Brick By Brick: who we are, what we do, and why it’s a great thing for Croydon

Brick By Brick: who we are, what we do, and why it’s a great thing for Croydon

Brick By Brick is based on a very straightforward idea. It’s a way for Croydon Council to deliver much needed homes for local people, with the proceeds that arise from this process returned to the council to help fund frontline council services. This means that the profit created by Brick By Brick stays within Croydon. Local people get priority to buy our homes, and unlike most private developers the profit doesn’t line the pockets of individuals or get sent to shareholders overseas.

But while the concept of Brick By Brick might be simple, the development process isn’t. Development is a highly complex process, which involves balancing many competing priorities and making difficult decisions. It can be an emotive subject. So when we talk about what we do we think it’s really important to focus on the facts – and in this age of misinformation and fake news, we think this is more important than ever.

So what does Brick By Brick do?
We focus on building private sale homes and affordable homes. The price of our private sale homes is set at the local market rate (and as Croydon has a lower value market compared to other parts of London, all of our for sale homes are available through Help to Buy). There are many different types of ‘affordable homes’ in London and these definitions are set by public policy. Our affordable homes focus on two types: ‘intermediate tenures’ such as shared ownership, and low cost or social rent homes, which are allocated by the council to those most in need on the council housing waiting list. We focus on these two types because we believe these are the most affordable tenures for local people. Around half of our homes are affordable, a much higher proportion than normally achieved by private developers. For all our homes we have a focus on design and build quality, because we think good quality housing is important for our customers and important for the borough.

We are very open about how we operate. We publish our annual business plan and end of year accounts publicly, and we have robust management and governance structures in place. We consult heavily on all of our developments, through a variety public events, one-to-ones and online methods, to try to gather as much local feedback as possible. We use this feedback to help us design our developments, and ensure that they are appropriate for the site and the area.

As a housing company, set up to deliver good quality and affordable housing, it is our mission to always seek ways to create new homes on sites in a considered and appropriate way. We understand that this may not always make everyone happy – people will have differing views around what sites are appropriate, or have personal preferences around design or the type of housing we should be developing. We accept that and it is up to us to work with the community, the council and other stakeholders to reach the best outcome possible.

So we think it’s a pretty simple model, and one that is more socially-conscious than the traditional development industry. Our profits go back to Croydon Council as our single shareholder and are reinvested in the community. A private developer’s profits go to their shareholders, who may never have stepped foot in Croydon. But because our business model is a new one it can be easily and regularly misrepresented. So let’s look at some of those more common misrepresentations of what it is that we do and how we do it – and sort out the fact from fiction.

We are not gifted money by the council
We do not receive public grant or financial hand-outs from the council. Developing land and building houses obviously requires finance – you need money to begin the process, which is then paid off at the end of the process with interest. We currently borrow our development finance, at market rates, from the council. This is a deliberate choice which benefits the council because they receive interest from us on this borrowing, which is then reinvested in the borough. If we were to borrow finance from a bank or other lender instead, any interest would go to them and be lost to the borough. Our total borrowing as of end January 2020 was approximately £200m. This is borrowing, not public grant, and it is repaid in full, with interest, at the end of the development process for each site. This is a win-win situation for Croydon.

We’re making good progress
We currently have over 1,000 homes under development across Croydon. We have completed around 90 homes so far (across 5 different sites), and we have another 290 homes (across 11 further sites) set to complete over the next 6 months. A further 9 sites are actively under construction. We are also currently progressing a further 33 sites through the planning process which, subject to approval, will start to be delivered in 2020.

From 2020, we expect to be completing around 500 homes every year and around half of all the homes we build will be affordable. This is a scale and pace of homebuilding which is absolutely unprecedented in Croydon and beyond, and it places the borough foremost amongst those councils directly delivering new housing for their residents. We are at the vanguard of a new generation of council-owned housebuilders, creating local homes for local people, and we have received widespread recognition for that.

