Housing targets in ‘jeopardy’ as PM calls for better quality new homes
In a new report, it warned of “inherent problems” in the planning system, and noted that the Ministry of Housing, Communities and Local Government does not have a “detailed implementation plan” for how it will actually scale-up housebuilding.
The report stated that while a ‘plan-led system’, where local authorities help shape what development takes place in their area through their own local plans, is welcome, too many authorities are struggling to produce them or keep them up to date, while the department is dallying over taking action to spur them on.
The committee also cautioned that local authorities are struggling to negotiate with developers over helping to cover the cost of the supporting infrastructure needed around new housing developments.
Meg Hillier MP, chair of the committee, said that there was “no clear rationale” for the 300,000 figure, given the department itself had said only 265,000 new homes a year were needed.
She added: “Government needs to get a grip and set out a clear plan if it is not to jeopardise these ambitions. Poor performance by the Planning Inspectorate in reviewing appeals has also added to delays. There is also a collective failure to ensure developers contribute fairly for infrastructure.”
In the report ‒ titled Planning and the broken housing market ‒ the committee makes a host of recommendations.
These include tasking the department with setting out, in a single publicly-available document, the full set of actions it is taking in order to hit its target and include year-on-year projections for the number it expects to be built.
In addition, by the end of the year the department should detail what interventions it will make when local authorities fail to produce local plans for housebuilding, alongside detailed actions and milestones for improving the performance of the planning inspectorate.
Building better homes
The report comes as the Prime Minister is due to give a speech today calling for new design laws to ensure new homes are built to a higher standard.
Speaking to the Chartered Institute of Housing conference, Theresa May is expected to call for new regulations forcing developers to build higher-quality housing, noting that not all authorities make ‘National Described Space Standards’ a condition of granting planning permission.
This is leading to “tenants and buyers facing a postcode lottery”, according to the Prime Minister, which would be fixed if these regulations were mandatory across the country.
She will say: “I cannot defend a system in which owners and tenants are forced to accept tiny homes with inadequate storage, where developers feel the need to fill show homes with deceptively small furniture, and where the lack of universal standards encourages a race to the bottom.”
House building not keeping up with demand due to population growth – Blend
Blend Network compared data from the UK Census in 2011 and Office for National Statistics (ONS) estimates of population growth up to 2017, and then compared it with official house building data over the same period.
It found that Belfast was the UK’s fastest growing city, with its population increasing by 21 per cent to 340,200 in 2017 from 280,211 in 2011.
However, over the same period just 4,220 new houses were completed in the city, equating to one new home for every 14 new inhabitants.
Coventry is the UK’s second fastest growing city, according to the network.
Its population increased by 13.6% between 2011 and 2017 from 316,900 to 360,100, an increase of 43,200 people, with just 5,460 new properties completed over the same period, equating to one new home for every eight new inhabitants. The city has seen house prices increase by 44 per cent over the same six years.
Meanwhile, although the population of Birmingham only increased by six per cent between 2011 and 2017, house building has entirely failed to keep pace with only 5,650 homes completed in the same six years, equal to one property per 11 new residents. House prices have risen by 34 per cent in the same period.
The city of Manchester was the sixth fastest growing city in the UK, with its population rising by 42,400 from 503,100 in 2011 to 545,500 in 2017. But the total number of houses of built in the city over the same period of time was just 6,360 or one new home for every 7 new residents. As a result, property values have rocketed 48% in six years.
Brighton saw its population increase by 14,900, or 5.45 per cent, from 273,300 in 2011 to 288,200 in 2017 but the total number of houses built in the town in the same period rose by only 1,070. As a result, the town built one house to accommodate every 14 new residents and saw property values leap 49 per cent between 2011 and 2017.
The town which saw the largest increase in property values was Slough, where house prices increased by 68 per cent between 2011 and 2017. Over the same period just 1,920 new properties were built while the population increased by 8,600, giving a ratio of one new home per four new residents.
Surprisingly, the population of London was the 11th fastest growing in the UK, seeing an increase of 651,000 between 2011 and 2017 taking the total population of the capital from 8.1m to 8.8m, a rise of eight per cent.
There were also 146,000 housing completions over the period equal to one house per four new residents.
House building in Cardiff was just about keeping pace with population growth. Its population increased by 11,200, or three per cent, from 346,000 in 2011 to 357,200 in 2017. Over the same period 3,629 new homes were completed equalling one new home for every three new residents.
