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The Northern Gateway may be barred to many

Manchester City Council promises that 3,000 of the homes being developed in the enormous Northern Gateway development will be affordable housing. But close to 86,000 households in Greater Manchester are on the social housing waiting list, and homelessness is visibly increasing. Affordable housing is unaffordable to many in Manchester. So who is this development actually for?

This ambitious project, with £1 billion invested by the council and other partners, is the one of the largest regeneration projects in the UK which plans to revitalize and connect existing green space and increase the amount of housing needed for a rapidly growing Manchester. The development stretches from Angel Meadows on the edge of the city centre to Collyhurst,1.5 miles away.

Manchester Council has partnered with the Far Eastern Consortium (FEC), a property development company incorporated in Hong Kong, to bring about this transformation to the city. The Chinese connection continues with the state owned China Zheijiang Construction Group Hong Kong, being chosen as one of three major building contractors on an intitial £200 million Meadowside development of the Northern Gateway project. China is currently holding an estimated 1 million Muslims in internment camps in Xinjiang, where they are subjected to forced labour, renouncing their religion and political indoctrination.

A total of 15,000 homes are promised for the Northern Gateway, so the councils promise to provide at least 3,000 affordable homes is equal to the 20% guideline for the amount of affordable homes that should be provided in a housing development. Whether that target is achieved remains to be seen as the council has a particularly bad record for not including affordable housing in city centre developments.

When it comes to how much of the affordable housing will be social housing the Draft Strategic Regeneration Framework(SRF) is not so clear. Only 110 social rent homes in Colllyhurst are promised in the SRF, although there are mentions of social housing and social rent homes being provided through the document. It is social rent homes that are widely regarded as having the greatest ability to alleviate the housing and homelessness crisis.

Affordable housing vs social housing

Social housing refers to housing owned by the council, or Registered Social Landlords such as housing associations.
A report by the Nationwide Foundation found more than one million vulnerable people in the UK were being forced into poverty by being shunted into the private rented sector (PRS), because of an acute shortage of social housing. The largest portion of the 12,000 non-affordable homes being built in the Northern Gateway are likely to become PRS flats (rather than build for sale, or mixed tenure), if the example of previous city centre developments are followed.

The governments definition of affordable housing is 80% of the market rate for renting or buying a house. The Joseph Rowntree Foundation, finds that affordable housing is generally 30% higher than social rents and as affordable housing rents go up, social housing rents tend to follow.

This is concerning as Manchester has seen the highest yearly rise in house prices (9% to July 2018) and rents (10% to April 2018) of any city in the UK. This continuing rising trend in property values coincides with a 3.2% drop in the UK median yearly wage in 2018, compared to 2008.

Northern Gateway

Map of the Northern Gateway. Source: Youtube

Dr Jonathan Silver, of the University of Sheffield Urban Institute in his report From Homes to Assets, says that Manchester Council has let the building of social housing fall behind in their attempt to attract more development. The report outlines the key factors in the Manchester housing crisis and how the concern for profit is shaping the housing future of Manchester.  Silver states in his report that:

“The lack of affordable or social rent housing included in the dozens of new developments will have to be delivered in all future housing schemes. Local Authorities might have felt this was hindering development in the years after the financial crisis but it is clear that Greater Manchester is now an improved investment proposition for developers.”

Silver spoke to The Meteor about his concerns over the Gateway:

“It is still unclear what levels of affordable and social housing will be provided as part of this urban redevelopment. The announcement for new social homes [110 in Collyhurst] are actually a replacement for units that were demolished over ten years ago and still show a net loss.”

Consumer websites recommend no more than 30% of your income be dedicated to rent. People paying over that can be described as suffering rent stress, which a survey has shown can lead to depression, insomnia and family arguments. The single biggest cause of homelessness today is eviction, a situation likely to have been preceded by prolonged rent stress.

Manchester Council’s definition of affordable housing has taken the concept of rent stress into account in their definition of affordable housing, which uses an average annual gross household income of £27,000.

Using the no more than 30% rule, MCC affordable housing level comes out at £675 per month for rent and up to £121,500 (excluding deposit) to buy a home. Though this works out less than the government 80% definition, even small residences are not affordable for many Mancunians.

The housing price website Zoopla (18/12/2108) states that the average monthly rental in Manchester is £629 for a one bed flat, with an overall average rent of all property types being £1,377. The average purchase of a one bed flat is £161,233, with an overall property price average of £227,181.

