DD2065 Rainham and Beam Park Housing Zone, London Borough of Havering

1.1 The Rainham and Beam Park proposal was designated a Housing Zone in MD1545 and funding of £30.56m was indicatively allocated to the zone (subject to the outcome of legal and property due diligence) to unlock housing and regenerate the area.
1.2 In December 2015, the GLA and the London Borough of Havering (LBH) entered into an Overarching Borough Agreement (OBA) to record the indicative allocation of funding for the Rainham and Beam Park Housing Zone. LBH will oversee delivery across the Housing Zone through implementing the governance arrangements outlined in the OBA.

1.3 Due diligence has now been undertaken in respect of the ‘Beam Park Station - GRIP 3 and 4’ and the ‘Beam Park Station - Development Costs’ interventions, the conclusion of which is set out below and in Part 2 of this report.

1.4 In MD1545 funding relating to Beam Park station is split into two categories: ‘Beam Park Station - GRIP 3 and 4’ and ‘Beam Park Station - Development Costs’. During due diligence it has become clear that as these interventions facilitate the same housing outputs; the Beam Park and former Somerfield (90 New Road) sites, it is more efficient to combine the two interventions together into one Borough Intervention Agreement (BIA) and therefore one Director Decision report.
Summary

1.5 The aim of the Beam Park station project is to design and construct a new railway station between Dagenham Dock and Rainham on the c2c line, in order to unlock and accelerate housing development on the Beam Park and former Somerfield (90 New Road) development sites, as well as other adjacent sites situated within the Housing Zone.

1.6 The new Beam Park station is identified as a key infrastructure component and development catalyst in the London Riverside Opportunity Area Planning Framework (September 2015) and it is at the heart of the Rainham and Beam Park Masterplan and Planning Framework (adopted by LBH as a material planning consideration in February 2016). The Planning Framework sets out a clear vision, supported by design and development principles, of a well-connected, sustainable, residential garden suburb.
1.7 The new station will significantly increase the Public Transport Accessibility Level (PTAL) within the Housing Zone. PTAL is categorised in 6 levels (1 to 6), where 6 represents a high level of accessibility and 1 a low level of accessibility. The eastern end of the Housing Zone is served by Rainham Station and most of this area achieves a PTAL of 2 or 3. Beam Park station will benefit the western end of the Housing Zone.

1.8 The current PTAL at the western end of the Housing Zone is between 1b and 2. Beam Park station will increase the PTAL of this area to 2 or 3. A PTAL rating of 2 is typical for an outer London borough and it will allow a considerable increase in the development densities achievable on these sites. As well as allowing more homes to be built, it is expected that a new station will also increase the market values achievable for homes in this area, improving the development viability of sites for residential use. In summary, a new station will unlock development and increase the number of homes deliverable in this part of the Housing Zone.

1.9 Land for the new station will be provided on the Beam Park development site, which is owned by GLA Land & Property Limited (GLAP). The GLA has selected Countryside Plc as the preferred development partner for the site, working with London & Quadrant Housing Group, and the Development Agreement between the parties is expected to be completed before the end of 2016. The Development Agreement includes the obligation for Countryside to provide a shell and core station building.

1.10 LBH is leading the delivery of the new station through Network Rail, following the Governance for Railway Investment Projects (GRIP) process; an eight-stage process which governs the design and construction of new projects on the operational railway. To date, LBH has funded the GRIP stages 1-3 (and is currently funding the GRIP 3+ stage, which is in progress). The GRIP 3+ stage will culminate in obtaining ‘Approval in Principle’ for the new station scheme. The Delivery Services Agreement for GRIP 4, which progresses the station design and regulatory approvals is due to be entered into by LBH and Network Rail in March 2017. The new station is projected to open by December 2020.

Proposition
1.11 The Beam Park development site straddles LBH and the London Borough of Barking & Dagenham (LBBD), but the location for Beam Park station is within LBH, and the station and the area surrounding it will be the first phase of development with the remainder of the development land within LBH developed as the second phase.

1.12 The project is currently pre-planning, but it is envisaged that the entire Beam Park development site will deliver c.2,845 new homes, of which at least 1,011 (35%) will be affordable. The new station also accelerates and unlocks development at a much higher density at the adjacent Somerfield site (90 New Road), therefore the output homes for this funding intervention are the Beam Park homes within LBH (755 homes) and the homes on the Somerfield site (90 New Road) (720 homes).

1.13 This funding intervention is expected to deliver 1,475 new homes in total, where at least 33% are affordable and 67% are private, on a per unit basis. The proportion of affordable housing is likely to increase when considered on a habitable room basis, but as both schemes are currently at the pre planning application stage, the unit details have not yet been finalised. The current programme indicates that the first homes will start on site within 2017-18, with phased completions from 2018-19 to 2024-25.

