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05/11/2015

Small developers must be at heart of housing revival, say experts

Words: Simon Wicks
London Housing / iStock: 000041231914

A revival of small and medium-sized housebuilders is critical to resolving London’s – and the UK’s – housing challenges.

But this can’t happen without concerted support from central and local government, and revisions to a planning system to reduce the risks to builders that take on small sites.

That was the key message to come out of A roof over our heads?, RTPI London’s World Town Planning Day debate about the housing crisis facing the capital on Wednesday evening (4 November).

“The big housebuilders are static. Local authorities have fallen away. It has to be about SME builders – but they need to be incentivised,” said Russ Edwards, design director of Pocket, a medium-sized developer that builds affordable homes for first-time buyers in London. “There needs to be a lot more builders of our size to fill the gap.”

James Stevens, strategic planner at the Home Builders Federation, pointing out that the number of small housebuilders in the UK had declined by 80 per cent since 1992.

This, he said, coincided with the introduction of the current plan-led planning system. “Local plans are very good at allocating strategic sites, but very poor at allocating small sites,” he said. These were more likely to be of interest to smaller housebuilders than larger developers who find more value in ‘strategic’ sites.

But without certainty that small sites will get planning permission, small housebuilder builders were exposed to intolerable risk. Unlike big housebuilders, “They are risking they own money,” he said.

The housing and planning bill proposed steps towards helpful reform of the system by introducing the idea of permission in principle for sites of ten homes or fewer. “But it remains a problem that lots of local plans don’t allocate small sites and don’t provide a sufficient range of sites.”

Unaffordable London

With the premise that the housing market was becoming increasingly unaffordable for many Londoners – especially the young – the event focused largely on the affordability of housing.

Gordon Adams, head of planning for Battersea Power Station, explained how the site’s developers and the local authority had wrestled with affordability and viability. Wandsworth Borough Council typically sets a 33 per cent affordable housing threshold, he said, but of the power station’s 3,444 homes, just 581 (15 per cent) will be affordable.

Adams explained that the reduced quantity was the result of a trade-off between affordable housing and the transport infrastructure that would enable the development to actually happen.

Previous attempts to develop the iconic building and the surrounding Nine Elms area had foundered on the site’s very poor transport links, he explained. But by part-funding a 1.75km extension to the Northern Line, the developers could turn the site into a viable development area. £400m of section 106 and CiL payments from developers were thus contributing to the cost of new transport links, with a reduced affordable housing obligation.

A lack of affordable housing in the capital was perhaps the biggest barrier for young people waiting to live and work in the city. With one questioner despairing of ever being able to afford to buy in London, Stevens admitted: “I think the future is very bleak for young people in this country. The demographics are now so out of kilter with supply.”

Russ Edwards from Pocket explained that the company offers compact homes to first time buyers on incomes of less than £70,000. Covenants prevent owners from subletting and ensure that homes remain affordable ‘in perpetuity’.

Pocket’s waiting list now stretches to 20,000 and is increasing by 250 a week. The company estimates some 1.5 million people in London alone fall into the category of potential customers, he said.

The only way to provide for this volume of people would be to release the innovative instincts of small to medium sized housebuilders, he said. But they need more incentives and a more supportive policy environment to reduce their risks and give them freedom to innovate.

Pocket, for example, operates on a profit margin of 10 per cent or less and proposed small changes to London’s housing standards could dramatically reduce the viability of their offer.

“Funding mechanisms like the Mayor’s housing covenant are a good way of giving a degree of certainty to SMEs,” he said, “but there needs to be ore transparency and less risk.”

“Resource constraints on the planning system mean that innovation is a non-starter – planners cannot resource what they need to do on standard projects, let alone put in the extra time required to understand new projects. So it’s up to SMEs,” Edwards concluded. “Unless SMEs can manage their risk profile there’s no point building.”

The event came in a week during which RTPI London launched its Mayoral series of lectures and the London Society convened a new All Party Parliamentary Group on London’s built environment. New London Architecture also recently announced 10 winners of a competition to propose solutions to London’s housing challenge. Winning suggestions included floating homes, suburban densification and leasehold reform.

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