Who paid for that 'independent' report? Surveying the Housing Crisis - Part 2

Tue Feb 16 21:32:30 GMT 2016

Surveying the Housing Crisis - Part 2
Marking the homework  How developers pay for 
independent checks on their affordable housing deals
http://www.georgenturner.com/marking-the-homework-developers-pay-for-independent-checks-on-their-affordable-housing-deals/
George Turner London13 Feb. 2016
email:  turnergeo at gmail.com
https://www.byline.com/column/49/article/813

In this article we reveal how the 'independent' 
advice received by councils on their affordable 
housing deals is often paid for by developers 
seeking to reduce their affordable housing obligations.

After my last article on how surveyors appear to 
be deliberately manipulating valuations in order 
to reduce the affordable housing obligations on 
their clients, a number of people commented that 
those figures are supposed to be checked by the 
council. Surely, if the developer is trying to 
game the system, it should be picked up on by the 
council who can reject their application; and if 
developers get away with it is that not the fault of the council?
In this post I reveal how developers pay the 
council's surveyors directly to check their 
figures, calling into question how independent that advice really is.

The merry go-round
When a developer submits a financial viability 
assessment, the council officers have to report 
to the decision makers whether they agree or not 
with its conclusions. That advice is fundamental 
to the decision about whether or not to accept a 
development because decision makers are often not 
allowed to see the underlying evidence.
One problem is that councils simply don't have 
the expertise to do the work required to come to 
a decision themselves. In the case of the Heygate 
Estate, Southwark Council didn't even have the 
software to open the viability assessment provided to them by Lend Lease.
To make up for this they hire consultants to 
review the information submitted by a developer. 
Often these consultants will be from the very 
same firms that will be submitting viability 
assessments arguing for reductions in affordable housing in other schemes.
For example, BNP Paribas, which is a very big 
player in the market for advising local 
authorities, was the viability consultant on 
Knight Dragon's now famous (and successful) 
attempt to cull affordable housing from the Greenwich Peninsula.
That is sadly the reality of the world of many 
professional services. Accountancy, law and other 
markets are often dominated by a few big players. 
There are a few smaller firms that solely work 
for the public sector, but they are rare.

Who pays the piper?
The advice councils receive needs to be paid for, 
and councils have had their budgets slashed. They 
often seek to recoup the extra expense of dealing 
with large developments from the developer, but 
how that payment is dealt with should be of some concern.
Though a freedom of information request I have 
found that 'independent' consultants working for 
the council are often asked to invoice the 
developer directly for their services. In Lambeth 
it even appears that the developer may have a 
right to veto who the council chose to provide them with advice.
The revelation comes from an FOI I made on the 
Shell Centre redevelopment. I asked for 
correspondence between the authority and their 
consultants on the viability issue. In this case 
BNP were providing advice to the council.
Contained in the bundle of emails is an exchange 
between an officer of the council and BNP 
Paribas. The officer is asking why Gardiner and 
Teobald, who had been sub contracted by BNP to 
review the costs of the development submitted by 
the developers, had not yet started work. The 
response, from Duncan Henderson, then of BNP Paribas, is included below:
In other words, we aren't paid by you, and so a 
request from you to start work ain't worth much.
Earlier in the correspondence, there is a 
suggestion that not only do surveyors providing 
independent advice to the council get paid 
directly by the applicant, the applicant also has 
an opportunity to object to the council's choice 
of advisor. In another email from Lambeth to BNP Paribas is the following:
After seeing this I spoke to a few contacts in 
the industry. They confirmed that the practice of 
getting the advisers to invoice the developer 
directly was common, although not universal. 
Sometimes the developer paid the local council 
who then paid the consultant (surely a much 
better system). However, they also said that it 
was extremely rare, if it happened at all, to 
allow the developer to have any say in who the 
council chooses to provide advice.
I also put it to Dr Anthony Lee, Senior Director 
of Development Consulting at BNP Paribas that to 
the public, the fact that the council's advisor 
invoiced the developer directly for their work 
could give rise to the impression that the advice 
was not truly independent. He replied as follows:
I disagree in the strongest terms with your 
suggestion that the public
.might draw the 
conclusion that [we] are not truly independent 
assessor merely because of an administrative matter of who pays an invoice.
Applicants pay planning fees to planning 
authorities and often fund the entire cost of a 
planning officer to deal solely with their 
application; does that compromise the 
independence of the planning officer? The answer 
is clearly no; the officer assesses the 
application against the Councils Local Plan and 
the national framework. We are doing the same.
he added
When we are commissioned by a planning authority, 
they are our client and we do the best we 
possibly can (within the guidelines set out in 
their Local Plan, the London Plan, the NPPF and 
NPPG) to identify opportunities for increasing 
affordable housing levels on individual schemes. 
Who physically pays our invoice is irrelevant to 
me and the other members of my team, all of whom 
are members of the RICS and owe a professional 
duty of care to their instructing client (which is the planning authority).

Lambeth declined to comment for this article.
So lets just recap how this system works on the 
basis of what we have learned over the last three articles on OurCity.London.
The viability test distributes billions of pounds 
of value between private developers and the public.
The process is usually conducted entirely in 
secret. Not even the people who have to take a 
decision on whether or not to approve an 
application are able to see the evidence on which 
they are supposed to adjudicate.
It appears that the evidence they are given may 
not present a true picture of the profitability of the development.
To mitigate this councils rely on the advice of 
professionals to test the evidence.
Often these professionals are also paid, sometimes directly, by the developer.
The same professionals working for the council 
are also in the market for employment with private developers.
Now to be clear, I am not accusing any individual 
of not trying their best when advising a council 
on a planning application. But this is obviously 
not the system that the public would design by 
choice to look after their interests.

#viability, #BNP Paribas, #Shell, #Heygate, #Greenwich, #Surveyors, #Lambeth
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