government quango Homes England, to whom the land had been transferred, were backing a bid for 150 apartments for a section of the land. The blueprints for 60 one-bed and 90 two-bed units as well as spaces for 84 cars and 245 bicycles came from Hecurl, a joint venture between developer and investor Hector Newton and fund and asset manager Curlew.
Corby Council's planning committee was told that the three blocks would be used as private rental stock (PRS) for at least 15 years, with rents set only slightly above housing association prices.
The Local Highways Authority said the site was 'woefully under-provisioned' in terms of parking for cars, bikes and electric vehicles and it raised concerns over whether bin lorries and fire appliances could access it.
The North Northants Joint Planning Unit said: "We are concerned that the proposal is missing up an opportunity to act as a catalyst and stimulator for Corby's growth, unlocking economic prosperity and quality of life."
When the application was submitted, Corby Council did warn Hecurl that the plan may not be viable - which means that it would not generate enough profit as a PRS scheme to justify building it. In fact, the council's own viability assessors White Land Strategies Limited said at the time that the scheme would only be viable if the apartments were sold privately.
But during discussions detailed in contemporaneous planning documents, Hecurl insisted that developer profit was not the driver, but the packaging of PRS units into an investment scheme. The revenue from rent would be invested into that fund and would eventually generate its own growth.
In response, Corby Council's planning officer Nigel Gould said: "The financial model is robust and will lead to the required long-term rental income that the investors require. In this respect the Borough Council has satisfied its duty of care."
During the development control meeting in May 2018 to decide on the fate of the application, members robustly challenged the rent levels that could be achieved by the development.
But planning permission was granted by the committee on the basis that the developer made a £275,616 contribution to local libraries and education and that the units were limited to private rental-only for the first 15 years.
It was also determined that Hecurl did not have to abide by the council's affordable housing targets - which said 30 per cent of the dwellings should be low-cost - because it would result in a financial loss for the developer.
When the purchase of the site by Hecurl was eventually completed in 2019 - for a reported £840,000 - Homes England released a lengthy statement applauding the scheme, saying it was 'the first purpose-built scheme in Northamptonshire where 100 per cent of homes will be available for private rental.'
Charles Amies , Head of South East Public Sector Land at Homes England said: “Our role is to accelerate the delivery of new properties on the land we own so more people can access the quality homes they need in the areas they want to live.
“We’re pleased to have agreed the sale of this well located site to Hecurl, especially as they’ve taken the innovative step of creating a development entirely available to people looking to rent a home. I look forward to seeing these new apartments form part of the wider regeneration of Corby.”
Athar Rashid, Managing Partner at Hecurl said: “We are delighted with the encouragement shown by Corby Council in supporting a Build To Rent development on this gateway site for the town.
“This flagship scheme will give local residents the opportunity to rent an affordable modern home, professionally managed and close to the town centre and local amenities.”
And Paul Oliver, CEO of Curlew added: “We hope that this first deal with Homes England will help to speed the delivery of buy-to-rent assets for both occupiers and investors – a mutual objective for both organisations.”
Work was due to begin in Autumn 2019, but then.. nothing.
Behind the scenes, a viability assessment (VA) had been produced for the now-defunct Corby Council as part of the planning process.
These assessments are undertaken by independent companies and are designed to assess whether a site is financially viable by looking at whether the value generated by a development is more than the cost of developing it. This includes looking at the key elements of development value, costs, land value, landowner premium, and developer return.
But VAs can be, and often are, carried out after planning permission has been granted. Cynics in several areas across the country have suggested that this plays into the hands of developers who can push permission through then rely on VAs to renege on their affordable homes obligations, holding to ransom hard-up councils who face financial penalties from the government for missing tough housing targets.
Corby has already had its fingers burned with VAs at Priors Hall and Little Stanion where, well after building had started, developers used a VA to say they could no longer afford to make promised Section 106 payments for community infrastructure like roads, schools, medical centres and public realm improvements. Then in 2019 the developers of Priors Hall were allowed to cut the number of affordable homes they were due to build.
