London: mind the gap

The development sits on the northern edge of Shoreditch, a dense urban area of inner east London, lying between trendy, pricey Islington to the north and even trendier (but not quite so pricey, yet) Spitalfields to the south. For buyers, the area has transformed totally in the past five years, from a marginal urban wasteland with fading small industries and little in the way of public amenities, into a vibrant, desirable, edge-of-the-city postcode that is home to emerging media companies, bohemian art galleries, minimalist bars and cool weekend nightspots.

Estate agents prefer to call the area ‘Hoxton’ rather than Shoreditch, referring to a corner of the area with a now-affluent square of the same name. Gentrification here is moving at a pace that is amazing, even by inner London’s current standards. According to the Land Registry, house prices are rising at the third-fastest rate in England.

But there’s quite another side to this story – one that’s a mere spit away from the idyllic loft living by the canal. Shoreditch, part of the London borough of Hackney, is by every trusted indicator one of the most deprived districts in the country.

Social housing makes up 83 per cent of all homes. Two thirds of people are on incomes below £10,000 a year. A third are on income support and half get housing benefit. A third have no central heating. School truancy is double the national average. Crime rates are more than double the national average. This is, in other words, a seriously socially excluded community. The presence of the Canal Building is at best an irrelevance.

In 1998, Shoreditch was, as one of the 17 most deprived areas in England, chosen as a pathfinder area for the new deal for communities programme. Money, ‘top-sliced’ from the release of capital receipts from council house sales, would go towards rebuilding communities rather than providing new homes.

In Shoreditch, residents seized the opportunity with both hands. A new deal trust was set up, led by a resident-controlled board. The council took a back seat as the residents set about determining the priorities for an initial injection into the area of £37 million, with a view to a ten-year and then 30-year programme to help transform the area for the local community.

Residents living on Shoreditch’s estates settled for a two-phase programme, the first part of which is ‘non-housing’ – addressing the problems of health, education, crime and, crucially, jobs. Housing will come later.

‘People want to build their lives, not houses,’ says Michael Pyner, chief executive of the Shoreditch new deal trust. ‘If you don’t give people jobs it’s not much use in the long term. ‘We are right on the City fringe and we are told the City is booming. Employment there will increase by 190,000 in the next 10 years. If we are not a part of that there must be something wrong.’

One of the early decisions made by the new deal board in Shoreditch was to allocate grant money to organisations from within the local community, rather than to newcomers to the area sensing a regeneration goldrush. Clayeon McKenzie, the tenant chair of the new deal trust, believes this is why local residents have not felt a part of earlier attempts to revitalise the area. ‘Professional people are very good at filling in the forms, are better at talking the language of regeneration. But do local people see the economic benefits in work? No. So we decided that anyone who puts a project together for us must have had a stake in the local community for at least five years.’

The new deal trust is also looking to the new industries in the area – including the dot.com enterprises – to give the people from the local community a stake in the good times. ‘Rather than saying there is no relationship between the two we have got to be more positive – it is not just a them-and-us thing,’ says Pyner. ‘Take new media. There is a disproportionate number of people from black and ethnic communities in that sector. Apprenticeships and other job opportunities must be encouraged.’

But, just as local people are struggling to get involved in the Shoreditch economy, so others involved in the local economy are struggling to get into Shoreditch. Soaring prices in the area are keeping out the key workers the area so badly needs – especially nurses and teachers. For them, a social housing tenancy is just not an option, given the dire shortage even for statutorily homeless people in the area. But then, when you are on less than £20,000 a year, nor is a £175K flat.

It is with this in mind that the government’s green paper proposes a new fund offering support to innovative low-cost home ownership schemes. It’s not the most revolutionary idea ever – shared ownership has been with us for many years – and it remains to be seen whether there will be any new money made available for schemes, but the government has clearly recognised the problem that exists in London.

Locally based Islington and Shoreditch housing association is building two schemes to accommodate nurses working at the nearby Moorfields Eye Hospital (one of the area’s bigger employers) for around 140 key workers. A manufacturing pharmacy is also planned. And Peabody Trust has completed two key worker developments in the area. One offers cost rents – midway between social and market rent levels – thanks to a creative land deal with Hackney council, and the other offers shared equity courtesy of a planning gain agreement.

But Clayeon McKenzie is suspicious of the new low-cost home ownership developments in the area, fearing the properties will simply be unavailable to local people. ‘What use is a place on sale for £120,000 to people around here? You’ll need to be earning at least £30-40,000 to qualify for that.

There aren’t many council tenants, or children of council tenants, on that kind of salary.’

Peabody insists that people already living and working in the area did come first in its list of priorities for the developments, and says the schemes have not detracted from its social housing programme. But local tenants do have a point about the price gap – and it applies as much to key workers wanting to move in as it does to local people interested in low-cost home ownership.

If prices do run at £150,000 and higher for a two-bed flat, even shared ownership will not be able to bridge the gap. With the market as it is, the green paper’s laudable encouragement of schemes may do little to help.

Back at the new deal trust offices, the board is getting ready for part two of the programme – which is set to look at the long-term options to tackle the underinvestment in the housing stock. Despite residents placing an early emphasis on non-housing improvements, the long-term strategy places housing at its centre.

The trust has set out a series of five options. Each involves private finance, including both stock transfers and using private finance initiative schemes without transfer. The housing options must be completed, with a decision made on the way forward by September.

But, as in so many areas where ‘future options’ are being considered, there is deep suspicion among council tenants that the council is just looking to transfer. ‘The new deal has made us quite confident – but we are still very nervous about the future,’ says Clayeon McKenzie. ‘We know that the green paper is all about abolishing council housing in the next ten years – and we fear that the whole of the regeneration agenda here seems to be about selling off our homes. People here are not fond of the council, but they want the security of tenure and rents that a council tenancy offers.’

David Thompson, director of housing at Hackney council, agrees that there has to be a debate. ‘We are not going to be prescriptive about this – it is not our role – but we do want to see the new deal board examining all the long-term options seriously. What residents need to realise is that the new deal’s initial cash of £30 million will not be able to deliver the long-term physical improvements that are needed. The area must have assisted private sector money.’

Whatever tenants decide, life is certain to change. Housing market pressure means new will be built regardless. Residents living in social housing have to work out whether they want a stake in its future – at a time when the green paper is pushing them towards transfer – or whether they are happy to let the loft developers have a free run. Doing nothing in Shoreditch is not an option.