Richard Carr looks at recent construction growth in build-to-rent sector

While there is plenty of negative or ambivalent media attention surrounding the UK property market at the moment, official figures show that there is much to be positive about.

The British Property Federation, which represents developers like Fortitudo Property, as well as property owners and agents has just released the first set of annual figures specifically for the ‘build-to rent’ sector. The figures represent the number of homes in the UK that have been built specifically to be rented out and professionally managed.

Growth in sector

Figures from the report show that the number of build-to-rent homes that have either been completed, are under construction or in the planning pipeline across the UK has gone up by 30% to 117,893 during the 12 months up to the end of March 2018.

Image Richard Carr construction growth in build to rent sector

This sector has been boosted after the government specifically gave it a more prominent role in the national planning policy. With a strong development pipeline, it’s likely that the build-to-rent sector could double to about 200,000 by 2020.

Completions also grow

The number of houses completed in this sector was 20,863, which is a 45% increase on 2017. The number under construction has increased even more by 47%. But why is this growth happening?

As well as the government’s support for the sector, build-to-rent generally attracts long-term institutional investors as it offers a rental income stream that can pay for things like pension liabilities. And, following the government’s lead, lots of local authorities have also put their weight behind this sector, as the realisation dawns that it offers a realistic way to generate long-term, useful income and will help to meet those all-important housing targets.

Regional variances

Housing associations and councils are collaborating with developers more and more on build-to-rent schemes. At the moment, London has more build-to-rent developments than other regions, but these figures show that everywhere else is catching up.

Regions outside of London account for 62% of the total of build to rent houses under construction. Again, this is partly thanks to more positive and supportive attitudes from local authorities, which are welcoming more rental-focused developments.

Areas outside of the capital that are becoming hotspots for the build-to-rent sector include Liverpool, Manchester and Bristol. London is increasingly being seen as more of a challenge by developers in this sector. This is even though many mortgage owners in London face difficulties due to the lack of affordability and high house prices.

This is because developers of homes they intend to sell can construct and sell in different phases, while a build-to-rent developer must finish the whole site before renting out and seeing returns.

Fast-tracking affordable housing

London’s mayor has backed the policy changes and said that developments that come with a minimum of 35% affordable housing will be fast tracked through the planning process. However, the build-to-rent industry argues that implementing a 35% threshold for developers who are building to sell, and those building to rent, is unfair as it “cannot compete with build-for-sale on land acquisition and pricing”. But, the affordable housing targets in London will stay.

One of the major criticisms often thrown at the build-to-rent sector is that it doesn’t properly address the urgent need for family-sized accommodation, as it concentrates on smaller homes for professionals. However, the research shows that this is starting to change, with 17% of the build-to-rent schemes currently under construction or being planned include decent-sized houses, as well as apartments.

Richard Carr

Richard Carr discusses unspent housing budget

It’s recently come to light that MPs are demanding an explanation from government ministers about a huge amount of money from the housing budget that hasn’t been spent.

They were informed that £817 million that was allocated for the UK’s desperately needed affordable housing schemes and other projects has ended up back at the Treasury.

Cross-party committee

News of this unspent cash has apparently astonished members of the cross-party housing, communities and local committee. It certainly seems to directly contradict the prime minister’s recent assertion that housebuilding is at the top of the Conservative’s priority list. In addition, it must have been shocking to hear for local authorities, many of which are becoming desperately mired in financial problems due to constant cost cutting measures from central government.

The committee discovered the colossal underspend for the financial year 2017-2018 and confronted both the homelessness minister (Heather Wheeler) and housing minister Dominic Raab. The government is under massive pressure from MPs and the Local Government Association (which is also controlled by conservatives) to implement some helpful measures for the local authority sector, which has endured budget cuts of 50% since 2010.

Strain on local authority budgets

Bob Blackman, Tory MP and acting chair of the committee, said: “We will be wanting to know why this very large sum has not been spent at a time of great strain on local authority budgets, and why it was not channelled to other spending projects.

“It does not help those of us who argue that more should be given to local authorities if the chancellor knows money he gave last time has not even been spent.”

MPs want to argue for more money for local authorities, given that unexpectedly high tax receipts have left the Treasury with between £7bn and £10bn extra.

Public finances

On the government’s side, the Chancellor explained that much work had gone into putting public finances back in order, and they’re now ready to pump money into services, which includes housing.

