Mixed-use development at Luton Power Court could be lost without £29.5m subsidy

The subsidy advice unit (SAU) has published a document offering guidance to Homes England about its proposed subsidy to 2020 Developments (Luton) Limited.

Luton Town Football Club’s property arm (2020) could “pivot to an alternative development plan”, if this money was unavailable, warned the report.

“The stadium development could be accompanied by a repurposing of the surrounding land for lower-cost uses, such as parking and retail outlets, instead of brownfield regeneration.

“This would enable 2020 Developments to recoup investments, including the £16.3m contractually committed to residential and mixed-use plots already, of which £12.7m has been spent.”

The SAU report considers Homes England proposed subsidy to 2020 Developments (Luton), and sets out its evaluation of the organisation’s assessment of compliance in allocating the funding.

Homes England is contributing £29.5m from its brownfield infrastructure and land programme to 2020 Developments to support a substantial viability gap in the redevelopment of the Power Court site, explained the report.

“Power Court is a 17-acre derelict former power station and industrial site, which has been underused for at least the last ten years. The site is allocated in the Luton Local Plan for redevelopment, but site constraints have prevented any scheme proceeding until now.

“This funding will be used for land restoration, the diversion of the culverted River Lea and de-culverting works, the relocation of the St Mary’s substation, providing new utility capacity, public realm, highways improvements and other works.

“The site is wholly owned by 2020 Developments. The infrastructure will unlock serviced development plots for not less than 780 properties and about 204,000sqft of mixed-use employment floorspace.

“Funding will be available against agreed infrastructure costs from March 2026 until March 2029. The subsidy will only fund activity related to the infrastructure works necessary for the servicing of the housing and commercial/mixed-use development plots on the site.

“It won’t pay for activity related to the Hatters’ new stadium infrastructure, which will be fully financed by the football club. Delivery of the housing and employment floorspace is expected to take around ten years to complete.

“Luton Town’s ambition is to have the new stadium operational by the start of the 2028/29 football season,” said the report. “To meet this deadline, 2020 Developments proceeded with infrastructure works essential for the delivery of the new stadium last year and the year before.

“A portion of these works are attributable to the project and costs incurred to date on these works will be reimbursed through the subsidy.”

The Homes England assessment states that the policy objective of its contribution is to support increased housing supply in Luton and economic growth, added the report.

“Housing delivery in Luton is challenging because of its comparatively low house prices and the recent increases in construction costs. The assessment suggests that without the subsidy, the project has ‘substantial (unfunded) abnormal development costs’, which can’t be recovered through housing sales revenues, resulting in a viability gap.

“These abnormal costs total £35.77m, including essential infrastructure works, land restoration and planning obligations required for the residential-led mixed-use development

“While 2020 Developments has committed to funding £6.3m towards abnormal costs, the remaining £29.5m must be addressed to make the project financially viable.”