So any claim that little progress has been made on our sites is inaccurate and misleading. Development is a long and complicated process: it takes time to set up a wholly new company (we were established in 2016); identify sites for development; consult with the community on proposals for those sites; take those proposals through the planning system; begin construction, and then complete and sell the homes.

In development, delays are commonplace, and we have suffered our fair share. But our Development Team are professional, committed individuals and are managing this complex programme very diligently. Housing is being delivered on multiple sites, and residents are now moving into their new homes. This is a really exciting time for Croydon and Brick By Brick.

Sales are going well
We currently have 62 sales reservations, with more being made on a weekly basis. That’s well over 50% of the homes that we have released for sale, and this includes the higher priced homes which are valued in line with the local market. This progress has been made despite the London residential market slowing considerably during 2019 as a result of the ongoing political certainty around Brexit. The profits from these home sales are returned to the council to be reinvested in public services. So any suggestion that sales on our homes are very slow, or that our higher priced homes are not selling, is simply not accurate.

Our homes are appropriately registered and warrantied
All Brick By Brick homes are registered with a variety of agencies and authorities as is the normal process for a housing company. These include, for example, Planning and Building Regulations, the National House Building Council (NHBC) warranty scheme, the Help to Buy scheme, and the Greater London Authority for grant, to name a just a few.

With regard to our ‘intermediate’ affordable housing offer, in order to ensure that we provide homes which are affordable to as many people as possible, we focus our intermediate offer on shared ownership, where qualifying customers can purchase as little as a 25% share. Last year we launched our first shared ownership homes for sale at Auckland Rise & Sylvan Hill in Upper Norwood and later in the year we launched more shared ownership homes for sale at Flora Court in Thornton Heath. These homes offer purchasers an opportunity to get on the housing ladder with a low deposit and smaller mortgage.

Mortgage providers have special terms for lending on what are designated as intermediate homes, and our buyers select from a range of mortgage products that are suitable for shared ownership. However on these first shared ownership schemes, as buyers came to the point of exchange of contracts with certain High Street lenders some discovered that they had imposed criteria for lending on these properties which included a requirement that the seller be a ‘Registered Provider’ with the national regulator for social housing.

Becoming a registered provider can be a long and complicated process and it is not a requirement for all lenders. However, in order to provide as many affordable financing options as possible for our customers, we are progressing this registration process while also actively working with anyone affected to find an interim solution that works for them. No reservations have so far been lost as a result of this, and any remaining shared ownership homes will be available for buyers to reserve on a similar basis.

We do not buy land from the council ‘for £1’
The suggestion that we purchase our land from the council for less than market value is not accurate and very misleading. We do not buy land for £1. For our initial site purchases from the council, we agreed a combined land value across a batch of sites. This was because we had an obligation to deliver affordable housing across the batch, so it made sense to value them together. Individual values still need to be assigned to sites, meaning that some of the individual sites within the batch appear to have minimum value of £1, but the valuation actually needs to be seen in aggregate across the whole group of sites because the sites are required to work together.

Furthermore, all Brick By Brick land purchases include an ‘overage’ provision to the council. This means that at the end of the development there is a recalculation of land value which factors in all of the actual costs and revenues on the development. Brick By Brick then tops up any land payment to the council if applicable. This means that the land value that is actually paid is directly linked to the actual revenue generated by the development – i.e. that the land value is fair and fully justified.

This control on land value is rare in the development industry, where land values are often inflated from the outset, ultimately leading to a reduction in the amount of affordable housing that can be delivered by the development later on. We ensure that this doesn’t happen on our developments, which is one of the ways we can ensure that we are able to deliver more affordable housing.

As we said earlier, development is a complicated process and can be easily misrepresented. But if you have read this far we hope you now have a better understanding of what it is that we do, why we do it, how we do it, and why it is such a good thing for Croydon!

If you want to learn more we have a full set of FAQs which we update on a regular basis. This includes information on a wide range of different topics and queries which regularly arise.

You can also email us at [email protected] or contact us via Twitter @brickbybrickldn.  Please do get in touch.