The chief executive of a leading business lobby group has urged council chiefs to adopt a more nuanced approach to the regulation of off-plan sales of new residential developments in Liverpool.
Liverpool City Council has pledged not to sell land to any developer that cannot prove it has the funds in place to complete a scheme and Frank McKenna of the Downtown in Business group says there are fears in the development community that the council wishes to ‘put a stop’ to any scheme that is funded using an off-plan sales model.
“Selling off plan is a common model used across the world to provide liquidity to deliver new schemes. From Lisbon to Los Angeles you’ll find reputable developers utilising it as a way to regenerate their city and provide new homes. Thousands of homes have been successfully delivered in Liverpool in exactly the same way,” explained Mr McKenna.
He says that the lack of regulation and oversight of the model in the UK has resulted in some schemes failing, causing reputational harm to Liverpool as a result. But Mr McKenna now fears that this has been allowed to ‘colour the judgement’ of the model’s wider merits and success.
“If the council wishes to regulate the model, then surely a better way would be to instigate a financial due diligence procedure and make this part of the planning process. It would allow the council to identify those in whose hands off-plan sales will be safe and would be revolutionary in the UK, as well as being a practical way to root out the bad apples. It would require some legal input to ensure legitimacy but I think it could be achievable and is a much better option than just stating ‘off-plan sales will not be tolerated.’”
Mr McKenna believes that institutional interest in Liverpool remains subdued and that developers delivering schemes using off-plan funding have ‘kept the market alive’.
“Viability in Liverpool remains a challenge and the developers who have steered a way through this have typically been those with a deep local market understanding and trusted local supply chain. If the council believes that institutional funders and their development partners will plug the gap if these developers leave the stage then I think they are mistaken. At what point during the last 25 years of sustained regeneration was that ever the case? The city’s regeneration has largely come from within, or with the help or large slugs of public subsidy, such as via the Objective One programme. Whilst there are some excellent examples of institutionally-funded projects, such as the Cargo Building and Baltic Yard, these are the exception, not the rule.
“The market is becoming more challenging with cost inflation skewing viability assessment and contractors going bust with depressing regularity. Now is not the time to be shutting off a viable funding stream nor demanding unachievable affordable housing numbers.” added Mr McKenna.