He said: “We’re making good progress on building the homes this country needs with, last year, a 20-year record high for housebuilding. This is how we build an economy that works for everyone.”

Affordable housing

However, this doesn’t fit with evidence regarding the number of affordable properties that have been built. Helen Hayes, MP for Labour said she thought it was astonishing that this amount of money is unspent when the number of affordable homes built by local authorities has plunged since 2010.

She said: “This is the biggest issue for families up and down the country. It is simply astonishing and unacceptable that there is so little urgency being shown.”

Since around 1988, local authorities have consistently cut back on social housebuilding due to the impact of increasing budget cuts. Councils have also been discouraged from building new houses by the government’s ‘right to buy’ scheme, which lets tenants buy council properties at a discount of 40%.

Council development companies

richard carr houseMany councils have implemented their own property development companies to get around the rules set by government, so that they can get on and build homes. However, progress has been limited, partly die to the threat from the government that they might extend ‘right to buy’ to the new development companies owned by the council.

While shadow housing minister John Healey said that housing and local government secretary Sajid Javid’s department is ‘selling families short by surrendering much-needed cash for new homes’, a housing ministry spokesman said:  “We are investing £9bn in affordable homes, including £2bn to help councils and housing associations build social rent homes where they are most needed.

“All of the affordable housing underspend from 2016-17, including £65m returned by the Greater London Authority, has been made available to spend on similar schemes.”

Potential council insolvency

The National Audit Office estimates that 10% of local authorities and county councils have less than three years left before they are vulnerable to insolvency. It seems many people agree that urgent action is now needed.

Some developers have always been positive about affordable housing, yet have had their hands tied. At Fortitudo, we always strive to be part of the solution for people who need affordable homes, and hope that the government will act to make it easier for their own housing goals to be met.

– Richard Carr

Richard Carr on why the government should stand firm on house building

Last month the government outlined planned changes to planning legislation in the UK to tackle the shortage of houses. The plans show that councils that don’t build enough homes will lose the right to decide where new houses should be positioned.

Nicknamed ‘nimby’ (not in my back yard) councils, local authorities who don’t meet targets are to be watched by the Ministry of Housing Communities and Local Government to ensure this changes.

New rules

richard carr governmentNew legislation will see councils issued a target for the number of homes they must build every year, taking into account wages, house prices and the number of key workers (for example, police officers, teachers and nurses) in the area.

Where an area has higher ‘unaffordability ratios’, higher targets will be set for the relevant local authority. Should they fail to deliver on the target, the council will be stripped of its planning powers.

The housing revolution

While the announcement received some mixed reactions in the industry, it’s clear that we do have a housing crisis. It was discovered recently by The Independent that the 2014 initiative designed to get people on the housing ladder is failing.

The Starter Home Initiative was described at the time as a ‘major push’ to get people in their first home and further said it would include “innovative changes to the planning system” to “allow house builders to develop under-used or inviable brownfield land by freeing them for planning costs.”

Four years later, not a single property has been built under this scheme, and officials now call it an “ambition”. Many point towards the lack of accountability for councils to deliver on their promises in terms of houses, something that the new legislation is designed to change.

Reaction to announcement

In the immediate aftermath of the speech, share prices for the biggest housebuilders went up, while industry leaders expressed some notes of caution particularly surrounding involving the community in planning decisions.

At Fortitudo Property, we’re in favour of robust and sweeping reforms to tackle what has become a huge problem. As an example, the last time the UK reached the target the government has set for 2020 was in the 1970s when 300,000 homes per year were built.

To get back to this, government intervention is absolutely necessary both at a local and national level. Increasing the planning power in local authorities is an important step forward.

Working together

To use the planning power in the best way, councils should work directly with the national government to sort out problems in the current planning process. To maintain and implement a sustainable housebuilding development scheme, councils must avoid the ‘nimby’ approach.

It’s also vital that developers receive much more government support. There are problems in securing funding from banks which is slowing down the expansion of the housing market, and it’s good to hear the prime minister discuss our role as developers in the reforms.

If the government and councils can succeed in getting rid of the red tape prevalent in the planning process, then more land will be available to developers.

Home Building Fund

The government also proposed to sink £1.5bn into the Home Building Fund, which is also very important particularly for smaller developers. This influx of cash will reduce the number of developers that are forced to wait on available sites.

