The Board at Red Kite Community Housing has decided that it cannot go ahead with the development proposals for the Castlefield site.
After significant debate at the meeting of the Red Kite Board on 14th September 2022, it was decided that developing the site is not financially viable. The cost of the proposed build, which is well over £60m, required a significant subsidy which rendered it too expensive.
We have received several offers for the land and our Board has given us the go-ahead to investigate further the sale of the site, as we believe this is the best thing for us to do and will still enable local homes to be delivered, albeit through a private developer.
The current buildings are unsuitable for modern living so they cannot be refurbished. Any sale will include the need to demolish the existing buildings within an agreed timeframe in order to clear the site for new homes.
The work we have done over the past few years means that the site is ready for redevelopment, and we have, through the planning permission we were granted, formally established the principle of regeneration. Unfortunately, the risks to us as an organisation of procuring a third party to develop the site were too significant, so our Board has decided the best option is to sell the site on to a volume house builder who will be better placed to secure improved prices for the construction and therefore manage the risks involved in delivering new homes on the site.
The money we receive from the sale, as well as the money we were going to spend on the development, will now allow us the opportunity to invest in further homes in the Wycombe area.
We can’t say yet, but the interested organisation wants to build homes on the site.
The sale will put certain conditions on the developer which will mean they need to demolish the existing buildings within an agreed time period and seek to redevelop the site under a new planning permission which they will apply for.
The money that we receive from the sale, as well as the money we were going to spend on the development, will now allow us the opportunity to invest in further homes in the Wycombe area.
Redeveloping the Castlefield site was always going to be technically challenging. The new homes were to be built on a steep and sloping site, making the engineering solutions very expensive. With inflation rising so much, the scheme was too risky and too expensive to build, and needed much more subsidy from Red Kite, a not-for-profit community housing association, than was originally allowed for.
The economic climate has become much worse, meaning that build costs, including the price of materials, have significantly increased over the last couple of years and look set to continue to rise. Despite our best efforts to reduce the financial risks associated with the scheme, contractors have not expressed a competitive interest in bidding for the work – as in any environment with escalating costs, it is an unattractive offer and exposes them to significant financial risk.
We know that when building homes on this scale, even though we have done as much work as we can to obtain a fixed price, there are always likely to be additional costs required. Given the way the economy is currently, and the increase in project cost to over £60 million, the risk to us of delivering the scheme became too great.
The Castlefield site has always been a difficult site to work with due to the nature of the land. We have gone through several designs, including redesigns of the current approved scheme, to try our very best to deliver a project that is financially viable.
Gaining planning permission took a long time, and when we received this in 2021 we had to begin the process of procuring a contractor. This was then impacted by the Covid-19 pandemic, which further delayed progress.
Given these factors beyond our control and the current situation with the economy we are now in a position where construction costs have spiralled, and despite seeking help with funding through various grant opportunities the numbers still don’t stack up.
The cost of the project was stretching to well over £60m and required a significant subsidy from Red Kite that could be better used to provide new homes elsewhere at a much lower cost and to invest in the homes we already have.
Subsidy is the money that we put into building homes and which we must write off, as the rent from the homes we build will never pay back the cost of building and maintaining them. Our Board felt it was better value for money to use this money to deliver homes elsewhere in the area on less challenging sites, as they could be built with much lower levels of subsidy.
We remain dedicated to building much-needed affordable homes in the area and will continue to develop on land that we own or purchase homes from developers through Section 106 opportunities. The money we would have invested in this project along with the proceeds from the sale will be used for delivering new homes.
By building homes in ways that are more financially viable we will be able to achieve better value for money and deliver more affordable homes.
We will do what we can to ensure that the organisation buying the site will develop new homes on the land.
The current flats are not fit for purpose – the cost of refurbishing them would be significant and we would still end up with homes that are hard to keep warm, poorly designed, and with a short remaining lifespan. The design and layout of the homes and surrounding open space on the site is very poor, so we do not feel that this is an appropriate option.
When Red Kite formed, we agreed to a number of obligations called 'the promises'. Redeveloping Castlefield was not one of these promises – the site was separately identified for a feasibility study to establish whether it could be refurbished or redeveloped. We have in effect been doing a ten-year feasibility study, trying our very best to make something work on the site. We have battled hard to come up with a scheme that met with the approval of the council’s planning department and that would also serve the local community to best effect.
No one wanted to succeed in this endeavour more than us, but we must know when to walk away. We can't put the financial security of Red Kite at risk for the sake of delivering this project, and in the current challenging economic conditions it wouldn't be the right thing to do for our tenants – in fact, it would be negligent.