Real estate

Delivering a million homes by 2020 – a reality check

Experts at the National Housing Conference in Manchester determined a multi-disciplinary approach is key to tackle the urgent need for housing.

However, the main challenge to this is the sheer volume of organisations involved in the process such as Registered Providers, Local Authorities (LAs), SMEs, contractors, planners and funders. The key question is how do we effectively enable these groups to work together, to deliver the homes required? 

SMEs have a role to play in contributing to the housing target but can often be under-resourced compared to large house builders. 

The rental market continues to grow especially with new graduates entering the market every year. Affordability is an issue for many renters so developers need to create a housing and living environment that attract rents. This in turn will make the development economically viable. 

So how do we unlock markets to provide flexible finance that can be shaped around the economics and commercial reality of housing delivery? On this front, some positive developments include:

  • the maturing build to rent market has made it increasingly attractive to institutional investors and overseas funds 
  • new build to rent developments need to be well located
  • Local Authorities should access funds from the Public Works Loans Board
  • The Homes and Community Agency (“HCA”) launched a number of products to enable investment and unlock sites, the largest being the £3 billion Home Building Fund to increase development from the private sector
  • the increased interest and investment into off site construction methods by non-traditional construction firms. 

Understanding the build to rent market is difficult as it is so new – therefore good analytics is crucial to the success of new developments. We have developed the PRS Insights platform which is underpinned by current real estate, demographic, socio-economic, financial and environmental data to enable multi-dimensional analysis of any build to rent opportunity.

However the lack of available land, competitive capital and state aid means that many projects simply do not have the resilience to see this fully through.

Another important factor that must be considered is that different locations require different solutions to housing delivery as there will be specific local economic factors at play. The market doesn’t look after itself and London and the South East is not necessarily the footprint for the rest of the UK. In order to tackle the supply shortage, the current house building process must be addressed. 

Our participation as a lead partner in the London First Inquiry attempts to challenge these questions and assemble solutions which can tackle a number of the issues. Our recent London housing data analysis, identified that 36% of houses that are given planning permission never get built. Making this process as effective and efficient as possible will begin to address the shortage and unlock more housing across the UK. This will then contribute to a ‘Vibrant Economy’ where people and places can actually flourish and break through the ‘housing crisis’ which has continuously proved a thorny issue for all political administrations. 

Both the public and private sector need to be part of the solution. In fact, the public sector is stepping forward as highlighted in a recent survey from the Town and Planning Country Association .* Two thirds of local authorities are considering establishing a Local Authority Housing Company (LAHC) with 18% forming joint ventures. This is a trend that is not unexpected given the ambitions of Local Authorities as highlighted in our ‘Spreading their wings ’ report published in 2015. 

Local Authorities have large land banks, knowledge of the planning process and an awareness of local need – hence partnerships on housing can generate significant returns for both parties and foster a relationship which can be fruitful into the long term and be multi-stranded: waste, maintenance, leisure, as well as housing. 

And that sums up the national housing conference session up perfectly - it’s all about collaboration if we are going to make the aspiration of “socially mixed, cohesive communities” a true reality.

Wayne Butcher, Associate Director, Government & Infrastructure Advisory