We very much hope that the government commits to these planned reforms, in the face of undoubted challenges. If these plans become watered down in a similar way to past policy changes, then nothing will change.

We need a radical transformation of the entire planning process, backed up by the government in order to achieve the sustainable housebuilding that the country needs. The announcements are very hopeful, however, and by empowering both developers and local authorities, the government is on the right track.

– Richard Carr

Richard Carr looks at the first smart housing development in the UK

The future is here, at least in terms of houses that do everything for you. Just like we were promised decades ago, houses in 2018 can use technology to take the hassle out of every day life for their owners.

Although most people are aware of smart technology used to control appliances from a smartphone app, or speaking assistants like Alexa and Siri, every day smart homes can seem a far away prospect. While we can assume that millionaires may use technology in ever-increasingly sophisticated ways in their homes, what about the more ordinary houses?

Latest technology

This is where Sommar Place comes in. The housing development in Milton Keynes looks very ordinary, and that’s the point. The houses are normal, every-day houses, but utilise smart technology as standard.

So, this isn’t a dream home for the future, it’s a home for now. They’re not for the superrich, but affordable homes for expanding families. Using this kind of interconnected technology will very soon be expected as standard for new developments.

Scandinavian design

richard carr TrivselhusThe 39 houses were developed by Swedish builder Trivselhus, using Scandinavian energy efficient design along with the most up tod ate smart home tech by Apple.

The system is fully interconnected throughout each property and is both easy to use and fully customisable. People who live in these houses can programme their home to do everything they want. For example, it’s possible to instruct the house to put the kettle on in the morning, programme the lights to come on at a specific time, or warm the towel rails in the bathroom as you’re waking up.

Automated from outside

Residents can also automate the house when they’re out, based on when they’re due to come back. For example, setting a customised programme named ‘coming home’ would make sure the lights come on, the heating is at the correct temperature and music is playing as they arrive home.

An Apple watch and an iPad come with the house, and residents can instruct their house using Siri, as well as Apple TV and HomePod.

What about privacy?

These days, many people are worried about the impact of interconnected technology on their privacy. This system uses end-to-end encrypted security to ensure that whatever residents do remains behind their closed door.

Previously only available in multi-million-pound bespoke homes for the very wealthy, this is the first time integrated smart tech has been used in affordable homes from the outset. While it’s possible to retrofit any home, this development is paving the way for technology to become standard in new developments.

Ken Forster is the MD of Tivselhus. He said: It’s our mission at Trivselhus to develop family homes that have a positive impact on how people live. Technology is essential in easing people’s lives, so it is important that moving forward family homes are designed with smart home technology at their fore.”

Ecological credentials

Any home of the future built in 2018 also has to consider the environment. Technology is not enough to make it cutting-edge, and these houses are built to sustain extreme climate change due to something called Climate Shield.

This is a mineral wool insulation system that, along with air tightness incorporated into the closed panel timber frame walls, ensures a level of protection that will last into the future. Added to this impressive manufacturing, the houses can be assembled in just one day.

Manual control is also possible, as technology can always go wrong. Day to day, the technology will seamlessly, efficiently and unobtrusively make life easier. This kind of development will one day be standard, and it’s exciting to see it take shape in real terms for people looking for an affordable and future-proof property.

– Richard Carr

Richard Carr on how the ‘Brexit effect’ could be evening out house prices

There’s no denying that Brexit has been a divisive issue since the referendum vote of June 2016. And while we don’t formally leave the EU until March 2019, there have been various effects on the economy and, of course, property.

While the initial burst of doom and gloom predictions surrounding the economy didn’t come to fruition, there has been a surge of interest in property around the UK which has boosted regional areas. Continue reading

Richard Carr discusses changes to National Planning Policy Framework

Last week the Prime Minister announced a major overhaul to the planning framework in the UK, in a bid to deliver the number of homes we need.

The reforms focus on maximising land use, strengthening protection for Green Belt land and putting more emphasis on turning planning permissions into actual homes. Continue reading

Optimistic start to 2018 for the UK’s property market

Most regions of the UK have seen a rise in asking prices since the beginning of 2018, leading to a justifiably optimistic feel for the sector.

The latest property pricing index from Rightmove shows that the Midlands is leading the way with prices rising more than three times faster than the national average. This rise in asking prices is fuelled by record home hunting activity in the country. Continue reading