At the end of 2015, shares in the Berkeley Group — the most potent, corporate symbol of high-end London property — hit an all-time high. The UK general election, which saw the Conservative Party win a clear majority, had gone the right way for a company whose riverside flats can come with their own Harrods concierge and a £15 million price tag.
Prior to the election, the period following the financial crash had ushered in a boom era for the UK capital’s real estate market. An unquenchable thirst for aspirational residential developments had left many property developers drowning in cash. Put simply, Berkeley has been very good at what it does, in an industry where the sun has been shining brightly for years.
As most people who work and live in London can testify, house prices do not square with anything approaching normal pay levels. That’s partly due to the inflationary effects of international investors, who see the city property alongside US government bonds and gold as one of the safest places to park their cash. Along with financial services and the English courts, this is the meaning behind London’s appointment as a ‘global capital,’ a status that underpins Berkeley’s continued success.
Then, at the start of this year, something funny happened. Convinced that nervy global markets would cause the demand for luxury London apartments to fall, hedge funds started placing wagers that Berkeley’s share price will decline. To bet against high-end London property is to bet against the status quo, but if the hedge funds are right, then Berkeley will find itself increasingly reliant on a less glamorous, though equally profitable kind of housebuilding.
This kind of development is typified by the company’s mega project in little-known Kidbrooke in South East London. As with any new product, Kidbrooke Village has to emphasize its proximity to established brands. Fortunately, it lies a mile from Blackheath — a kind of classic English country village that got trapped in zone 3 of the Greater London area — and Greenwich, which has been hawked by the local tourist board as ‘the place where time began,’ thanks to its royal palace and historical links to astronomy and maritime London. All these handy connections aside, what sets Kidbrooke Village apart as a development is its sheer scale. When I visit the development’s showroom, I am told by one of Berkeley’s sales representatives that it is the fourth largest urban regeneration project in Europe.
Like all large-scale housing developments, the master plan is subject to change, but the current construction forecast is for a £1 billion investment in 4,000 homes (down from 4,800), new schools, a commercial centre, hotels, restaurants, offices, and a new “transport interchange.” Given the full picture will take up to two decades to complete, a true reflection of Kidbrooke Village’s early years should probably contain a few more cranes and diggers than the tranquil CGI-rendered footage in their promotional videos suggests.
It’s the second time this area has been re-imagined in the last half century. Kidbrooke Village is being built on the grounds of the Ferrier estate, a council-run social housing project which was built between 1968 and 1972. Set across two sites and eleven 12-storey concrete towers, the Ferrier was initially highly desirable, with prospective residents paying a premium to move into roomy flats with up to five bedrooms. Over the following decades, the sheen wore off. Local authorities used the estate as a dumping ground for successive groups of refugees with nowhere else to go, while social and economic deprivation slowly took hold. Several people who worked on the estate dismiss the notion floated to me by a Kidbrooke Village sales representative that the Ferrier was a “centre of crime” for the surrounding area. Yet, its reputation as a no-go zone — rife with drugs and anti-social behaviour — proved to be an ultimately destructive strain of mildew. After Margaret Thatcher’s government passed legislation allowing council housing residents to purchase their property, only 160 of the 1,906 homes on the site took up their right to buy.
Whatever eventually comes from Berkeley’s re-development of the area, few would argue that its predecessor, was a beacon of community. Indeed, one of the few things to connect the estate’s residents were the pharaoh ants that infested the Ferrier’s central air duct and made their way unimpeded throughout the buildings. By the turn of the century, Greenwich council had concluded that the estate needed replacing. Berkeley was chosen as the lead developer in 2006: within three years, Kidbrooke Village had been awarded final planning permission by London’s mayor and aspirant future Prime Minister, Boris Johnson. At a rate of one household a day for five years, the Ferrier’s tenants were moved on to other social housing schemes, with the last residents departing in 2011.