1.14 The 755 new homes to be delivered within LBH at Beam Park are already counted as outputs from the GLA’s land and property programme, therefore they are classified as ‘Indirect (in other GLA programmes)’ outputs for GLA reporting purposes. GLA officers in the Housing Zone Transactions team are working with LBBD to incorporate the housing outputs (potentially 2,090 homes) on the Beam Park site within LBBD into the Barking Riverside Gateways Housing Zone, given that the Beam Park Station funding unlocks housing at the LBBD end of the Beam Park site, as well as within LBH. In addition, the new affordable homes at the Somerfield site (90 New Road), proposed to be 210 homes, are to be funded from the GLA’s 2015-18 affordable homes programme through the Registered Provider Circle Housing Group, and therefore are also classified as indirect outputs. The private homes at the Somerfield site (90 New Road) (proposed to be 510 homes) are to be classified as direct outputs. Although some of the homes will be classified as indirect and others as direct outputs, LBH will be required to deliver all 1,475 homes under the BIA.

1.15 Circle Housing Group purchased the Somerfield site (90 New Road) with the benefit of a planning consent for 497 homes, with no affordable housing. However, as a consequence of the higher development densities achievable and the increased development viability of the site because of the prospect of a new station, Circle Housing Group intends to submit a planning application for 720 homes, with at least 30% affordable housing (the GLA is working with Circle Housing Group to seek to increase the proportion of affordable housing even further).

1.16 As well as new homes, the Beam Park development site will provide an urban centre, to include commercial spaces, schools, a health centre, dentist, pharmacy, nursery and leisure centre. It is also intended that the Somerfield site (90 New Road) provides a metro-size supermarket at ground floor level.

Funding

1.17 LBH’s Housing Zone bid requests a grant of £9,600,000 to contribute towards the costs of the design and construction of the new station. Of this, £800,000 is grant and £8,800,000 is recoverable grant. The £800,000 grant is intended to contribute towards the costs of the GRIP process to the completion of the GRIP 3+ stage, which have to date been met by LBH. At the end of this stage, Network Rail will produce an Approval in Principle report which validates the preferred design solution for the station. Network Rail will also produce outline designs and Contract Specific Requirements documentation to enable LBH to procure GRIP 4 services. The £8,800,000 recoverable grant is a contribution towards the GRIP stages from GRIP 4 onwards, including the construction of the platforms and necessary alterations to the railway systems and infrastructure, as well as other works such as the installation of ticket machines required to facilitate the effective operation of the station and the railway. Housing Zone funding will not contribute, however towards the construction of the station building.

1.18 MD1545, allocated £800,000 towards Beam Park Station GRIP 3 and 4, and £8,800,000 towards the Beam Park Station Development Costs. As mentioned in paragraph 1.4 above, it is proposed that both allocations are combined into a single BIA. This ‘rolling together’ of funding into one agreement does not alter the overall quantum of grant approved under MD1545.

1.19 Further details on the funding package for the station, including LBH’s contribution, is within part 2 of this paper.

1.20 The £8,800,000 recoverable grant is proposed to be recovered from future Community Infrastructure Levy (CIL) and S106 contributions received by LBH on sites within the Housing Zone, such as Beam Park and the Somerfield site (90 New Road).
Stakeholders / Contractual Arrangements

1.21 The counterparty in respect of these interventions is the London Borough of Havering, who will enter into a Housing Zone BIA with the GLA.
Appraisal

1.22 Project due diligence was undertaken by Lambert Smith Hampton, who also commissioned expert consultant Pell Frischmann to produce a technical note on the effects of Beam Park station on PTAL. Further details are contained in Part 2 of this paper.

Project Milestones

1.23 Two major milestones have been achieved on this project to date:
• The adoption of the Rainham and Beam Park Masterplan and Planning Framework as a non-statutory planning policy document that will be a material planning consideration when considering development proposals in the Rainham and Beam Park area (February 2016). This document is predicated around a new station at Beam Park; development at the quantum proposed in the Planning Framework will only be possible if a new station is built. The emerging plans for the Beam Park and Somerfield (90 New Road) sites have regard to the location of the station and local centre proposed in the Planning Framework.
• LBH and Network Rail have entered into the Delivery Services Agreement for the GRIP 3 works (February 2016).
Further milestones are listed in paragraph 7.

Governance
1.24 GLA will contract with LBH and this relationship will be managed through quarterly meetings. The relationship will be led by a designated officer from the GLA’s Housing and Land Directorate, with oversight from the Housing and Land Senior Management Team.

