promoting more custom build housing

Promoting more

Custom Build Housing

Presentation to the BuildStore

Development Finance & Construction Conference

in association with

Ted Stevens, Chairman (NaSBA)

Mario Wolf, Senior Policy Advisor, Housing

Supply and Markets (DCLG)

What we want to cover

• What is the Custom Build Homes sector?

• The Policy driver - the Government’s Custom Build

Homes programme

• Ways in which builders can deliver custom homes

• Learning from the Dutch experience

• What’s in it for developers?

What are ‘Custom Build’ Homes?

‘Homes built by individuals or groups of

individuals for their own use, either by building

the home on their own or working with builders’

The last five years – share of all housing

Source: HB&R – UK Self Build Market report. Q1 2011

Insert HB&R graphs here

UK custom build home numbers

compare poorly internationally

Source: NaSBA/SmartLIFE self build comparison

The Housing Strategy for England and

the Government’s priorities• High level Government focus on

economic growth and social

mobility

• Strong emphasis on taking a

localist approach - putting

communities in control

• For housing this means

improving affordability, creating

greater stability in the housing

market and increasing quality

“…a clear and pressing need for more homes to

meet growing demand…”

Grant Shapps MP, 2011

Housing supply measures• The Housing Strategy sets out package of measures to boost the

supply of new homes

• Substantial new direct investment– focused on getting the

housing market moving again

• New Buy Guarantee scheme to help prospective buyers

• Ambitious measures to boost house building substantially, including a

£1.3bn investment to get Britain building

• Freeing up public sector land for 100,000 new homes

• Stronger support for Custom Home Building

• In the long-run, responsiveness of supply to demand driven by:

• Simplified planning framework that supports growth

• Proportionate and cost-effective regulation

The Custom Build Homes Programme

“…we need strategic reform of the way in

which housing is planned and funded

[including]:…

Stronger support for Custom Home Building,

including making available up to £30 million of

new funding to support provision of short-term

project finance on a repayable basis.”

“I want to create a self build revolution where building your own home is not just the preserve of the privileged few.”

Grant Shapps MP, Minister for Housing, June 2011

“Self builders deliver affordable, greener and more innovatively-designed homes, and make a big contribution to the number of new homes built in this country. But there is still significant opportunity for growth in the sector which can only be opened up if Government and industry work together...

… I pledge to continue pushing for further action to make self build an easier option for everyone.”

Grant Shapps MP, Minister for Housing, July 2011

Why is Government focussing on this sector?

• Important to national economy (value over £3.6bn annually)

• Important contribution to housing supply (sector builds as much as our large

house builders)

• Growth potential (demand growing) - More people want to custom build.

Ambition is to double size of sector over next decade

• Protects and creates local jobs, strengthens local construction supply chains

and promotes sector diversification

• Improves local choice and can offer better value for money (scope to make

housing more affordable for a new generation)

• Localism - Big Society - in action

Custom Build Homes programmeHousing Strategy announced Custom

Build Homes Programme:

• Councils to establish demand and

facilitate such housing

• More public land to be made

available

• Promote larger scale locally-

planned custom build home

developments

• Work with industry to establish a

Custom Build Homes Portal

• Appoint Custom Homes

Champion

• Make up to £30m available to

support provision of short-term

project finance for group

schemes on a repayable basis

Action Plan (July 2011) to

address barriers of land,

finance, regulation and

inadequate support and

guidance for self builders

Government asked to:• Make more land available for self-

builders

• Encourage lenders to offer more finance

products for self builders

• Remove and simplify over-burdensome

regulations holding back the sector

Commits Industry to:• Promote new implementation models,

such as making serviced plots available

• Work with Government to identify

suitable ‘revolving fund’ facilities to

support group projects

• Provide clear independent information to

would-be self builders via a new online self

build ‘portal’, to enable more people to self

build.

What action has Government taken…

• Moved quickly to established Industry-

Government Implementation Group to

implement Action Plan and maintain momentum

• Written to banks and building societies calling on

them to make more finance products available to

custom home builders

• Promoting use of publicly owned land for self

build housing- approximately 40% of land suitable

for development is currently sitting within public

sector land banks

• Introducing more proportionate and cost-

effective regulation

• Localism Act and planning reforms

…further Government action• National Planning Policy Framework (NPPF) asks local

authorities to take account of local demand of people wanting

to build their own homes (Paragraphs 50 and 159)

