4 THE URBAN ESTATE
Extent of holdings
30. The CEC's Urban Estate is by a large margin their
main business division. In 2008-09, as Figure 3 below shows, urban
property accounted for 74% of the value of the Crown Estate and
73% of its revenue. This is a fairly typical contribution as over
the last ten years urban property has usually accounted for 75-80%
of the value and 70-75% of the revenue of the Crown Estate. As
Figure 4 shows, most of the CEC's urban property is concentrated
in London76% by value of the Urban State was concentrated
in London as of 31 March 2009. The London Urban Estate includes
retail and office space in Regent Street and St James's, single
office blocks elsewhere in central London, and residential property
in Kensington Palace Gardens and Regent's Park as well as property
let on regulated and assured tenancies on estates in Westminster,
Camden, Hackney and Lewisham. The property portfolio outside London
includes offices, shopping centres, industrial sites and other
Figure 3: Property value as a 31 March
Source: The Crown Estate (Crown Estate Commissioners)
Figure 4: property value of the Urban
Estate 31 March 2009
Source: The Crown Estate (Crown Estate Commissioners)
31. Management of the Urban Estate is long-standing
core business for the CEC. Notwithstanding an understandable dip
in its value last year, the CEC's 2009 Annual Report remained
upbeat about the division's "relative success,"
pointing in particular to the promise of their investment programme
"that will totally revitalise the southern Regent Street
During the course of our inquiry we received positive comments
from a number of major stakeholders in the urban environment supporting
The CEC's own assessment.
32. In its written evidence, English Heritage concluded
the overall impression is that the Crown Estate
is a good steward of the historic environment and it draws a reasonable
balance between the goal of maximising commercial returns and
the conservation of historic buildings. Having established a constructive
and consultative relationship, the occasions when The Crown Estate
and English Heritage disagree significantly on the approach to
be taken on a particular site are now rare. [ ... ] English Heritage
suggests that the Committee endorses the Crown Estates current
management of its historic assets and underlines the importance
of this approach continuing into the future.
From its perspective the British Property Federation,
commenting on one of its members, wanted "to put on record
that, so far as we are able to judge from our dealings with it,
the Crown Estate has always been at the forefront of the sector,
working with the British Property Federation to improve the sector
and the services that our sector provides to British businesses
33. In oral evidence, Ms Rosemarie MacQueen, Strategic
Director Built Environment at Westminster City Council, told us
They have no special favours but they are a very
intelligent and astute organisation in terms of the fact that
they use top quality architects and planning consultants to put
together their packages. They are very aware of what the Council's
wider objectives are in terms of livability and total place making
and I think we have a very productive relationship with them,
but it is a tough negotiating relationship on both parts.
She also told us, in particular, that the CEC's efforts
to revitalise Regent Street:
[ ... ] have been extraordinarily successful.
They were very clever in the way they went through the process.
They looked first at what people understood about Regent Streetit
was rather dusty, lots of airlines, carpet shops, et cetera. They
then moved to positioning what they wanted to do, which was to
make it an internationally branded street. Obviously because they
had the control they were able to decide which shops they would
want to put in when leases fell in and they then in a sense blocked
the street and came through, jointly between ourselves and English
Heritage, in terms of what some people would have said was extraordinarily
radical [ ... ]. It has become a destination that international
visitors will want to go to see when they come to London.
In their evidence, the Regent Street Association
(RSA), which benefits from free accommodation on the Crown Estate,
supported Westminster City Council, observing that "over
the last fifteen years the relationship between The Crown Estate
and the RSA has improved enormously[ ... ] a true partnership..has
grown particularly over the last ten years because of the redevelopment
in Regent Street. The RSA went on to state that it "enjoys
working with The Crown Estate" and that "the single
ownership of Regent Street is a huge advantage and leads to consistency
34. In their written evidence, the CEC outlined their
future plans for the Urban Estate. They intend to concentrate
"on a limited number of sectors where we have a competitive
advantage, for example through concentrated ownership of assets,
expertise or local knowledge." They identified their principal
- high dependence on the volatile central London
- limited access to working capital, restricting
the ability to invest; and,
- managing the increased risk of tenant failure
as businesses struggle during the economic downturn.
Their intent, therefore, is to "reduce our exposure
to commercial central London property by strategic disposals of
non-core central London holdings and through working with partners
in our core holdings to spread our risk and access additional
sources of investment capital while retaining a significant element
of control over our core holdings in Regent Street and St James's".
