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Westminster Property Association article supporting the work of the DSF

For those fretting about delivering affordable housing in Westminster there is one private organisation quietly getting on with it.

The Dolphin Square Foundation (DSF) is a charity established in 2005 with the proceeds from the sale of the long leaseholds of the eponymous and famous riverside Pimlico mansion block. Its brief is basically to provide “mini-Dolphin Squares” for Westminster residents “in housing need”.

Lancastrian Brian Ham has been its Chief Executive since 2009 and, armed with the £125m Dolphin Square legacy, the DSF now has no less than nine live projects under way.  His goal is to get 1000 affordable homes in the pipeline in the first five years of his stewardship.

The current nine projects will deliver more than 400 units, so he’s looking pretty much on target – and he needs to be because he has a board of big hitters including some of the great and good of property: Former LandSecs’ chairman Ian Henderson, Trevor Morross, Chief Executive of Dorrington, Colin Redman,
formerly of Grosvenor – in fact the board is stuffed with potential customers for what DSF produces – ready-made residential property investments. But more of that later…

DSF’s first seven refurbished properties have just been delivered in Queen’s Park, Westminster, and two more detailed planning applications are due for decision before Christmas.  The foundation is also working on three joint ventures, two in Westminster and one in Westbourne Park, also in Westminster, in partnership with a church.

In Westminster, DSF and Barratt have joined forces to refurbish and develop the former police hostel, Trenchard House on Broadwick Street, in Soho.  The Foundation is Barratt’s social housing partner in a deal with the Homes and Communities Agency. 65 out of 78 homes will be intermediate keyworker housing, with 13 private apartments.

The foundation’s ninth scheme is a proposal to buy 78 units from Argent’s first phase at King’s Cross, where a block of intermediate housing is being built above a school.  “Three more exciting proposals” are in the pipeline, says Brian Ham.

The foundation’s constitution allows it to develop rather vaguely “in the locality” and this is not defined in borough boundary terms, but it can only develop outside Westminster with the council’s consent, which has a seat on the board. “We have an understanding the lion’s share will be in Westminster,” says Ham.

“We work without grant aid, so the challenge is to find sites we can pay a sensible price for – usually in stiff competition with others. It is a constant balancing act to be able to build houses that are affordable.  In many respects we are more like a private rented developer than a housing association – but charging intermediate rents.”

“We aim to achieve a net running yield of 4% and we don’t factor in capital growth, that’s just rental. Our rents are controlled through the planning regime and our preference is to do schemes that are solely intermediate without social housing.”  “I’m a strong believer in mixed neighbourhoods, but the pragmatist in me recognises the difficulty of doing mixed buildings from a design and management point of view.”

He lists the problems: different rents, different service standards, complex charges and separate circulation cores which cause “horrendous inefficiencies”. “So let’s have mixed neighbourhoods,” he says, “but on a building by building basis. Pepper-potting just doesn’t make sense.” Something his private sector rivals wholeheartedly agree with.

At Moreton Street in Pimlico, planning conditions are just being finalised for a 39-apartment scheme, designed by Paul Davis and Partners.

These will be offered at 65% of open market rents, whereas under planning rules, they could be offered at 80% of market. But that would make them unaffordable to households earning less than £50,000 a year. “We want to make our stock available to people earning a bit less than that,” Ham explains.

Tenants will be selected by the foundation from a list of qualifying keyworkers registered with Westminster and DSF “markets” the scheme’s availability to those on the list.  About 3000 keyworkers are on that list at the moment but Ham admits it is “likely to grow”.

The development programme has been about giving Dolphin Square Foundation a track record and credibility so it can fulfil more developers’ affordable housing requirements.  “We’ll take flats off developers without grant aid,” says Ham. And now that housing associations are also shorn of grant aid, the foundation is looking like an increasingly attractive partner for developers.

About £85m of the foundation’s original £125m legacy is now committed and the aim is to recycle this by securing debt finance on schemes as they complete and let. Rents are tied to wage inflation or the price index so DSF has an inflation-proofed income stream.

The short term priority is to achieve the full £125m worth of schemes that can then turn into a medium-term strategy to recycle the capital. “It is pretty much like Peabody Trust 125 years ago, but the board wants independence from state funding,” says Ham.

There is growing interest from private investors in Dolphin’s model. “The model should work well for investors who want to commit equity to completed developments that are income producing. Some money doesn’t want the development risk, but we’ll have a nice income stream from our developments.”

There are also other advantages in providing much-needed affordable, intermediate housing. Tenants don’t move around so much. The average “dwell time” reveals Ham is expected to be about four to five years – three times that of the private Assured Shorthold Tenancy market place, which means many less voids.

There are cost advantages too stemming from the mono-tenure character – all of which mean, Ham maintains, that Dolphin is pretty competitive when it comes to bidding for sites. “It all works for us at around £500 a sq ft [capital value]” he says.

Given the track record Dolphin has now established, the heavyweight board and the substantial legacy which will soon be available for recycling into new schemes, you can’t help thinking that the foundation could have an illustrious future as a new model for the private rented sector. It has shown the initiative which the much trumpeted PRSI has so far failed to deliver.

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