Cabinet members approved a scheme to spend up to £88.2million on building 179 new homes on vacant land in Bridge Road, next to Stratford High Street DLR station, in a vote in July 2024.
The development would include 65 homes owned by the council to be let for social rent.
But the council has now increased its budget to £91.5million, while reducing the planned number of socially rented homes to 45.
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Council documents say this is because property developer Hollybrook told it of “a need to increase the build cost”.
The scheme backed by council leaders last year aims to build the homes in high rise buildings on an “island” of land surrounded by Bridge Road, Bridge Terrace and New Mount Street, behind the Rex Theatre.
The land had been vacant for more than 20 years, according to council documents, with ownership split between the council and two private landowners including Hollybrook.
Cabinet papers published at the time said this “fragmented land ownership” meant that “development of this site has been frustrated for years”.
But the planned deal between the council and Hollybrook would see the council take ownership of the land and pay the developer to build the new housing scheme, with a budget of up to £88.2million.
The expectation was that 65 of the new homes would be owned by the council for social rent, and the remaining 114 would be sold on the open market – meaning 36 per cent of the housing would be classed as ‘affordable’.
Newham mayor Rokhsana Fiaz said in the cabinet papers that the scheme would “enable the development of much needed new social rent homes on a key strategic site which has been vacant for over a decade”.
But in a decision taken by the council’s corporate director of resources last Wednesday, July 2, the council has increased its maximum budget to £91.5million.
This was a result of a “reassessment of the costs” following building safety guidance published by the health and safety executive last year.
The papers also said this increase would cause the net present value – an estimate of how profitable an investment might be – to fall from £7.4 million to £5.5 million.
They say that, to mitigate this, the number of socially let homes should be reduced from 65 to 45, with 20 homes instead being marketed for ‘affordable’ rent, up to 80pc of market rates.
The number of private homes sold on the open market would remain at 114, meaning the overall proportion of homes classed as ‘affordable’ would remain at 36pc.
Council papers say this means the net present value would increase to £9.2million.