Currently In Manchester, the average income is £26,510 (18/12/2018) which then suggests paying up to £663 per month on rent avoids stress. So your average waged single person would already be suffering rent stress in the average Manchester one bed flat. There are many earning below the average wage in Manchester, and private rents in the Gateway developments are likely to be higher than average.

Overseas investment

The FEC is already marketing its project Angel Meadows (located at the start of the Northern Gateway) in Hong Kong with the smaller flats (500 square feet) being offered for sale starting from £200,000.

The advertising and sale of flats to buyers from other countries is a growing trend in Manchester’s property development boom.
Enquiries from Chinese investors about properties in Manchester rose by 256% in January 2018, compared to the same month in 2017, reported the CEO of Juwai.com, China’s largest property website.

A recent example of this trend were flats built by Fred Done’s development company FICM Ltd, that were marketed heavily in Hong Kong during construction.  Using £22.5m borrowed from the GM Housing Fund, the Blackfriars high rise flats were built with no affordable housing included and no Section 106 contributions to the council, which should go towards infrastructure and services improvements in the area. This kind of marketing has led to developments in Manchester, such as One Cambridge St, being 94% owned by overseas investors.

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    Read The Meteor's previous story: Council in partnership with ‘most brutal police state in the Middle East’ says Amnesty International

Companies registered overseas are also cashing in on the property investment boom in Manchester. The number of properties owned by overseas companies in Manchester rose by 8.6% (to 1736 property titles) in the eight months up to June 2018. The rise in Manchester outstripped many of the London boroughs, more commonly known for overseas ownership. The 44% of the Land Registry titles in Manchester that had a price attached to them came to £834 million.

Wisdom Max Ltd was the company owning most properties at 137, with an estimated value of £27 million. The majority of these property owning companies are incorporated in tax havens, the ultimate owner is often hidden. Wisdom Max is incorporated in the British Virgin Islands. The Meteor’s investigations connected Wisdom Max to a property development company registered in Hong Kong, Fulcrum Global.

What is the problem with overseas investment?

Some of these overseas investors are just ordinary people struggling to live with a dysfunctional property market in their own countries

According to the South China Morning Post, more than 50% of rents are over £2,000 which is 122% over the average annual salary.  The average house price in Hong Kong (HK) is HK $13,042 per square foot which makes a modestly sized 1 bedroom 500 square foot flat cost £650,000.

Middle class Hong Kong and Chinese citizens see property investment in Manchester as an opportunity to invest in the property market as there are few prospects at home. Giving them a chance to help their own children obtain property (something that they may not be able to afford for themselves) and perhaps attend university and live in the UK.

For the overseas companies investing in property in Manchester, the ultimate owner and the source of their cash often remains a mystery. The majority are registered in tax havens such as the British Virgin Islands, Jersey, Guernsey, and others. The secrecy this provides to the owners enables them to avoid tax payments in whatever country they reside in. The hidden ultimate ownership of these companies also means that criminal gangs and other corrupt persons may be laundering money through these properties.

Whatever the source of overseas investment into Manchester’s housing market, evidence suggests that it drives up housing prices. This doesn’t just increase prices for new builds, it has also been suggested to have a ‘ripple effect on raising the price of housing in areas near to the new developments. A report from King’s College London, Centre for Macroeconomics (CFM) found that foreign investment contributed to rising house prices.

Silver says of the investment into the Gateway development:

“The Northern Gateway has now become a space that is shaped by international finance. A part of Manchester with land owned by a Hong Kong Stock Exchange listed company whose concern is to drive profits for shareholders rather than support the housing needs of Manchester. This is another example of how public land becomes financialised through overseas investment that should be of concern for Mancunians.”

Some politicians and organisations in the UK have been calling for taxes on overseas property buyers to control the number of foreign investors.

In Canada, a year after a tax on foreign home owners in Vancouver was implemented there was little impact. Prices went down slightly but came back up again. A Canadian real estate executive said that the tax has “zero impact” on affordability. People that could not afford housing before the tax still could not afford it after.

North West denied fair access to housing fund

Of the £7 billion allocated by the UK government to build affordable housing, only 20% of the funds will be distributed outside of London and the South East, according to a report by the Greater Manchester Combined Authority.

Andy Burnham, Mayor of Greater Manchester said, “such a skewed distribution of public money is demonstrably unfair and unacceptable. It overlooks the huge economic potential of the North of England and …will fuel the economy where it is already strongest.”