They also want to invest a substantial part of the funds raised
from disposals outside London, "in major retail schemes and
Mr Bright further expanded on this approach, observing that "we
already own a number of retail parks [ ... ]. Retail parks, particularly
in the south east, are in short supply; there are not many of
them. Therefore, if the opportunity arises to invest in a good
one, that seems to us to be a sensible investment decision to
Residential housing proposal
35. One area of the CEC's proposed future direction
for their Urban Estate is currently being challenged. Among the
"non-core" assets it has identified for disposal are
some 1,500 homes on four London residential estates: Cumberland
Market, Millbank, Victoria Park and Lee Green. These estates include
a proportion of affordable and key worker housing. With regard
to the latter, a number of organisations, including Westminster
City Council and a number of local hospitals have nomination rights
to place business-critical workers in cheap local housing.
36. During the course of our inquiry, the CEC announced
a consultation exercise on their proposal to sell the freeholds
of these properties to a new owner who would also manage the properties.
We quickly received evidence from concerned tenants, local councillors
and MPs expressing their vehement opposition. Regrettably time
constraints and the stage our inquiry had already reached prevented
us from holding an additional oral evidence session on this issue,
but we ensured that the topic was explored in the evidence sessions
already arranged. The grounds for opposition to the proposed sale
can be broadly divided into two categoriesthe handling
of the consultation exercise and a more fundamental objection
to the proposal itself.
Complaints about the consultation
37. In a joint submission, the residents' associations
at all four affected estates argued that the consultation exercise
was being mishandled. They asserted that the CEC were not being
sufficiently transparent, withholding information relating to
"the number and proportion of the different types of tenancy
on each estate", and the rationale for the sale and potential
purchasers. They also observed that their request for a ballot
of residents had been refused "although this would be standard
practice if a Local Housing Authority were considering a similar
disposal/transfer of stock."
38. Evidence from councillors in the Regent's Park
Ward (Camden) also complained that "consultation letters
were delivered as unaddressed correspondence and so missed as
'junk' mail", that 'drop-in' sessions were poorly organised
with tenants turned away because "they turned out to be appointment
based" and that "the timeframe is very short, barely
two months and there has been no dissemination of answers to questions
raised by tenants who did get to attend a consultation appointment."
They also alleged that they had not been formally consulted "but
simply informed of the consultation letter to residents"
and that "none of the other local stakeholders have been
consulted, local authorities, [key worker] nominating bodies (hospitals,
education departments, the police etc), Local Strategic Partnerships
or the Greater London Assembly, NHS or other strategic bodies."
They also observed that as the CEC have already stopped the choice
based lettings scheme and closed key worker waiting listsresulting
in a number of empty properties on the estate"it is
not surprising therefore that many residents feel the consultation
to be a sham."
39. In a separate submission, Camden Council also
complained about lack of transparency during the consultation
exercise, asserting that "when approached by council officers,
CEC has effectively refused to provide information to Camden Council
about the possible sale of the estate in Camden other than what
is on the website. The council therefore cannot assess what the
terms of the sale would allow an incoming purchaser to do."
During oral evidence, Ms MacQueen told us that Westminster City
Council only heard about the proposal "the day before it
went into the press."
She observed that given the "spirit of partnership working
that we certainly have had and has been very productive on the
commercial estate, I was a little surprised and maybe they were
a little surprised that we were very quick off the mark to ask
them to come in and discuss the matters with us."
40. We also received evidence from local MPs Frank
Dobson, Meg Hillier and Bridget Prentice, drawing our attention
to the opposition of "the overwhelming majority" of
residents and their demands for a ballot. They too complained
about inadequate disclosure of relevant information for instance
on "the number and proportion of different types of tenancy
on each estate, details of changes in rental policy, information
on tenants' rights to consultation, on the demographic make-up
of the residents and on planning consideration", accusing
the CEC of hiding behind commercial confidentiality. They also
questioned the CEC's commitment to the consultation exercise,
suggesting that their withdrawal of the Tenants' Handbookwhich
sets out the rights of tenantsfor new lettings "raises
questions about the good faith of The Crown Estate."
CEC response to criticism of
its consultation exercise
41. The Chief Executive of the CEC was keen to defend
the consultation exercise. He told us "we are very anxious
to hear what our tenants feel about this and also to give an opportunity
to explain more of the thinking behind this proposal" and
stressed that "we have not yet taken a decision."
He added that "my Chairman, Sir Stuart Hampson, and I have
also said that we want to meet the chairs of the residents' associations
on these four estates before the board takes any decision on that.
That meeting has been arranged for early April."
He was though, not convincing on the subject of disclosure, committing
himself only to the extent that "I think a certain amount
of information has been available"
and placing an emphasis on "the need to ensure that we protect
when, given that around 1,500 tenants are involved, there should
be scope to de-personalise at least some of the basic statistics
requested by the tenants and local authorities.