Social housing does feature at Kidbrooke Village. Self-contained apartments have been built for the elderly, and since the start of the project there has been ‘affordable’ housing. This meant that by January 2012, Berkeley could claim that former Ferrier residents occupied most of the 229 homes built on the new site. At the project’s apartment salesroom — where it is explained that this is a “community brand” development rather than a luxury one — I am assured that the former Ferrier tenants are on the periphery of the 109-hectare site. There will be a more even spread of the remaining 1,525 affordable homes the group has committed to develop, though this figure could well be a moveable feast.
The requirement for property firms in the UK to build ‘affordable’ housing — often around 80 per cent of market rates — is a hotly-contested part of any development. Private enterprises like Berkeley are loath to do it, because it makes projects less profitable, though they know some provision for affordable housing is unavoidable. This is particularly true of developments in Labour-led councils, where Kidbrooke Village is located. One way of clawing back that lost profit involves something called a viability assessment, which property developers use to argue that they cannot deliver their targeted affordable housing while still maintaining their required profit. (There is no evidence that Berkeley has used viability assessments to its advantage in negotiations with Greenwich council, which incidentally is campaigning hard to force the public disclosure of these opaque arrangements. But it is widely known that the practice is endemic across the planning industry.)
According to one Berkeley insider, property developers will always look to inflate costs and deflate anticipated revenues, which effectively amounts to the legal enshrinement of profits against the margin-eroding effects of affordable housing. For Berkeley, it could prove a particularly useful tool if — as the hedge funds have predicted — buyers for its luxury accommodation in central London head elsewhere. Affordable is, of course, a contentious term. But its definition is certainly stretched even after a twenty per cent discount is applied to the market rates for Kidbrooke Village. At the project’s salesroom, I am quoted £470,000 (the equivalent of $680,000) for a two bedroom flat due for completion next year, while newly built four-bedroom houses go for up to £900,000. With average ground rent and service charges an extra £3,000 a year, it’s tricky to see how private or housing association rents will neatly pair with the project’s utopian strapline — ‘A new village for everyone. For London’ — given that the borough’s median household income is below £36,000 a year.
It’s not hard to look at the sweep of the last two decades and get the impression that Kidbrooke Village is gentrification cloaked in the respectable guise of regeneration. But as this project erases what came before, it’s worth asking just how the ideal behind Berkeley’s project is being shaped, and how its developers imagine a new community will be created. A shared sense of renewal and geographical rebirth seems unlikely, given the paucity of former Ferrier residents in the new development. Another possible answer is contained in a ‘regeneration case study’ published on Berkeley’s website. “What will help Kidbrooke emerge from a recent troubled past,” it argues, is “the attention to detail and quality in the public realm.” In turn, this will “create a place where people will battle hard to buy or rent, either privately or through the housing association.” In this vision of community, it is financial struggle — the necessary plight of London existence — which binds individuals into a collective.
Depicting community is hard enough — let alone one that doesn’t properly exist yet — but there are still a few clues buried in Berkeley’s promotional material to suggest what Kidbrooke Village’s community will look like. Within these signs is the reflection of the high-end luxury type of development Berkeley is better known for. Call it luxury community. Attractive actors relax on the balcony with a glass of Chablis; a copy of GQ sits on the expertly-tucked bed; rooms carry the veneer of a corporate hotel. Again, we are reminded of the speed of the commute to work, in central London.
Berkeley is smart, and knows that in constructing a “sustainable community,” it cannot accidentally build a ghost town. “This is certainly not designed to be a dormitory for the City,” explains one pamphlet, omitting the disclaimer that residents are unlikely to be chosen based on their occupation. There is reason to doubt the aspiration, given Berkeley was pitching Kidbrooke Village properties to Asian investors as early as 2010, providing yet another place for absent international buyers to park their money. This is the hidden meaning of a community development in a London context: Housing billed as regeneration is marketed to a mixture of cash-rich global buyers and higher income — or highly indebted — locals.