tmgroup panel discussion: How do we get Britain building?
We spoke to industry experts – including Rob Hailstone (Bold Legal Group), Alan Milstein (Residential Property Surveyors Association) and Eduardo Reyes (The Law Society Gazette) – for their views on what needs to change to get Britain building, speeding up New Build transactions, and meeting the demand for more housing.
Here’s what they said…
Eduardo Reyes, Commissioning and Features Editor at The Law Society Gazette:
We need to create greater density in outlying areas of cities and invest in our transport links
In the 20th Century, my home city of London achieved growth in homes in a way that has created challenges for future development. Many other cities and towns share this experience. In particular, the 1930s saw a boom in housebuilding, fuelled by new, widely available mortgage products.
This great democratization of finance delivered huge swathes of housing, though a significant proportion was built in areas that were poorly-served by infrastructure, including transport. Hence, they remain part of the city’s great sprawl.
We need greater density in outlying areas, of our cities and towns, and that means creating or improving attractive ‘town centres’, using vacant land, and improving our transport links.
‘Section 106’ is inadequate and needs to be reformed
‘Section 106’ – the mechanism by which developers reach agreement with councils on the provision of infrastructure and community facilities – needs to be reformed. It has proved an inadequate way to deliver the infrastructure and facilities needed to create new centres.
One result has been further rings of development around older established centres – a sense of identity and convenience getting more diluted the further out you are, so the incentive for more rapid growth is reduced.
Further out, we too often wind up with freestanding housing developments with low densities, which do not sit in any cultural or economic context other than a road trip to work and shops.
‘Section 106’ agreements are too often superficial, prettifying add-ons to new developments. A more powerful and reliable mechanism is needed.
We need to tax unused land to stop people sitting on it as an investment
Tax law needs reform. Development potential increases the price of land even before homes are built on it. It has become a helpful asset for some businesses to sit on, including both supermarkets and developers themselves. We need to find a way to tax such unused land at a level that will bring it in to ‘use’.
New laws keeping the cost of retail space down would help to create new centres with a heavier density of homes and businesses
Stricter Paris-style ‘designated use’ laws on commercial property, chiefly shops, should also be considered to keep the cost of retail space down, and its variety up – and such spaces should be designed into new centres. This strengthens the idea of a new ‘centre’, around which a heavier density of homes and businesses can grow, because people will sacrifice space to be near them.
The high streets in my bit of South East London often have lower-cost retail units than seen elsewhere in inner London, and it has made a renaissance for independent businesses possible – some wildly successful, others just optimistic try-outs, all of them adding to the convincing fabric of the place.
Christopher Watkin, UK Property Market Commentator:
There should be incentives in place for building inexpensive homes
There has been a shortage of smaller townhouses and smaller apartments being built in the UK over the last 20 years. The builders do want to build, but there's a deficiency of building land in the UK, and if there's a shortage of building land, then of course new homes builders build whatever gives them the biggest profit. The properties that give them the largest profit are the biggest and most expensive properties and they certainly are not bungalows as they take up too much land. So who can blame them?
Yet would it surprise you to know that it’s not a lack of space (look at all the green you see when flying over the UK), it’s the planning system. Green belts must be observed, but only 1.2% (yes 1.2% - that isn’t a typo) is built on in this country as a whole with homes – we need the planners to release more land (and then force/encourage builders to build on it - not sit on it). Another problem is that of the smaller new homes that have been built, most of them have been snapped up for renting, not owning.
So, what’s the answer? Build more Council houses? Yes, sounds great but the local authorities haven’t enough money to cut the grass verges, let alone spend billions on new homes. The Government did relax the planning laws a few years ago, for example for changing office space into residential use, yet they could do more as currently new homes builders have no incentive to build inexpensive homes or bungalows that the system needs to make a difference.
We must all remember that property will always be a great investment
Changing the dynamics of the national property market will only change in decades, not years. The simple fact is we are living longer, and we need 240,000 to 250,000 houses a year to stand still with demand, let alone start to eat into 30 years of under building, where the average has been just under 170,000 households a year.
