Newham Council has been asked to look at introducing a public-private partnership into its flagship Carpenters Estate project with the borough’s mayor blaming construction inflation and fire safety regulation for spiralling costs.
The estimated borrowing the authority will need to build the huge regeneration scheme is now estimated at £1.42bn, up from £1.1bn in September 2023.
The Stratford scheme, being delivered by the council’s wholly owned housing company Populo Living, will see more than 2,300 homes delivered across a 23-acre site, with half of the properties made available for social rent.
The East London local authority’s cabinet signed off an increase of £69m across cost increases to two phases of the project earlier this month.
Its first phase involves the refurbishment of the 23-storey James Riley Point tower to bring 132 social-rented homes back into use.
According to Newham’s cabinet, the cost of this phase has risen to £98.3m from £78.1m in September 2023 due to “prolongation, inflation, and increased cost estimates”.
Meanwhile, the cost of the phase 2 Lund Quarter – involving the construction of 505 new homes – has risen from £196m to £245m.
Part of the rise was due to the increase in the number of planned homes – from 385, the council said.
At a meeting of the authority’s overview and scrutiny committee on Tuesday (18 February) members criticised the cost increases and the length of time the project has taken to get underway.
Newham’s mayor Rokhsana Fiaz press the green light on the scheme in December 2018. Her predecessor Sir Robin Wales’s had relied on finding a joint venture partner for the estate regeneration.
Councillor Carleene Lee-Phakoe said signing off the cost increases was “a decision that demands greater scrutiny, greater accountability, and a greater honesty with the people of Newham”.
She added: “This £1.4bn regeneration project is one of the most significant undertakings in our borough’s history, yet in its current form it raises serious financial, strategic and ethical concerns that our council must not ignore.”
The Labour member added that the council should not accept “a plan riddled with financial mismanagement, weak safeguarding and an ever-growing risk of failure”.
Committee chair Anthony McAlmont questioned whether the proportion of social rented homes should be reduced to improve the scheme’s financial viability.
Members voted to ask the cabinet to commission an independent review of all financial strategies for the project, including considering a public-private partnership.
They also called for an internal audit of its procurement process.
Before their formal request, Fiaz dismissed the idea that the involvement of private finance would have sped up the scheme, stating “I suspect it would have taken longer”.
She blamed construction cost inflation and high-rise fire-safety regulations as reasons why costs have jumped.
Fiaz said the initial report revealing the information about the project was “a prime example of us being ethical in our demonstration of transparency” in demonstrating challenges that “are normal in any scheme of this size and complexity”.
She added: “The paper […] has presented to cabinet a realistic assessment of the net present value of the Carpenters Estate scheme based on information now known, taking into account issues that have impacted the entirety of the housing sector as it relates to both public and private-led schemes as a consequence of construction inflation and as a consequence of a heightened regulatory environment, particularly as it pertains to fire safety.”