• Looking at how we can promote larger scale locally-planned

custom build home developments

• Worked closely with industry to establish new Self Build Portal

and support Kevin McCloud as new Industry Champion to raise

greater public awareness of the benefits of custom home

building

• Worked closely with industry to shape a new £30m investment

fund to support provision of short-term project finance to multi-

unit ‘group’ projects on a repayable basis

Where next?• Launch and implement £30m investment

fund

• Joint Industry-Government engagement

with local authorities, developers, lenders

to explain and promote the take-up and

facilitation of the self build business model

• DCLG/HCA workshop on bidding for public

land disposals and applying for funding

• Continue to work on taking forward residual

actions in Action Plan which have not yet

progressed

• Industry report back to Ministers by end

2012

Ways in which builders can deliver custom homes…

• Sell ‘serviced’ plots with services and access in place

• Sell plot with a design and build contract to build a client’s house design

• Sell plot and build a watertight shell with the option for the self builder to

finish-off

• Offer complete package ‘turnkey’ service – from plot to handover, including

full design, construction and finance

• Work with group of self builders to build – for example – a terrace of homes,

block of flats or multi-unit scheme

• A case study on Homeruskwartier District in Almere – a 3,000 home self

build project that’s currently underway in The Netherlands

Providing ‘serviced’ plots

Sell plot with design and build contract

Sell plot and build watertight shell

Offer complete package ‘turnkey’ service

Work with group of self

builders

• Developer finds site and

undertakes feasibility study of site

development potential – eg multi

unit scheme, block of apartments

or terrace of homes

• Developer finds site and

undertakes feasibility study of site

development potential – eg multi

unit scheme, block of apartments

or terrace of homes

• Developer prepares outline

scheme (no detail)

Work with group of self

builders

• Developer finds site and

undertakes feasibility study of site

development potential – eg multi

unit scheme, block of apartments

or terrace of homes

• Developer prepares outline

scheme (no detail)

• Community consultation showing

indicative designs. Firms up design

detail in discussion with clients

Work with group of self

builders

• Developer finds site and

undertakes feasibility study of site

development potential – eg multi

unit scheme, block of apartments

or terrace of homes

• Developer prepares outline

scheme (no detail)

• Community consultation showing

indicative designs. Firms up design

detail in discussion with clients

• Submits for planning

Work with group of self

builders

• Developer builds as required, and

custom builder is given choice to

finish-off units

Work with group of self

builders

• Contractor builds as required, and

custom builder is given choice to

finish-off units

BENEFITS FOR CONTRACTOR

• Pre-sold development off plan

• Cash flow benefits (plot sales and

staged payments for build)

• Minimal involvement in the

interiors/fitting out work (where

homes are self finished)

Work with group of self

builders

• Contractor builds as required, and

custom builder is given choice to

finish-off units

BENEFITS FOR CONTRACTOR

• Pre-sold development off plan

• Cash flow benefits (plot sales and

staged payments for build)

• Minimal involvement in the

interiors/fitting out work (where

homes are self finished)

BENEFITS FOR CUSTOM BUILDER

• Can influence design

• Reduced risk

• Firmer price certainty

• Save perhaps 20-25% if self finish

Work with group of self

builders

Homeruskwartier District, Almere, Holland

An area of 100 hectares to the SW of city centre

So far around 1,000 self build homes built; 3,000 planned

A number of different zones/themed areas

City put in infrastructure and sells plots at about £290/m2

Real mixture of homes built but average three bed homes

are costing £150,000 (including land)

Amsterdam

Almere

November 2007

JANUARY 2008

JUNE 2009

OCTOBER 2011

Homeruskwartier District, Almere, Holland

Homeruskwartier District, Almere, Holland

Homeruskwartier District, Almere, Holland

Homeruskwartier District, Almere, Holland

Homeruskwartier District, Almere, Holland

Some lessons from Almere for UK practice• Strong LA vision and leadership needed

• Public land critical to promote sector growth

• Master plan large sites through competitions but enforce through light touch

planning regulation (reduce consent times by using SPZs, design codes, LDOs)

• Marketing essential to promote model. Central marketing through ‘Plot Shop’ with

range of ‘approved builders’ gives one-stop-shop for self builders

• Management company needed otherwise LA plot sale process onerous

• LA can offer cheaper land/help with mortgage but still make profit- can help FTBs

• Economic climate and stagnating housing market helps support new business

models- self build seen as market opportunity

• Government needs to support but no need for top-down regulation- leave to

localities

• Culture change- builders and LAs don’t necessarily know best (let local people build

homes they want. Don’t micro manage)

• Housing Associations can play important role to promote

• Lenders need to embrace opportunities presented by market- business opportunity

• Self build not sole answer to housing crisis but plays important role

The size of the prize for developers?

• Self build sector set to double in size – that’s another

£3billion a year

• Most of that growth is expected to be driven by

developers ‘enabling’ a range of small to medium sized

multi-plot (‘group’) schemes

• New £30m Investment Fund that will shortly be

launched will help with land, infrastructure and

construction costs on multi-unit schemes

• Those that get in first will be ahead of the pack and will

gain the biggest share of this growing market