House building in Edinburgh was also on track with its expanding populace which increased by 4,065, or one per cent, from 477,940 in 2011 to 482,005 in 2017. Over the same period Edinburgh saw 11,107 new houses completed equal to three new homes per new city resident.
More work to be done
Yann Murciano, chief executive at Blend Network, said: “That there is a housing crisis in the UK is well recognised and beyond dispute but the extent of the crisis we are facing has been laid bare by examining this data.
“What is also troubling is that we may not be building homes in the right places. There is clearly a need for greater house building in Belfast, Manchester, Coventry and Birmingham for instance, but perhaps less so in cities like Glasgow, Swansea or Sunderland.
“Given how much is made of property values in London and the link between high house prices and a lack of property, it is perhaps surprising that the data suggests there is less of a chronic under-supply of housing than would be believed.
“Obviously, property developers can only build housing where it is needed with financial support but often struggle to raise enough funds from traditional lenders.”
Persimmon forced to slow down home sales and increase build costs to improve quality
Persimmon has received heavy criticism from purchasers over the last year about the quality of the homes it was building and it has introduced other measures to help tackle the issue.
This includes a retention programme where up to 1.5 per cent of the property value may be retained by the customer until any snagging issues are cleared up.
It has also introduced an independent review into the business, including workmanship and customer service.
The trading statement said Persimmon was changing the timing of house sales to focus on quality.
“We continue to expect our overall build costs to increase by about four per cent for the year,” the builder said.
“This includes ongoing investment to enhance specification in support of improved levels of customer satisfaction and is after mitigation through progressing our off-site manufacturing activity and reviewing our approach to infrastructure development costs,” Persimmon stated.
So far this year, total forward sales revenue, including legal completions, slightly decreased to £2.7m from £2.8m in the same period in 2018.
However, Persimmon said that it was confident that these sites would make a good contribution to sales once the homes were released for sale.
Overall, the trading update revealed that sales reservations remained in line with the expectations, achieving a similar level of legal completions in the first half as last year.
Mortgage Solutions has contacted Persimmon but the housebuilder declined to comment further.
After recognising the actions taken to improve customer service, the group had 350 active sales outlets for the year to date compared with 375 in 2018.
Its weekly private sales rate per site since the start of the year was five per cent lower than the previous year.
It said pricing conditions remained firm across the regional markets, the average selling price of sales to the private market in its forward order book being about £237,850 compared with £236,500 in 2018.
The group has opened 43 of around 90 new outlets planned for the first half of the year and is building new homes on all sites that have a detailed planning consent.
The board has also recently concluded the renewal of its £300m revolving credit facility with strong support from the group’s five relationship banks.
Residential building work increases for first time in 2019 – IHS Markit
While residential construction rose at its fastest rate in three months, this was offset by falls in commercial construction. Business activity in commercial construction fell to the greatest extent seen by the firm since March 2018, with the finger of blame pointed at ongoing Brexit uncertainty.
Civil engineering activity also fell in March, although the rate of decline eased since February.
As a result the report’s Total Activity Index posted a score of 49.7, up slightly from 49.5 in February – a score of 50 represents an unchanged situation.
Duncan Brock, group director at the Chartered Institute of Procurement & Supply, noted that a small rise in job creation, optimism in the sector and “resilient house building” were not enough to give the construction market a real boost.
He continued: “It is unlikely that next month will bring about any positive news given the challenges of a weaker UK economy, volatile pound and intense competition for new orders, as Brexit continues to cast a long shadow over the sector’s future.”
A report by the Centre for Policy Studies in January suggested that overall housebuilding figures for the last decade are set to be the lowest seen in any ten-year period since the end of the second world war.
House building growth hits lowest level since March 2018
According to the IHS Markit data, new building orders increased only marginally at the start of 2019, which contributed to the slowest expansion of employment numbers for two-and-a-half years.
All three categories of construction output recorded weaker trends than those reported in December, the research revealed.
Residential work was the strongest performing area, although the latest expansion was modest and the slowest seen since March 2018.
The report noted that Brexit-related anxiety and associated concerns about the domestic economic outlook continued to weigh on client demand.
And while there was still hope for the industry for the rest of the year, this too had been stunted.
House building loses momentum
IHS Markit economics associate director Tim Moore noted that the construction sector had shifted down a gear to start the year.
“Commercial work declined for the first time in 10 months as concerns about the domestic economic outlook continued to hold back activity,” he said.
“The latest survey also revealed a loss of momentum for house building and civil engineering, although these areas of the construction sector at least remained on a modest growth path.
