The bill for Greenwich’s council house-building programme has grown to £314 million – some £74 million more than the original estimate.
Greenwich Council blames Brexit and the pandemic for the increase, as well as industry-wide skills shortages and the cost of using modular construction techniques to build energy-efficient new homes quickly.
Council leader Danny Thorpe pledged to start work on 750 new homes by 2022, when his Labour group faces re-election – the biggest such programme since the late 1970s.
At present, 388 Greenwich Builds homes have been given approval, but plans for another 320 homes on part of the former Thomas Tallis School site are expected to be submitted for planning soon after a brief consultation was held last week.
Other projects – such as new homes on the Barnfield Estate in Plumstead – are in the pipeline.
When approved in 2019, the original bill came in at £240.2 million – £142m of which was to be paid for by borrowing, following the loosening of rules set by central government on borrowing against their housing stock. A further £43.4m came from right-to-buy receipts, with another £32.4m coming from a City Hall grant.
The council is now set to borrow another £46.2m to help pay off the 31% increase in costs. Councils typically borrow at very low rates from the Public Works Loan Board, an arm of the Treasury. Another £27.5 million will come from more right-to-buy proceeds. The council’s cabinet will be asked to approve the extra money next Wednesday.
In addition, new tenants are effectively paying into the programme, as those in Greenwich Builds homes will be paying London Affordable Rent – about half market rents – rather than typical council rents, which are much lower.
Most of the new homes are on small chunks of council land, usually on existing estates – closed-down offices and yards, former garages, and – controversially – parcels of green space in Kidbrooke and Plumstead. The council has a 23,000-strong waiting list for housing – but loses about 150 homes each year to right to buy.
The modular building techniques – where parts of the home are assembled in a factory before being taken to the site to be fitted together – have been lauded for the speed of construction and their energy efficiency. But Greenwich has struggled to get the parts in on time and on budget.
“Greenwich, like many others including private developers, have struggled to secure enough modular units from providers at costs originally (and reasonably) envisaged,” a report to senior councillors says.
“Modular housing is a relatively new industry, especially at the scale now demanded, and this has meant we have had to find alternative providers often at higher costs to not compromise on quality.”
Increased costs of labour and materials are also being blamed – with construction wages jumping 14 per cent during the spring and materials being 20 per cent more expensive this summer than they were the previous year.
Other factors include on-site difficulties, such as the discovery of buried asbestos in a site at Well Hall Road, Eltham.
The report will lead to new concerns about cost controls at the council, weeks after it was revealed that the council’s Woolwich creative district project had cost £45 million – £14 million more than the publicised budget.
Council officers have conceded they could have been more explicit about the risks to the project, which includes the flagship Woolwich Works venue.
Greenwich Builds is one of a number of council-house building projects across London taking place after mayor Sadiq Khan released funds to councils and the government relaxed borrowing restrictions.
Southwark has pledged to start 2,500 homes by 2022 and Hackney 2,000. Lewisham has promised 1,000, although that figure includes housing association homes. In September, Greenwich won £38m in City Hall funds to build more homes.
Greenwich is also abandoning plans to build new homes on two sites that had originally been earmarked for new homes. One, at Bliss Crescent in Lewisham, has been dropped because it would be too difficult to access the site for construction. A second plot, closer to Elverson Road station and facing the River Ravensbourne, remains in the programme.
Another site, at Villas Road on the Glyndon Estate in Plumstead, is also dropped because of “site constraints”.
The former Simba Project building on Artillery Place in Woolwich is to be transferred to Meridian Home Start, a council spin-off organisation which builds homes for higher rents. Work on a site at Antelope Road, on the Woolwich Dockyard estate, is to be delayed into the next phase of the project.
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