42. Mr Bright also argued against a ballot on the
grounds that "there are a lot of different kinds of tenancies
involved here [ ... ]. We want to find out what those various
tenants feel about this proposal, what their concerns are. We
think that a ballot will not give us that. We think the consultation
exercise that we are conducting at the moment, which involved
surgeries, hotlines and engagement with the tenants, will give
us a better feel for what the tenants' concerns are."
Consultation exercise: our conclusion
43. Proposals to sell rented housing, because they
raise concerns about future security of tenure and rent charges,
are seldom likely to be greeted with enthusiasm by tenants and
their representatives. However, there do appear to be legitimate
concerns about the way that the CEC has handled this consultation
exercise. The criticisms about lack of transparency and real engagement
are strong and not lightly dismissed. We were particularly concerned
to hear that the CEC had failed to consult local organisations
with rights to nominate key workers. Regardless of the outcome
of this particular proposal, we recommend that the CEC review
their community and local stakeholder consultation processes with
a view to increasing transparency and engagement.
Opposition to the CEC's proposal
44. Setting aside their concerns about the handling
of the consultation, residents and other stakeholders had more
fundamental objections to the subject of the consultation. Their
first set of objections concerned the rights of current tenants.
Particularly given that a purchaser has yet to be identified,
residents and their representatives argued that a change of ownership
could lead to increased rents or charges for current residents.
During oral evidence, the CEC were able to provide some reassurance,
informing us that "the rent regimes on all the different
types of tenancies are secure when and if a new owner takes over[
... ]. Essentially, the bottom line is that for existing tenants
the security of tenure and the rent regime that they currently
enjoy would transfer to any new purchaser."
The Chief Executive subsequently wrote to us to confirm that:
[ ... ] should this proposal proceed, any new
owner would manage the properties subject to the tenants' existing
rights as set out in their tenancy agreements and, for those that
were issued with a tenants' handbook, the rights outlined within
that handbook; a new landlord, or indeed any subsequent landlord,
would not be able to change this. These protections are encapsulated
in the Law of Property Act 1925 and the Landlord and Tenant (Covenants)
It is also worth adding that if the proposal
goes ahead, the rental framework that is currently in
place would not change. It
would be transferred to the new owner. For
residents on regulated tenancies, rent levels are determined by
the Rent Officer. This would not change. For residents whose rent
levels are currently subject to a 'ceiling rent'a maximum
possible rent as a percentage of the market rentthis also
would not change.
45. There are, however, a second set of objections
to the proposal. Ms MacQueen of Westminster City Council, told
us that, with regard to:
[ ... ] the key worker and also the affordable
housing units, which they have predominantly in the Millbank area,
yes there is concern there [ ... ] our concern is that we have
nomination rights for a number of unitswe have still to
establish it, but we believe it is several hundredfor people
who are working in the Primary Care Trust, teachers in Westminster
and also in services such as the Police and Fire Services. What
we are concerned about is that there may be assurance of tenancies
now, but when those tenants either go or when the assured tenants
eventually, I am afraid to say, die that will then be a break
and there will then be no opportunity in the future to retrieve
Camden Council made a similar argument in their written
evidence, stating that "there is also a concern that future
lettings of flats may be at full market rents which could well
put the homes beyond the reach of workers such as nurses."
The local MPs too drew attention to the number of organisations
who currently nominate key workers, and thus stand to be affected
by a change of ownership; "eight hospitals...The London Ambulance
Service, ten NHS Primary, Community and Mental Heath Trusts, the
London Fire Brigade, London Underground and Transport for London,
the Metropolitan Police, the Education Departments in Camden,
Westminster, Hackney, Tower Hamlets and the House of Commons."
They also drew our attention to an unwelcome possible precedent
in that, after the Church Commissioners sold their affordable
housing in south London to Grainger PLC in partnership with Genesis
Housing Association "rents rose, the key worker scheme was
abolished and some of the properties have been sold off."
In this context, they noted that Paul Clark, the CEC's Director
of Investment and Asset Manager had previously worked for the
Church Commissioners and had been responsible for that sale.
46. The CEC offered less reassurance about the future
of affordable housing and key worker housing in these estates,
should they be sold off. Whereas Mr Bright felt able to give existing
tenants "a categorical assurance,"
when it came to future occupancy, he stated only that "when
it comes to deciding who might take over these properties, if
we go ahead, we are going to be looking very closely at the management
prospectus that they hold out to us. We will certainly want to
take that very much into account before we reach any decision."
47. The key question is 'to what extent should the
CEC take account of concerns about the future of affordable housing
and key worker homes on these estates?' or, couched in more general
terms, 'to what extent can and should the CEC accommodate wider
public interests within their duty to maintain and enhance the
value of the overall Crown Estate and the return obtained from
it for public funds?' This question gets right to the heart of
the tension we identified earlier over the interpretation of the
requirements of good management in the case of the CEC.