Conclusion
1.25 GLA investment totalling £9,600,000 will unlock the development of the Beam Park and Somerfield site (90 New Road) sites. Without an improved PTAL and consequently higher residential market values, the Beam Park development opportunity is marginal, due to the site remediation required as a consequence of its former factory use, as well as the necessary flood attenuation measures. In this scenario, it is unlikely that developers would be interested in this site. If development were to come forward, it would be on the basis of a car-led scheme at much lower densities; the opportunity to maximise development densities and provide a substantial number of homes for LBH and for London, would be missed.

1.26 Beam Park station will also benefit the adjacent Somerfield site (90 New Road). The site has recently been purchased by Circle Housing Group with an existing planning consent for 497 homes with no affordable homes. Circle is seeking a revised planning consent for a denser scheme, with at least 30% affordable housing, which is made possible by the provision of a new station at Beam Park. Furthermore, the new station will benefit the proposed development sites to the north of the station, along the A1306. These sites are being assembled and brought forward for development by LBH and (subject to a further Director Decision) it is intended that the GLA will invest further Housing Zone funding into these schemes.

2.1 The project is expected to deliver a new station and 1,475 new homes, in addition to commercial and community space by March 2025.

2.2 The housing outputs relating to this project have changed since the approval of the Housing Zone in MD1545. Initially, the housing outputs for the two Beam Park interventions were 1,242 homes (370 affordable homes and 872 private homes) and all were indirect outputs as they related to the Beam Park site which is counted through the GLA’s land and property programme. The Somerfield site (90 New Road) was proposed to be a separate intervention delivering 497 housing outputs (163 affordable homes and 334 private homes).

2.3 The proposed revised position, which is outlined above and reflected in the BIA, is that the station will unlock the delivery of 1,475 homes as follows:

2.4 The original 1,242 housing outputs on the Beam Park site included homes on the LBBD side of the site and it is not possible to include them in this BIA. The Housing Zone Transactions team, however, is working with LBBD to incorporate these housing outputs into the Barking Riverside Gateways Housing Zone, given that the Housing Zone grant is unlocking the LBBD side of the Beam Park site, as well as the LBH side. The housing outputs for the Somerfield site (90 New Road) are now included in the Beam Park intervention; the funding indicatively allocated to the Somerfield site intervention under MD1545 is no longer required and it is proposed that the £2million of grant funding is moved to the A1306 Land Assembly intervention, to allow LBH to purchase additional land and provide 150 additional homes. This change was managed through the Housing Zone Change Management Process (DD1485) as outlined in paragraph 2.8 below.

2.5 The MD1545 approval for this zone stated that the Beam Park and Somerfield (90 New Road) sites would provide 1,739 homes together, including 533 affordable homes (31% affordable), but as mentioned above, the Beam Park figure included homes within LBBD which cannot be included in this Housing Zone. The result is that the total number of homes to be delivered on these two sites has decreased by 264, (which includes 43 affordable homes) although the overall percentage of affordable homes for the sites is increased from 31% to 33%. The overall number of homes within the housing zone is unchanged at 3,457, because the A1306 land assembly intervention (with the additional funding diverted from the Somerfield (90 New Road) intervention can now deliver 150 more homes, and the homes to be delivered on the indirect scheme Napier and New Plymouth have increased, as LBH now intend to comprehensively re-develop the blocks, as opposed to refurbishing them.

2.6 Due to the merging of the housing outputs from the Beam Park Station and Somerfield (90 New Road) sites interventions outlined at paragraph 1.4 above, notwithstanding the removal of the Beam Park housing outputs located in LBBD, the revised number of homes to be funded through the Beam Park Station BIA is 233 homes higher than the original bid in relation to Beam Park alone (including 120 additional affordable homes), for the same amount of funding.

2.7 Given that the housing outputs within this BIA now relate to two sites and have increased by 223 homes, there have also been changes to the housing outputs delivery timescales. The programme approved in MD1545 consisted of 150 homes on Beam Park and 160 homes on Somerfield (90 New Road) completing within 2015-18, however, a re-profiled schedule with revised completion dates was approved in principle by the Assistant Director – Programme Policy and Services on 2 August 2016, following a recommendation to approve from the Housing Zone Steering Group in June 2016, in accordance with the Housing Zone Change Management Process (DD1485).

2.8 The latest proposed schedule shows all homes on Beam Park completing by 2024-25, with 46 homes on Somerfield (90 New Road), which are amalgamated in the indirect outputs figures on the schedule (section 3), completing within 2015-18 and the remainder phased from 2018-19 to 2024-25.