The GM Housing Investment Fund,  was implemented to give loans to develop housing projects, but as reported previously in The Meteor the £300 million fund has been mainly lent to private property developers who have dodged their affordable housing and section 106 commitments.

Effect of Right To Buy

Currently in England, the number of homes being sold under the Right to Buy scheme is also contributing to the lack of social housing availability. According to government figures, only one social home is being built for every three sold.

Greg Beales, of Shelter UK, said, “These dismal figures show that at a time when more families than ever need affordable homes, their chances of getting one are being wrenched away….. It is absolutely vital that any properties sold are replaced on a like-for-like basis.”

Salford’s Mayor, Paul Dennett, recently spoke of the attrition affecting council homes in Salford:“Since the government incentivised right to buy in 2012, we’ve seen the loss of around 13,000 council homes: 5% of our stock. None of those has been replaced not one, because of government restrictions: we’ve generated the capital receipt and the prime beneficiary has been the Treasury.”

Austerities effect on housing

Austerity driven reductions in council budgets and the cuts and changes to welfare payments have all played their part in increasing poverty and the homelessness crisis in the region (previously reported on here).

Professor Philip Alston, United Nations special rapporteur on extreme poverty and human rights, in his November report states it:

“Seems patently unjust and contrary to British values that so many people are living in poverty… the Government has remained determinedly in a state of denial.”

He argues that people want to work, and to live in safe affordable housing. Alston’s summing up echoed the words of Nelson Mandela: “The experience of the United Kingdom, especially since 2010, underscores the conclusion that poverty is a political choice.”

Austerities effects are exacerbated by the UK’s low wage economy. A study by Cardiff University found in-work poverty was disproportionately concentrated in households in private rented housing, who have been hit by a combination of rising rents and caps on housing benefit. The study stated that:

“If policy does not do more to tackle rising housing costs directly, then it seems likely that these will eat up gains made elsewhere – for example, in terms of the planned increases in the minimum wage.”

The Growth of Manchester

Manchester City Council indicators point to rapid economic growth, a fact which is included in the marketing of these properties to Hong Kong and China.

Property website Juwai.com, in its marketing to China, reports that Manchester has an expanding young population of which 40% are graduates with 69% of graduates from Manchester universities choosing to stay in the city because of the career opportunities.

The marketing may be factual but the end result of regeneration, if not thought out carefully, can lead to current communities being pushed out and replaced by more affluent ones (aka social cleansing). In London, this has been shown in some regeneration projects, such as the Elephant and Castle. The Salford Star, reveals that Salford Council has approached the housing problem by replacing social housing with more expensive properties. Still leaving Salford one of the poorest areas in the country, albeit with more affluent pockets due to the influx of young professionals into the new mainly private rented sector developments.

How much affordable and social housing will the Northern Gateway provide?

With great economic forecasts for Manchester’s growth, it seems that social and affordable housing should and could be made available in the Gateway, but will it?

Dr. Silver told the Meteor that, “It is still unclear whether the Northern Gateway will address or reinforce the housing crisis. Already Collyhurst residents are worried about compulsory purchase orders displacing them from their homes and seeing their neighbourhood become an extension to the city-centre.”

Manchester City Council’s previous record of allowing developers to avoid section 106 agreements and affordable housing quotas in the city centre, cast some doubts as to whether they will uphold their promises in the Gateway. Councils have an obligation to consider viability assessments produced by the property developers. They estimate the amount of profit in a development and can reduce the amount of Section 106 money and affordable housing provided, if the council accepts the assessment. Will the council prove less accommodating to the developers this time?

The Northern Gateway is providing more housing but who will benefit from it? The evidence presented here suggests it will be
corporate international investors and people that are already affluent and privileged. It looks very unlikely to benefit those that most need it at the sharp end of the housing crisis.

There are many factors outside of Manchester City Council’s control but they have a responsibility to all the communities in the city to do their best. The council needs to look at the long term effect of just building primarily luxury apartments in city centre developments. It is time for Manchester Council to encourage social responsibility from developers by challenging viability assessments and insisting they provide affordable and social housing.

The Northern Gateway will lead to a better life and living conditions for some. But as it stands the Gateway will be barred to those most in need of decent housing.

 

Dale Anne McAulay

Feature Image: Original image (without lock and chain) taken from the Northern Gateway Draft Strategical Framework

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