“Staff recruitment slowed to a crawl in January, with construction firms reporting the softest rate of job creation since July 2016.”
He added that delays to client decision-making on new projects in response to Brexit uncertainty was a key source of anxiety. Difficulties converting opportunities to sales were reflected in a slowdown in total new business growth to its lowest rate since last May.
“Business expectations for the year ahead slipped to a three-month low and remained subdued in comparison to historic trends in January,” Moore continued.
“Positive sentiment towards the outlook for civil engineering work remains a key factor helping to support business sentiment across the construction sector, according to survey respondents.”
Chartered Institute of Procurement and Supply group director Duncan Brock, added: “Residential building, the stalwart of the sector leading the way in the last six months, lost its momentum with the weakest performance since March 2018.”
Boris Johnson attacks big housebuilders for ‘abusing’ market dominance
He also urged a “crack down on landbankers” and for councils to be given incentives including retaining income from stamp duty and a tax on enveloped dwellings to boost housebuilding.
Johnson’s speech at the Conservative conference came after the Ministry of Housing, Communities and Local Government announced a series of measures intended to support house building and home buyers, including a New Homes Ombudsman and introducing permitted development rights.
‘Abusing dominant position’
Johnson said the party should be giving more young people the chance to become owner-occupiers, and that would require action on house building.
“Let’s encourage more small private builders,” he said.
“Let’s take on the big eight home builders, some of whom are now frankly abusing their dominant position. Let’s crack down on land bankers.”
Retain stamp duty
Instead, he argued councils should be given greater incentives and control of taxes raised in their area to allow them to build more homes and permit more developments.
“Let’s give councils a real incentive to go for planning permissions and to go for growth and to give planning permissions on those brownfield sites, with long overdue fiscal devolution,” he said.
“Give good councils the ability to retain stamp duty, council tax, business rates, and annual tax on enveloped dwellings, and they will have a motive to go for growth.
“Of course you would need to prevent councils from hiking the business rate, and you would need an equalisation formula because the yields are so different across the country.
“But we ought to be giving back control,” he added.
Barclays and the government launch £1bn house building fund
The Housing Delivery Fund will provide competitively priced loans from £5m to £100m to developers and housebuilders, who show the experience and track record to complete their proposed project.
Loans are available to new clients, as well as existing Barclays borrowers, in an effort to help increase the pace and volume of housing provision.
The fund is also aimed at diversifying the housing market by supporting small and medium sized businesses; almost two-thirds of homes are currently built by just 10 companies.
Of the £1bn fund, Barclays is providing £875m and Homes England, the Government’s national housing agency, will contribute £125m.
The total funding for a development scheme is up to 80% Loan to Cost and 70% Loan to Value allowing developers to stretch their equity/capital further.
John McFarlane, Barclays’ chairman, said: “There is a vital need to build more good quality homes across the country.
“This £1bn fund is about helping to do exactly that by showing firms in the business of house building that the right finance is available for projects that help meet this urgent need.
“We are very pleased to be working with government to get the country building more homes, more quickly.”
Housing secretary James Brokenshire added: “My priority as Housing Secretary is to get Britain building the homes our country needs.
“This new fund – partnering Homes England with Barclays – is a further important step by giving smaller builders access to the finance they need to get housing developments off the ground.
“This is a fantastic opportunity to not only get more homes built but also promote new and innovative approaches to construction and design that exist across the housing market.”
The government aims to add 300,000 new homes a year to supply by the mid-2020s after 217,000 homes were built last year.
Legal and General Homes expands senior team with Sly and Stubblefield
These key hires are part of significant expansion plans for the builder and its ambitions to deliver over 80,000 properties over the next five to ten years. With three sites across Berkshire and Oxfordshire, Legal & General Homes now has a pipeline of over 3,000 new units.
Prior to joining Berkeley Homes where he held the position of head of finance for the Western division, Chris Sly was senior finance manager at BT Openreach. Further, he was commercial finance manager at E.ON and was also finance director of two small to medium enterprises. He also spent six years as non-executive director of Bromsgrove Housing Initiatives.
Matthew Stubblefield has 16 years’ experience in construction health and safety management. He joined from Croudace Homes Group, where he was group head of health and safety.
James Lidgate, CEO of Legal & General Homes, said: “Legal & General Homes is looking to regenerate the UK’s landscape for the better and build vibrant communities where people want to live. Using Legal & General’s long term capital, we are seeking to create a legacy that we are proud of. To do this, we are putting together a capable and experienced team.
