Why aren't we building more homes?
The New Housing Pipeline Report prepared by the Home Builders Federation (HBF) and Glenigan in April 2016 shows some encouraging trends - the number of residential homes approved during the final quarter of 2015 was 20% up on both the third quarter and a year ago. This brought the overall number of new homes granted planning permission in 2015 to 281,000, representing a 5% rise on the previous year.
While this is positive news, it is clear that we are still falling short of the annual requirement of 220 – 250,000 new homes being delivered on the ground. In 2015 the total number of new homes registered was just 156,000. While we can’t make a direct comparison between the number of homes granted planning permission and those delivered in any single year, as consents tend to take longer than a year to implement, we do need to understand why we are still failing to build enough homes in the UK.
Working closely with residential clients at NJL, we shed light on some of the key issues facing the housebuilding industry today:
1) Unlocking Strategic Sites
Although the government’s ‘Brownfield First’ policy was discontinued with the introduction of the National Planning Policy Framework in 2012, Local Authorities do still tend to promote the use of previously developed land over greenfield land in Local Plan strategic allocations and the consideration of planning applications for housing.
While brownfield land can provide new homes, such sites often come with huge obstacles such as contamination which affects viability and significantly increases the time it takes to build. Despite this, Local Authorities often reallocate large brownfield sites within new Local Plans that were not delivered during the previous plan period, overlooking genuinely deliverable sites in the meantime.
Although greenfield sites can often be delivered more quickly, this is not always the case, with many larger sites requiring major infrastructure connections which take third party agreement, significant investment and time.
The phasing of housing delivery and s106/CIL issues on strategic sites can be complex in nature, with some planning permissions needing to be revisited entirely.
While strategic sites can provide many new homes to meet the long term need, these must be balanced with smaller deliverable sites that can come forward quickly to plug the gap.
2) Skills and Materials Shortage
Put a load of housebuilders together in a room and it won’t be long before everyone is talking about the national construction skills shortage.
The Royal institute of Chartered Surveyors (RICS) found in 2015 that bricklayers and quantity surveyors were the hardest to find, with Sally Speed, skills and talent Director at RICS, warning that "unless government looks to address the problem urgently, some of its key housing and infrastructure programmes could soon face crippling delays and spiralling costs.”
An exit from the EU in June could further exacerbate the problem; preventing skilled labourers from entering the UK to work in construction.
Coupled with the lack of skills is a lack of materials to build new homes, with a brick shortage causing significant delays to housebuilding over the last few years. While the Department of Innovation and Skills (BIS) have recently declared the shortage officially over, it will take time for the increase in productivity to trickle down to projects on the ground.
Tackling the skills shortage requires a rethink of the ways in which we attract young people to work in the construction industry, with greater incentives and training availability needed.
3) Market Movement
Sometimes developers secure planning permission for housing that simply cannot be built due to changing market demand. An example of this is the abundance of apartments granted consent in Warrington on the basis of the town becoming a hotbed for students commuting to Liverpool and Manchester or attending college in Warrington. This optimistic approach transpired to not reflect reality, with students preferring to live in larger cities. The upshot of this is that Warrington now faces a shortage of larger family homes.
Predicting the housing market is something that all housebuilders attempt to do as they select sites to purchase or promote which may not be developed for 5 or more years. While it often goes to plan, it is inevitable that there will be some risks associated with crystal ball gazing.
4) Lack of Smaller Builders
The delivery of housing in the UK is concentrated in few hands, with the financial crisis driving an estimated 7,000 smaller builders out of the market. Banks are now reluctant to lend to smaller firms who may be seen as more of a gamble than their well-established counterparts.
Securing planning permission requires significant up-front investment which comes at a risk; particularly in Local Authority areas without an up to date Development Plan. This can also be off-putting to smaller builders without the requisite capital.
While the government have tried to entice smaller builders back into the market, for instance through the London Housing Bank, it is clear that more needs to be done.
Land banking is not the problem
Housebuilders are still being blamed for ‘land banking’ sites with implementable planning permissions to drive up prices, despite research by the HBF in 2014 demonstrating that such sites only account for 4% of land owned by Britain’s larger house building companies.
Indeed, all of the housebuilders that we work with are building out sites as quickly as possible, proving that this is simply not true. Which begs the question…
…Can we speed up the building process?
Modular homes that are built off site can save time and reduce costs for house buyers, also allowing customisation which can’t be achieved via traditional building methods.
Urban Splash and ShedKM are rolling out the modular hoUSe concept, where residents can choose between open-plan or more traditional layouts, select the number of bedrooms, and also choose whether living quarters are upstairs or downstairs. This has proved extremely popular so far and because the houses are factory built, they cost the same as a standard build of the same size.
The way in which modular homes speed up the build process can be seen below.
Have you experienced any other issues preventing housing from being delivered? We are always keen to hear from you so get in touch today.
Images used courtesy of modularhomeowners.com, Thomas Rutter on Flickr and Scott Maxwell on Flickr.