2.9 A further change to the MD is that the repayment of the £8,800,000 recoverable grant has been brought forward as follows:

2.10 In addition to this, £750,000 of recoverable grant is moved from the ‘New Road Access for Buses’ intervention to the ‘A1306 CPO Sites Phase 1’ intervention. This is because the acquisition of land to provide access to the Beam Park and Somerfield (90 New Road) sites will be progressed through the land acquisition and CPO strategy being used on the A1306 sites, and it is more efficient to combine the funding into one land acquisition BIA.

2.11 In accordance with the Housing Zones Change Management Process (DD1485), these latest changes were recommended for approval by the Housing Zones Steering Group in October 2016. It was agreed the request falls within a “Tier 2” pre-contract variation under the Change Management Process and therefore would require Housing Zones Steering Group review followed by agreement in principle by the Assistant Director – Programme Policy and Services, or in their absence a Head of Area other than the Head of Area in whose area the Rainham and Beam Park Housing Zone is, before being submitted for a Director Decision. GLA officers confirm that this process has been followed.

3.1 The Rainham and Beam Park Housing Zone will contribute towards the implementation of the policies set out in the London Housing Strategy. In January 2014, the GLA published an Integrated Impact Assessment (IIA), including an equalities impact assessment of the strategy. The policies related to increasing housing supply, to which the Beam Park project will contribute, were covered by the IIA for the Further Alterations to the London Plan (March 2015).

3.2 The IIA concluded that updating housing projections and targets would support the delivery of sufficient housing and may help to stabilise house prices, supporting equal opportunities throughout communities. Furthermore, the provision of housing, including maximising the delivery of affordable housing, would be in line with the other policies of the Plan (e.g. Policy 3.5), ensuring that the needs of different groups are taken into account in housing design.

3.3 The delivery of new and additional homes will help to implement Objectives 1, 2, 3 and 4 of the Mayor’s Equalities Framework: Equal Life Chances for All (June 2014), through creating new homes and housing products as well as well-designed housing schemes.

3.4 The designation of an area as a Housing Zone is intended to identify an area with high potential for housing growth and delivery within London. The GLA Housing Zone designation and associated funding is often partnered with other funding streams and non-financial assistance, in order to deliver these new homes, and therefore this decision will facilitate these goals and ultimately ensure that the needs of different groups are taken into account in the design and development of new homes.

3.5 In order to access this funding, LBH will be required to enter into a contract with the GLA to deliver the interventions specified in this Director’s Decision. With regard to project delivery, the contract places the following obligations on LBH in respect of the Equality Act 2010:
• LBH will comply in all material respects with all relevant legislation including but not limited to legislation relating to health and safety, welfare at work and equality and diversity, and will use reasonable endeavours to procure that all Borough Parties do likewise.

• LBH confirms that it has and is in full compliance with, a policy covering equal opportunities designed to ensure that unfair discrimination on the grounds of colour, race, creed, nationality or any other unjustifiable basis directly or indirectly in relation to the works is avoided at all times and will provide a copy of that policy and evidence of the actual implementation of that policy upon request by the GLA.

a) key risks, issues and mitigation of these

4.1 The key risks are that planning permission for Beam Park and Somerfield (90 New Road) will not be achieved, the costs of delivering the station may increase and sufficient CIL may not be available in order to fund the station and repay the GLA.

4.2 There is a risk that neither scheme will achieve planning permission, but the applicants are both working closely with LB Havering and the GLA, for example, there are monthly Beam Park stakeholder meetings and both applicants have attended pre-application meetings with GLA and LB Havering. Further details on the other risks and their mitigation are contained in Part 2 of this report.

4.3 The GLA has carried out ‘know your customer’ checks to verify the party with which it is contracting under these proposed transactions. LBH is a statutory body, formed in 1965 by the London Government Act 1963. It is required by statute to produce a Statement of Accounts each year and to have these audited. Its primary address is: Town Hall, Main Road, Romford, RM1 3BB. LBH has been a GLA investment partner since June 2014. GLA officers have confirmed that the Authority has an official Government website; they have also confirmed that the lead officer involved in the proposed transactions at the Authority works within the department of the relevant executive officer.

b) links to Mayoral strategies and priorities

4.4 The purpose of the Housing Zones Programme is to increase housing supply by accelerating and unlocking development to deliver 75,000 homes by 2026. The Beam Park Station project will contribute towards this and support the aim to deliver 42,000 homes per annum, as specified in the Further Alterations to the London Plan (March 2015).

c) Environmental considerations

4.5 The scale of the Housing Zones programme presents significant opportunities for innovative building design, in order to reduce resource costs and unlock investment connecting new developments to necessary utility and social infrastructure assets. Such assets include low carbon decentralised energy and water networks, green infrastructure, waste and recycling collection infrastructure, low emission transport hubs, as well as parks and open spaces. Boroughs and other counterparties to Housing Zone designation should look for opportunities to address environmental and wider regeneration where viable; improving quality of life and place making benefits, which could unlock investment in line with the policy ambitions set out in the London Plan. GLA support can be made available to help identify environmental opportunities in specific locations.

