Redeveloping pubs and shops steals value from surrounding homes
Stephen Taylor, Hampstead Neighbourhood Forum
- Credit: PA
My neighbours have a problem. They own a lease and a share in the company that owns the freehold of their building. Their immediate neighbour wants the fire insurance to cover the market value of the property – five million pounds. They want to insure only for the cost of rebuilding – half a million.
How is a house you can build for £500,000 worth five million? The difference is the value of the land. So how is a scrap of land in Hampstead, zoned for residence, worth £4.5M?
Well, everyone knows that: it’s the location. The land is in inner London. The Heath is a few minutes walk away. The air is relatively good. There are shops and a good hospital in walking distance, Underground and Overground stations, and a good choice of pubs, with the best right at the bottom of their road. The point here is that almost all the value of their home lies outside their land, in the local amenities.
About that pub. Some years ago a developer bought it, converted the top floors to flats and closed the pub. If he could convert the entire building he could expect to sell it for £5M, more than twice what he paid.
Developers like to describe such projects as “unlocking value” in a site, but it is more useful to think of it as shaving a bit off the value of hundreds of surrounding homes by removing an amenity. Ever-rising house prices cushion the pain and mask the transfer of value. But the developer has not created £2-3M of value. He nicked it from the neighbours. Legally.
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Without planning controls, everything in a good area gets redeveloped as luxury housing. There goes the neighbourhood: the pubs, the shops, the offices, the jobs. The endpoint is a dormitory suburb, fit only to drive home to, and barbecue on weekends. Two sets of current government proposals would remove many controls and allow this to happen.
Not all development is bad. My neighbours’ house was thrown up by speculative developers 150 years ago; these days it’s a conservation area. But the price of bad development is severe – and you pay it.
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- Stephen Taylor is chair of Hampstead Neighbourhood Forum.