Developers have been facing fierce scrutiny over expensive service charge bills. We need developments to balance amenity and affordability.

That means understanding which amenities offer the best value for money. It means considering how a scheme interacts with its surroundings. And it means a new, more comprehensive definition of value.

One size fits all?

Scale makes a massive difference when determining what amenities to include on a scheme. Some features’ costs can rise in line with a scheme’s size: you can get away with a smaller, less expensive gym on a smaller development, for instance. Other amenities, such as swimming pools or spas, introduce larger, inflexible costs.

Our analysis of over 40 schemes across London shows this in action. The vast majority (69%) of the schemes we analysed offered a concierge service. The cost of providing that service can vary massively, from £50,000 per year for a concierge running during office hours Monday to Friday up to £200,000 for 24/7 staffing. Larger schemes may also be able to support a second person working on the desk during busy times or a porter to help deliver parcels without impacting too significantly on service charges. Smaller schemes may instead use a virtual concierge service or parcel lockers to help deal with deliveries more efficiently.

By contrast, just 38% of the schemes we studied offered a cinema, and only 24% had a swimming pool. These amenities are more difficult to scale, so are easier to support either on larger schemes or with a higher service charge.

For developments offering a swimming pool, there’s an inverse relationship between the size of the scheme and the service charge. Larger schemes can clearly split the fixed costs between many homes, keeping the cost for each household down. This is certainly the case at Poplar Riverside, where St William have had the foresight to not provide a private gym, but instead get an affordable commercial gym provider in the commercial space on-site as part of the first phase.

Our model suggests a scheme needs at least 411 homes to support a swimming pool while keeping service charges to £8 per square foot. You could bring costs down to £6 per foot on a scheme of 598 homes, but a 225 home scheme would need to charge £12 per square foot.

There is a similar relationship at play for spas, which also introduce large, relatively fixed costs. But there is no simple relationship between the number of homes and service charge for amenities such as gyms, concierge, and parking, all of which can scale easily with the size of a development.

Private, public, or something in between?

With any amenity, developers have a choice. Should they provide facilities for each individual household, for the community of residents as a whole, or for the wider neighbourhood?

Providing amenities within each individual home creates a sense of privacy, exclusivity, and luxury. But it can also increase costs, sometimes prohibitively. Incorporating a balcony into every home on a scheme is feasible (and indeed required by the new London Plan); individual cinemas or swimming pools, less so.

That exclusivity comes at a cost: it will result in fewer social interactions between residents, as they spend more time behind their own front doors. Providing shared amenities, such as communal outside space and shared workspaces, can help create a sense of community within a scheme, creating opportunities for neighbours to get to know each other. By offering a balance of private and shared space, developers give residents the freedom to choose how closely they interact with their neighbours and when.

This sense of community is particularly valuable for rented homes, whether Build to Rent or for sale to individual landlords, as renters who are friends with their neighbours move home less frequently. Research on the US market showed renters who know at least seven of their neighbours were 62% more likely to renew their tenancy than someone who didn’t know their neighbours.

One way to bring the costs down for residents is for developers to design schemes where some amenities are open to the general public and the private amenity is minimised. By sharing costs with the wider community they can provide facilities that wouldn’t be affordable otherwise. For example, by incorporating a public lido or business space into a development, the developer will be able to provide a higher quality, larger-scale facility by opening up to the public.

The key will be in getting the balance right between private and public amenities to keep the service charges low enough to be affordable, while retaining enough private amenity space for the residents to create a community vibe.

Redefining value

There’s more to value than how much you can charge per square foot. As Environmental, Social, and Governance (ESG) issues rise up the agenda, other measures of value will grow more important.

During low demand times of day, scheme managers could open up the pool to a nearby school to use for swimming lessons, or schemes could open up co-working space to local start-ups and not-for-profits. These uses won’t help drive financial value, but they could help sway undecided council members at planning committee and give residents the sense that where they live is giving back to the local community.

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