48. The CEC themselves consider their arguments in
favour of proceeding with the sale are clear. To ensure that the
Urban Estate continues to enhance revenue and value, they need
both to concentrate on its high value assets and to diversify.
In order to diversify, they need to raise investment funds by
selling off 'non-core" assets. As the CEC explained to us
"obviously the capital we realise from any sale [ ... ] and
the disposals that we make [ ... ] the capital then becomes available
for re-investment elsewhere in the portfolio. There are a number
of priorities for that re-investment elsewhere."
From this perspective, selling to a "housing provider whose
mainstream business is managing and owning this kind of housing"
is fully in accord with the CEC's core duty to maintain and enhance
revenue and value, while having due regard to good management.
49. Opponents of this proposal, however, did not
agree with this assessment of the CEC's obligations. They noted
first that "affordable housing has been provided by the Crown
Estate since shortly after the First World War"
and considered it was disingenuous of the CEC to argue that they
lack expertise in managing this type of housing. They also saw
no compelling financial imperative to sell, given that, as Ms
MacQueen pointed out to us, the CEC had previously been able to
fund "very complicated and very major schemes"
in central London using other means. They argued that the CEC
should retain ownership of these estates as part of its stated
commitment to stewardship, communities and sustainable development.
They argued, moreover, that "due regard to good management"
in these circumstances should be interpreted more broadly as an
obligation to protect the scarce supply of social housing, key
worker accommodation and, more generally, to protect community
cohesion in the wider public interest. Regent's Park Ward councillors,
for example, put the wider case against the proposals as follows:
Among the Crown Estate's core values are Integrity
and Stewardship and sustainable communities are at the heart of
its Corporate Responsibility Framework. Over many years these
values have been demonstrated in the provision and management
of the affordable/key worker housing provided across London. The
Government has made clear that an increase in affordable housing
stock is needed and that mixed communities are at the heart of
sustainable housing provision. The Crown Estate is in a key position
to make a contribution to these aims and the management of the
estate should take these matters into account when looking towards
the future. The benefit to London and the Government from the
provision of key worker, rented, housing far outweighs any short
term financial gain to be made by the sale and effective loss
of this vital housing stock and the communities within it.
50. Given the paucity of such housing in London,
the direction the CEC decide to go in this instance is a substantive
policy issue. When we put this to Sarah McCarthy-Fry MP, the Exchequer
Secretary to the Treasury, we were surprised first that HM Treasury
did not appear to have been informed of the decision to initiate
a consultation exercise and second at how cautious Sarah McCarthy-Fry
MP and her official were about their ability to influence the
CEC's final decision. She did confirm that "I would expect
the Treasury to be consulted, of course, on this" before
the CEC made its final decision, but considered that "whether
I would then be able to issue a direction if I thought that they
were not going in the right direction and I thought that they
were doing something that was contrary, as I said it comes back
to whether it would be considered reasonable and whether they
were acting outside their remit."
Her official, Ms Paula Diggle, Treasury Officer of Accounts,
appeared most concerned about the narrow issue of whether tenants'
rights were protected, observing that "If I thought that
none of that was going to happen I would certainly want to tell
the Minister and want to consider intervening. It does not seem
that that is going to happen."
51. We will explore Ministers' power to provide guidance
and to direct in more detail in section 9. Having regard to
the wider interests at stake, and on the basis of what we have
learned during the inquiry, we recommend that the CEC should examine
and set out clearly how they take their good management obligations
into account in decisions on residential property. More generally,
we note the extent to which local stakeholders were taken by surprise
by the CEC's proposal to sell-off residential housing, and urge
the CEC to engage more fully with key public bodies in London
about their future plans for their London portfolio and their
potential impact on London communities.
35 The Crown Estate, Annual Report, July 2009, p 6 Back
Ibid., p9 Back
Ev 79 Back
Ev 111 Back
Q 85 Back
Q 97 Back
Ev 95 Back
Ev 44 Back
Ev 44 Back
Q 172 Back
Ev 102, LHAs are required to hold a ballot of residents if a stock
transfer is planned. Back
Ev 107 Back
Ev 112 Back
Q 91 Back
Q 92 Back
Ev 109 Back
Q 159 Back
Q 162 Back
Q 160 Back
Q 161 Back
Q 162 Back
Q 163 Back
Ev 116 Back
Q 87 Back
Ev 112 Back
Ev 109 Back
Q 171 Back
Q 171 Back
Q 158 Back
Q 168 Back
Ev 102 Back
Q 89 Back
Ev 107 Back
Q 237 Back
Q 239 Back