Surplus government land could solve housing crisis

Copyright: David Lawson – appeared Property Week May 1998
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Finding land for 4.5m new households by the next decade has left ministers quaking. The new government has always had its eyes set on a second term of office, but how do you handle such a problem without offending too many voters?

 A kill or cure solution may be sitting under everyone's  noses. And aptly,  it is being offered by  the country's  kill and cure specialists  -  the Ministry of Defence and National Health Service.  Both have been clearing the decks for most of the last decade. 'Housing would have been in deep trouble if we had not seen the end of the Cold War and  the advent of care in the community,' says Stephan Miles Brown of Knight Frank. 'Former military bases and old hospitals have helped fill many  gaps left by local plans.'

  He is worried that the well is running dry, however. 'After ten years, there cannot be much left.' There is also a general impression among many market observers  that further MoD sales land have limited value for housing because sites  tend to be away from residential areas and often stigmatised by contamination.

  Neither fear appears justified.  'We are selling as much now as a decade ago,' says Nicola Maxted of Hillier Parker, which has 1,200 hectares spread across the six regions it handles for the Defence Estate Organisation, much of which could hold housing. 

   Almost  150m pounds could  be raised  from sales this  year and another 200m pounds is in the pipeline up the end of the decade. And this will hardly dent the gigantic estate,  said to make up almost 1% of Britain's land area.  'The size  is continually changing but is presently estimated at around 240,000 hectares,' says Diane Tilly, head of disposals and valuation at the DEO.   Large tracts are unsuitable for housing because they are remote, open training areas. 'Some 5,500 hectares could, theoretically, provide in the region of 27,000 homes.'

  Theory and practice may be some way apart, however. 'Some redundant bases would far outweigh levels of demand local markets if released for housing,' says Richard Haynes, Knight Frank's national valuation consultant to the MoD. Others are reserved for  commercial use, either by planners or by an MoD sensitive to reactive to loss of jobs when bases close.

   The NHS has also been consistently selling  at a rate of around 230m pounds  a year.  With 7,000 hectares of land and buildings worth 1.2bn allocated for disposal, that implies a continuous stream of sites well into the next decade. In fact, this underestimates the likely supply. Initial impetus for defence sales came from the 'peace dividend' - a combination of armed forces reductions and withdrawl of US support facilities after the end of the Cold War. Many of the 3,000-plus bases and depots came under review and several have already been sold for housing, such as Caterham Barracks, now being renovated by Linden.

    Another wave of reductions is anticipated as the new government seeks efficiency savings to bolster its plans to freeze taxation. High-level leaks over the current Defence Review have already intimated that dozens of Territorial Army centres could come to the market. This could put a cracker under builders, as unlike many bases, these are often within urban areas. 'The review is bound to throw up sites that have not yet been identified,' confirms Tilly,  although she says it is too early to pin any down.

  Health disposals  are also likely to take off. NHS Estates has grabbed most of the headlines over the last couple of years with sales of redundant hospitals. Miles Brown points out that these have been a crucial influence on local markets like some London's suburbs, where conversions have provided much-needed input to  starved markets.

  But  this is only the tip of a potential iceberg. These are  non-operational assets left when health care  was devolved, says Ken Brown of NHS Estates. Local trusts have now had two years to assess the property they took with them and are beginning to rationalise, says Andrew Watt, head of residential land at St Quintin in Manchester.

  He has a clutch of former hospitals to sell such as the Whittingham in Preston, Calderstones in Blackburn and part of the Royal Albert, Lancaster, each a potential  housing scheme.'There are also many smaller sites worth less than 1m pounds each in the pipeline,' he says. These offer a big bonus to home-hungry politicians, as they are usually additional to projections within local plans. 'They could have an important impact on making up local shortfalls,' he says.

  Trusts are under pressure to sell  because they  must pay a notional rent for premises, says Nigel Durman of Wetherall Green & Smith, which is handling a stream of hospital disposals  around London. It is  also a  major player in defence sales, where the same factor is coming into play as  each section of the armed services applies 'resource accounting' to allocate the costs of  land and premises.

 PFI schemes are also becoming a major influence. The government has accepted the idea of surrogate health privatisation with almost embarrassing joy and while the property industry continues to grumble about bidding costs and bureaucracy,  hospitals offer the brightest hope for progress.  Miles Brown points out that the whole of London's Fitzrovia faces transformation as AMEC progresses plans for a PFI with the local hospitals.

 This kind of project will throw up another batch of redundant buildings. Even where existing health premises remain, they often have generous surrounding land which can be  hived off for housing.  While these smaller sites  help infill towns, housebuilders are even more exited by much larger lumps coming out of the defence estate. Redundant barracks and bases provide the elbow room for economies of scale.

  Upper Heyford in Oxfordshire is probably the highest profile example, where up to 10,000 homes could be built. These schemes are so large that builders have organised into consortia to handle them. Westbury, Taywood and Wimpey are among the big names involved.

  They are also in the queue  for  RAF Quedgley, a former  storage depot near Gloucester, where 25 potential developers scrambled for a piece of the action. Three sites have already raised more than 6m pounds from St Modwen and Ashtenne for commercial development. But there is potential for more than 1,000 homes on the remaining 350 acres, says Susan Lynch of  agents Drivers Jonas. Others on the shortlist include Countryside, Rutland, Beazer, Taywood, and Wimpey.

  The site could meet all the expected  needs  for the region over the next decade, which indicates the significance these bases can have for local plans. Local councils do not always have the same hunger for housing as ministers, and Tilly admits that she often has to battle as hard as the armed forces she represents.