That means, today as a country, we have a pent-up demand of 2.25m additional households and we need to build a further 4.2m households on top of that figure for population growth between 2019 and 2039. So, irrespective of whether we have a short term blip in the property market in the next 12/18 months, investing in property is, and always will be, a great investment as demand will always outstrip supply.
Dominic Woodward, Director, Tri-core Developments:
We need to invest in our planning departments so workload, holidays and sickness breaks stop being a roadblock for planning applications
The main roadblock is the planning system. Getting planning through in a timely and cost effective way is not straightforward. The planning portal says 13 weeks for a complex full planning application to be decided, but those involved in the system know this is not the reality.
Routinely, consultation responses are not provided in time due to workloads, holidays and sickness breaks for those persons involved. This requires planning officers to request an extension of time meaning the clock stops before the stated deadline. Planning applicants have little choice but to accept these requests for extension, as refusing the request to extend means the application will be determined “as is” resulting in a guaranteed refusal – leaving developers between a rock and a hard place.
Cut-off dates for consultation responses and more rights for applicants – even at the cost of more expensive planning applications
Providing cut off dates for consultation responses could help, and in the event responses are not provided by the cut off, that department loses the right to comment on the proposed application. It would be a “use it or lose it” right for consultees to get their comments in on time. This is the case at appeal, so should be no different for an actual planning application.
In addition, there clearly should be more rights for applicants to get applications decided on time. The ombudsman that covers planning has no teeth, the default position seems to be if you have cause for complaint, just go through the appeals process. That will add 6 months to 1 year – plus all the additional costs associated.
Although likely not popular, we would actually be happy to pay more for planning applications to have a better funded system – but only on the provision of getting a better service that delivers decisions on time. The system is woefully underfunded, there aren’t enough planning officers (bums on seats) and those that are there usually end up leaving to work privately for better money, only worsening the problem.
Alan Milstein, Chairman, Residential Property Surveyors Association (RPSA):
Industry-wide snagging standards could make all the difference
In the rush to build more houses, it is almost inevitable that question marks are raised over quality. Often buyers are given only a 15 or 20 minute accompanied tour on the day before completion to point out any snagging issues, which may, or may not be rectified before they move in.
Stories of new homebuyers subsequently finding hundreds of snagging issues, as well as far more serious structural failings, are disturbingly common, and the rectification process is all too often a battle against an uncooperative major corporate developer.
The Residential Property Surveyors Association (RPSA) believes that protection for consumers can only come about by the development of industry-wide snagging standards to facilitate an objective and accurate assessment of quality to be made, allowing builders to know what is expected, and an Ombudsman to have a measure against which to make adjudications.
Bringing developers and warranty providers to the table to begin the task of creating proper snagging standards has proved challenging and slow. Understandably, perhaps, builders don’t want to accept the need for snagging standards because, according to their figures, satisfaction rates against new home owners significantly exceed 90%. But the reality is that a worryingly high number of new homebuyers experience a moderate or significant number of snagging issues and find the rectification process to be difficult, lengthy and, often, highly confrontational.
Matt Smith, WPB and The Chair Consultancy:
We need a National Housing Service to protect British citizens’ wellbeing
We need a National Housing Service. Housing is as integral to the wellbeing of British citizens as health and yet it is treated with almost contempt by those in Westminster – something which needs to be adjusted if we are to improve policies.
This is not a new suggestion. Countless government-commissioned reviews, leading economists and industry trade bodies have lobbied for years in favour of setting up an independent housing body – akin to the Financial Conduct Authority or Bank of England, but tasked with measurable targets to deliver a set number of new homes every year. Critically, to also think long-term about the tenure make-up of the UK’s housing market. Our need has never been greater.
We need to start building for everyone – not just for capital gain
Britain needs to be strategic and even-handed in housing, focusing the attention on helping the young and balancing out the housing market. Looking beyond the five-year mark, we need to encourage the delivery of every tenure. Policy changes are required and should be our focus. As the age of home ownership continues to rise, building for everyone must become more important than just building for capital gain.