5.1 As per the allocation in MD1545, this DD is requesting the authority to enter into a contract with London Borough of Havering for £9,600,000. This is £800,000 grant for part of the design phase of Beam Park Station. The remaining £8,800,000 is a recoverable grant to the London Borough of Havering for a contribution towards the completion of the works to Beam Park Station.

5.2 The recoverable grant is simply a non interest bearing loan, to be repaid with instalments of £2,200,000 at March 2023 and March 2027, with the remainder to be paid by March 2030.

5.3 As part of the Borough Intervention Agreement the London Borough of Havering has a contractual obligation to pay back the £8,800,000 to the GLA.

5.4 This project was estimated to deliver 1,242 dwellings in MD1545, but is now delivering 1,475 dwellings, this amounts to £6,508 per dwelling, which is very good value for money.

5.5 There is a risk of cost over-run on the station works but this is the risk for the London Borough of Havering, and the GLA’s contribution is capped at £9,600,000 (£8,800,000 being recoverable grant).

5.6 Finance to have sight of the contract between London Borough of Havering and GLA.

5.7 In allocating £9,600,000 to this project the GLA would have committed £90,125,000 of funds from the £200,000,000 housing zones budget, resulting in a remaining £109,875,000.

5.8 There are no further financial comments in part 2.

6.1 Under section 30(1) of the Greater London Authority Act 1999 (as amended) ("GLA Act"), the GLA has the power to provide the funding for the proposed interventions providing that doing so will further one or more of its principal purposes of: promoting economic development and wealth creation, social development, and the improvement of the environment in Greater London.

6.2 The interventions will unlock the delivery of housing and affordable housing, and it is open to the GLA to take the view that funding it will promote both social and economic development, and is therefore within its power, contained in section 30(1) of the GLA Act.

6.3 Section 31(1)(a) of the GLA Act prohibits the GLA from using its section 30(1) power to do anything which may be done by Transport for London. Whilst the provision of funding to deliver a station is potentially something that TfL may do, section 31(5B) provides that the prohibition in section 31(1)(a) does not apply where the GLA incurs expenditure in doing anything for the purposes of, or relating to, housing or regeneration. The provision of funding to deliver the Beam Park station will unlock the delivery of housing (and LBH will be legally required to procure the delivery of this housing), and is therefore for the purposes related to housing or regeneration, and is not therefore prohibited under section 31(1)(a) of the GLA Act.

6.4 In exercising the power contained in section 30(1) of the GLA Act, the GLA must have regard to the matters set out in sections 30(3-5) and 33 of the GLA Act, and also the Public Sector Equality Duty in section 149 of the Equality Act 2010, which are explained in paragraph 7.3 of the legal comments of MD1545. As is noted in paragraph 7.4 of MD1545, the London housing strategy, which included a policy for Housing Zones, has been subject to an Integrated Impact Assessment, and GLA officers consider that the delivery of new and additional homes within the Housing Zones programme will help to implement Objectives in the Mayor's Equalities Framework "Equal Life Changes for All." (See also sections 4 and 5 of MD1545).

6.5 The GLA has engaged with LBH in relation to the interventions which are the subject of this Director Decision. It is not considered necessary or appropriate for the GLA to consult with any other persons or bodies including those specified in section 32(2) of the GLA Act for the purposes of this Director Decision.

6.6 The GLA funding for the interventions is grant funding (partly recoverable). It is not being provided on a commercial basis and is not therefore a specified activity under section 34A of the GLA Act that is required to be provided through GLA Land and Property (GLAP).

6.7 External lawyers have been instructed to prepare and negotiate the funding contract for the GLA, including the incorporation of any provisions required to ensure compliance with State Aid rules. No funding is to be paid out unless, amongst other requirements, LBH’s solicitor has provided an opinion (satisfactory to the GLA) as to the State Aid treatments of the interventions. Further, if there is found to have been any unlawful State Aid, and the interventions cannot be restructured so as to be compliant, LBH must repay the unlawful State Aid following a written demand for repayment by the GLA.

Appendix 1 – Site Plan of Beam Park site (within LBH)
Appendix 2 – Site Plan of Somerfield site (90 New Road)