WORK on a notorious unfinished tower block is to restart after the owner was given a £900,000 discount – in the middle of a housing crisis – to the amount he has to pay to build affordable homes in Croydon.
Originally the developer of the 20-storey IYLO building was required to contribute £2.9 million towards the construction of reasonably priced homes.
That figure has now been revised so owner Stephen Hung, who purchased the development via an offshore tax haven, only has to pay £2 million.
Labour accused the council of allowing itself to be "held to ransom" at a time when a chronic shortage of housing has left hundreds of families in emergency bed and breakfast accommodation.
Jason Perry, the council's cabinet member for planning, regeneration and transport, said it was this deal or nothing.
He said: "The reality is the market has dropped considerably since the scheme was originally approved.
"The only way it was going to be viable was if that agreement was renegotiated, taking into account the downturn in the economy.
"This is £2 million which would not have been going on affordable housing in Croydon.
"Surely we're now in a much better position than we have been over the last few years?"
Labour leader Cllr Tony Newman said the council should have waited for Westfield and Hammerson to be given planning permission for the £1 billion town centre regeneration project, with a decision on this expected in the summer.
He explained: "If the council waited until the plan had been approved it would have been in a much stronger negotiating position.
"Instead, it has allowed itself to be held ransom and has sold Croydon short at a time when we desperately need all the money we can get to build new homes."
The first Section 106 agreement, signed in March 2007, committed original developer Larnbrook Properties to an affordable housing contribution of £2.9 million.
The development passed to Phoenix Logistics and then to its subsidiary St James' Croydon, which went into administration.
In October 2011 the IYLO, which sits on Newgate Roundabout at the junction of Wellesley Road and St James' Road, was bought for £10 million by a company called Rosefair, based in the tax haven of Jersey.
Last month the Advertiser was able to trace ownership of the project, now called Island, through that front company to Mr Hung, the owner of two country clubs in Hertfordshire, and a hotel in Newbury, Berkshire.
The businessman, who lives in a £1 million house in Wanstead, east London, has been marketing the tower, which contains 182 mainly one- and two-bedroom flats, to investors in Hong Kong, including adverts promoting its tax avoidance potential – such as not paying stamp duty.
He will pay less towards affordable housing at a time when projections show the number of families presenting themselves to the council as homeless each year will rise to 1,030 by 2014/15.
No construction work has been done on the site, which has become a graffiti-covered eyesore, since 2011.
Croydon Central MP Gavin Barwell said he could understand if people were frustrated by the new 106 agreement.
"I can completely see why people would question it, but the reality is that it's not a choice between £2.9m and £2m, but £2m and nothing." he said.
The deal commits Regency Homes, Mr Hung's company, to finishing the work by 2015.
"The council has been incredibly supportive of our efforts to get Island off the ground again," said Mr Hung, in a statement issued through the council.
"This is an exciting investment opportunity for our company and I'm delighted to be part of the regeneration of the town centre."
Workers have been clearing the site this week ahead of construction starting in a fortnight.