Policy must genuinely support all tenures. With over 1 million people on social housing waiting lists, we must recognise that institutional and affordable housing are worthwhile endeavours and encourage greater investment into purpose built rental homes. We should also remove the additional 3% SDLT multiple dwellings premium, as this would increase the affordable housing contribution.
Precision-engineered modular homes could help to build high quality homes for the future
The supply in the housing market needs to adjust and recognise the need for more, advanced labour forces, in order to keep up with the growing technological advances and more control at local level.
Mark Farmer published a report into the UK’s construction labour model entitled ‘Modernise or Die’. He identified the need for innovation to solve the skills crisis, and claimed that “We have so big a challenge around the declining workforce in construction that we cannot recruit or retain our way out of it. We have to be prepared for a reducing workforce, which means we need to be able to build more with less”. That means new ways of building for the future.
All in all, the demand for change in this market is high. The real challenge will be democracy ‘buying into’ the change. However, innovation and planning for the next 50 years would help. Our current housebuilding industry is capacity constrained and can’t possibly meet the 300,000 annual target. Precision-engineered modular homes offer a new way of building high quality homes - in volume and faster than traditional construction.
Joe Pepper, CEO at tmgroup:
It will require real vision and leadership to help address the problem
Why is building new homes so difficult? After all, as a nation we have been through terrific periods of house building in the last century, so what has happened to us to make it so difficult now? The answer is multifaceted, but in essence we have made the planning laws increasingly complicated and reduced the number of firms competing to build, whilst at the same time leaving it more to the market.
The roots of many of the current issues go back to the 1980s, when the government erroneously believed that the population was likely to decline over the coming decades. This led to a massively reduced element of social housing development, and a tightening of conservation law around where property could be built. This combined with the subsequent periods of boom and bust, caused a disproportionate displacement of smaller developers contributing to the dominance of the larger developers that we see today.
Given the length of time that it takes to navigate the local planning laws, a developer has to invest at risk for a long period of time before they can be confident of getting a return, and that gives the bigger and more established developers a significant advantage and creates a blocker for new entrants.
The ongoing disparity between supply and demand also fuels the house price growth, which dis-incentivises further growth. As time goes on, the problem only builds up, and as the government also benefits from the growth in house prices, it will require real vision and leadership to help address the problem.
Removing communication barriers could help to improve the situation in the short term
At a more prosaic level, we can seek to improve the communication between all parties – developers, local authorities, conveyancers, estate and land agents and so on.
At tmgroup, we have been linking local authorities and conveyancers for almost 20-years, and have recently extended that to estate agents and consumers through our mio platform.
We are also in active dialogue with lenders and developers about extending it further which would give all parties the real-time status of a deal without the associated chasing around which currently happens.
It doesn’t take much imagination to extend that further into the planning process to save time for all parties both during the process and during the subsequent sales transaction.
Rob Hailstone, CEO, Bold Legal Group:
New Build property transactions can be significantly helped along by homebuilders choosing their developer’s recommended conveyancer
Back in the 90s, I was recommended many, many times by the ‘site girls’ of a large developer in the South West.
They liked me to be instructed because:
• I had already been through the site documents and had (with the developer’s solicitors) corrected anything that I felt wasn’t right, and was therefore quicker than a conveyancer who had to trawl through the sale pack for the first time.
• I was prepared to be proactive rather than reactive.
• I gave regular updates.
• My fees were competitive.
• I would even walk the site at various stages with the developer’s solicitors to get a clear picture of the lay of the land, etc…
In short, I knew the development inside out.
On a number of occasions, I had to push back when something was wrong or didn’t suit a particular client. Did the developer like it, no, did I care they didn’t like it, not at all! If anything, I actually earned their respect. However, I am sure one ‘site girl’ in particular (Gloria) still spits feathers every time my name is mentioned because she missed her target on more than one occasion when I insisted something needed changing. The majority of conveyancers are professional and not easily swayed from the duties that they owe to their clients. Being recommended by a developer to act for their buyers should not, therefore, be an issue. After all, they act for buyer and lender more often than not, and cope well with any conflict there.
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