Both Chris and Matthew are excellent additions to the company and join at an exciting time for Legal & General Homes as we build thousands of new homes and our schemes come to life across Berkshire and Oxfordshire.”
‘In the UK, we are way behind the curve’ – BSA
These build methods have been used in Almere, a town near Amsterdam, since the 1970s as well as in other European countries and the US. The BSA took a delegation of UK lenders and industry representatives to examine the Almere site and understand how its methods could be introduced here.
In the UK, we are way behind the curve. One of the barriers to this form of building is the perceived lack of a track-record.
Valuers, lenders and insurers know more-or-less how a house built of brick, block and tile will behave.
They are more cautious about MMC in its multiple forms. Improving understanding is essential if MMC is to take off, so the BSA led a group of lenders and valuers to experience MMC first hand in the Netherlands.
Rabobank is one of the Netherland’s largest mortgage lenders. They explained that initial reservations towards MMC were overcome by their confidence in building regulations. Dutch lenders rely heavily on building permits issued by local authorities, which stipulate the parameters of what can and cannot be built.
So far, Rabobank has had a positive experience of MMC, and believes that most lenders in the Netherlands are comfortable with these build techniques.
The plot shop
The use of innovative building techniques allows a real creative use of space. (See the gallery below for pictures.)
We saw both a high-end open plan family home with separate spaces for children and parents and a small first-time buyer property, incorporating an office space so the self-employed contractor can work from home.
Architects are confident about the long-term performance of MMC properties, which have to meet the tough building regulations in the Netherlands.
At the plot shop – or Kavelwinkel – we saw how easy it was for self and custom builders to find a plot and get building.
All in one place, you choose your plot size, find a builder and source an architect if needed. The process looked quick and straightforward.
As long as you build within the regulations of the building permit, you are free to build your home in any style and shape.
Helping social changes
The Netherlands is facing very familiar societal and demographic changes to the UK: an ageing population and first-time buyers struggling to take their first steps onto the housing ladder.
Almere project manager Jacqueline Tellinger, believes these types of developments give people the control to build the homes they want, where they want to live.
“It’s about strengthening civic initiative,” she says.
Driving through the streets of Almere it is noticeable that while there is an array of very different looking housing, the styles blend – rather than looking disorganised, the different areas and styles instead add character. I came home with a bad case of house envy.
We certainly learnt a lot from our European neighbours and all of us, the BSA, lenders and valuers all improved our understanding of how MMC works and how it has been successfully implemented at scale.
To make this a reality in the UK and move MMC to mainstream will take a joined-up approach from all those who contribute to housebuilding.
This is something that the new cross industry MMC working group set up by the Department for Communities and Local Government must achieve.
On development: ‘That this is a growing market is unquestionable’ – Liz Syms
The investigation into land banking, kicked off after the Budget, may well result in builders having to either quickly start developing the land they are sitting on or sell it off.
This land is usually held by the larger house builders, and sometimes even other organisations such as supermarkets. It looks like the key focus will be land that has already been granted planning permission but has not been developed.
While the findings of the investigation won’t be revealed until the Spring Statement, it could result in instant measures on those hoarding land.
This could be good news for the smaller developer as it may well result in parcels of land with planning permission being sold off either shortly before or after the statement. It may also result in the government bringing in maximum timescales for a builder to develop the land after receiving planning permission.
For the smaller developer this could mean that rapid access to development finance is essential. This could give them a much-needed edge over the larger housebuilder as smaller developers are also more likely to start on a project immediately and see it through to completion. Often focusing on only one project at a time, not several.
Over 2017 there has been a growing number of lenders offering development finance. Some are set up purely to focus on development, others are bridging lenders or other types of lenders who have seen the opportunity to branch out into development.
Rates vary, but as with all types of specialist lending, rates can become one of the least important factors. Speed, amount of loan, proportion of build cost and flexibility can end up being far more important. Depending on the needs of the developer and how experienced they are, sometimes the experienced lender will also offer the developer other help or guidance, too.
For brokers just going into this area it can be quite a departure from what they are used to, of course. Often money is advanced in tranches and the development lender will work from the GDV (gross development value) and the costs of the build to ensure that the project can be completed, and the loan exited.
Some development loans are based on more nebulous things such as the experience of the developer, while as with the mainstream market some lenders will only deal with residential developments, others with commercial or semi-commercial.
That this is a growing market is unquestionable, if it is an area that you are new to but would like to get more involved with, there are networks and master brokers who can help you, either with help and advice, by helping you to package and place a case, or by doing it for you on a referral basis.