And at West Corby, before the first sod has even been turned, a VA said that the multi-millionaire developers could slash the number of affordable homes on the site to just five per cent because a £169m profit would not be enough for them to consider developing the site off the A6003.
There is no obligation on councils to make VAs public or to even show them to planning committees who are making important decisions about developments, and indeed the Station Quarter report wasn't. Officers summarised it for councillors at their development control meeting back in 2018 but the full report was only made public more than two years later in May this year, without fanfare, on the North Northamptonshire Council website.
The conclusions drawn by assessor Chris White of White Land Strategies Limited, were stark. The scheme, as it stood, was unviable, and whichever way you looked at it would make a loss.
Mr White speculated that if a large proportion of the 150 units were put on the open market, the scheme could generate a £2.6m (or 17 per cent) profit for the developer if they were sold within three years.
He also, crucially, said: "Given the negative viability results, without any affordable housing contributions, the council may wish to reserve the right to a review mechanisms to monitor the development to ensure that, should the scheme be represented as a sale model, an opportunity to review the viability of the higher value is considered to enable potential affordable housing contributions to be tested."
Builders moved on to the site during lockdown, although progress initially appeared to be slow.
Then at the end of June this year, the apartments appeared on Rightmove and locals began getting in touch with the Northants Telegraph to air their concerns.
Local businessman David Walker contacted the local authority and his local councillor but has not received a reply. He told our reporter: "I am very upset at the recent changes to the above planning application and subsequent work.
"From the application and public meetings, it was very clear that these dwellings were to be totally private rented sector, all 150. Publicly it was discussed that these dwellings were being built with monies from a London pensions investment company who would be managing the development with a full time and 2-part time members of staff.
"Only because of these factors planning permission was granted, they were never to be for sale on the open market.
"Without any notification, communication or consulting with residents, these planned PRS flats have now appeared for sale.
"How can this have happened? Why was this change permitted? This is wrong."
Mr Walker has also written to MP Tom Pursglove who has pledged to find our more from the new Chief Executive of North Northamptonshire Council Rob Bridge.
The developers Hecurl were happy to speak frankly to our reporter about what had happened.
Spokesman Athar Rashid said that their Corby development had been a 'challenge'.
He said: "After almost two years of trying Hecurl finally secured finance to build the first 100 units of the scheme in March 2020.
"At the time no lender would support the full 150 units. Corby is an untried and untested market for such a scheme and this made lenders very nervous about the development.
"Unfortunately with the onset of Covid, Hecurl lost its only route to funding in March 2020. We then went to almost every lender in the market and the development was repeatedly turned down and deemed too risky.
"We even approached the government backed funding schemes including the Housing Delivery Fund but they also felt the scheme was too risky and the development was turned down.
"Having already spent a considerable sum on site purchase, planning and advance payments to a major contractor Hecurl was incurring increasing costs without a route forward.
"Eventually earlier this year we secured funding for a smaller part of the project of 50 units but only on a for sale basis.
"This was the only funding option available to us. The alternative would have been to mothball the site for a period of 5-10 years or consider alternative planning for a possible commercial building much like the Stagecoach depot on the adjacent site.
"The lack of comparable developments in Corby means that lenders are reluctant to back the scheme as there is little evidence that such a scheme would work.
"Covid has made the task of funding much more difficult with lenders being even more cautious than before.
"We are now experiencing further challenges with some of the construction workforce having returned back to the EU and steep increases in construction costs fuelled by large house builders returning to building, HS2 using up most of the resources and disruption of global supply chains.
"Hecurl have spent a great deal of resources and worked very hard to deliver a landmark scheme in Corby.
"We’ve had to contend with exceptional circumstances and it must be appreciated that we are limited by what the lenders will support however we continue to strive to deliver a scheme that will support the wider regeneration of Corby and create a sustainable and thriving community."
On Friday the Northants Telegraph visited the site to find construction work gathering pace. Karl Stephenson, a commuter who was leaving Corby train station as we arrived, said: "I've seen the pictures. The apartments look nice. This site has been empty for long enough. Corby needs places to live and I think this place is as good as any."