The government’s commitment made in 2017 to build 300,000 new homes per year has been well documented. Two years down the line, although the numbers are falling short of the goal, the future looks positive for the new build industry.
In the year ended June 2019, 173,660 builds were completed, 8 percent more than in the previous year. Private new build completions were 7 percent higher than the previous year, and housing association completions were 12 percent higher.
At present, the amount of new properties being built each year is higher than the number of new households being set up over the same twelve-month period. A new household is formed, for example, by children leaving home to live in their own property, or by couples separating to form two households where previously there was one. The Office for National Statistics estimated in 2018 that the number of new households per year will be 159,000. Even factoring in a possible post-Brexit slowdown in building, construction is likely to continue to substantially outstrip the new households figure.
Government strategy
In October 2018, the government revisited its pledge of the previous year and stated that it was committed to delivering 300,000 homes per year by the mid-2020s. This was accompanied by suggested reforms designed to improve the planning process and deliver investment where needed.
New permitted development rights allow larger extensions and building upwards from existing properties, while development and land acquisition rules are to be made clearer in respect of the creation of new towns and garden communities.
It is also intended to allow Local Authorities to sell surplus land and develop more brownfield sites.
The government recently announced in August 2019, its intention to provide £600 million of new money via the housing infrastructure fund towards the building of 50,000 new homes in five high-demand areas in London, Bedfordshire and Essex, along with accompanying infrastructure and public services. This is in addition to the £1.3 billion already allocated to 76,500 homes.
Quality will be important, following former housing minister Kit Malthouse’s claim that much of the homes being built now will soon be ripped down and bulldozed as unsuitable. The Building Better, Building Beautiful Commission has been set up to tackle the challenge of poor-quality design and build. Its recent interim report, published in July 2019, has started defining proposals to ensure that future builds are beautiful, sustainable and designed to meet people’s needs.
Future developments
As well as new build on vacant land, unused retail space is likely to be made more widely available for residential development. Online shopping accounted for 18 percent of all UK retail sales in 2018, with over 2,400 stores closed on the top 500 high streets that year as well as units on larger out of town retails parks becoming vacant. Local Authorities have been reluctant to grant permissions for change of use in case of a future upturn in retail fortunes, but if the downward trend continues it is likely that more retail space will be released.
Creating mixed developments helps retail sectors thrive, by bringing in homes alongside shops and restaurants. A return to more traditional designs of high streets with public squares is happening in some areas, with different architects being brought in to design different blocks to provide visual variety.
London developments are leading the way with innovation, with the canalside site at Fish Island Village combining a social enterprise campus providing working space for local creatives with one, two and three bedroom homes.
The older generation continues to increase in number, with households headed by someone aged 65+ estimated to account for 88 percent of growth from 2016 to 2041. The government is keen to see more later living accommodation built and intends to give greater encouragement to developments by ensuring that suitable sites are made available to a wide range of developers. They want older people to be able to choose from a range of housing options, including retirement and care homes. This in turn would bring larger family homes onto the market as older people move to more appropriately sized accommodation.
Newly built social housing figures remain low, with councils now preferring to target funding towards affordable housing. Part of the reason for this is the higher rents payable for affordable housing, typically 80 percent of the standard market rate, as opposed to social housing where rents are just 50 percent. Local authorities, particularly in the South East, are setting up their own housebuilding companies to combat lack of council homes, with profits from the sale of full-priced new build homes paying for construction of new social housing.
The number of affordable homes being built is rising as councils insist developers include a number within larger developments. In 2017, the number was up 11 percent on the previous year to 53,572.
With many younger buyers struggling to afford to buy a home outright, more co-living developments are being designed, with hotel-sized rooms for each resident together with shared spaces. These are designed as a solution primarily for the younger generation, who can benefit from shared amenities and leisure spaces and live within a community. The developments are designed to be a step up from shared houses.
The new ‘green standard’
In October 2019, the Housing Secretary unveiled a new green standard for all new build homes, aimed at cutting carbon emissions for future generations.
The Future Homes Standard, as it will be known, will ban gas boilers and other fossil fuels from new homes by 2025, instead requiring builders to install cleaner heat sources such as solar panels or air source heat pumps, to cut carbon emissions by up to 80 percent. Stronger building regulations will also be implemented to reduce the carbon footprint.
Local Authorities are now expected to produce their own design guide, reflecting the unique setting, character and history of their area, to ensure that developers build attractive, well-designed homes that suit their locale.
It is also intended to reform the planning system to make it faster and more efficient. A simpler system will allow Local Authorities to process applications more quickly, benefiting both developers and individual householders who want to extend or modify their homes. Local Authorities will issue their own design codes, setting out the characteristics of well-designed places and demonstrating what good design means in practice.
New build work for Lawyers
With residential construction continuing to increase year on year, acting for developers or their buyers is a good target market for property solicitors. However, dealing with a new build purchase can be an onerous task for the conveyancer. The amount of paperwork is substantial and the checklist is long, including checking planning applications, road and sewer agreements, common parts maintenance agreements, NHBC inspections, building regulations approval, access rights, completion requirements and more in-depth checks on the site on which the property is being built, for example in respect of flooding or environmental contamination.
As well as this, agents and developers can pile on the pressure, demanding a 28-day exchange period or loss of the reservation fee and, potentially, the buyer’s chosen plot.
Solicitors aiming to take on a substantial amount of new build work in the future can create systems of work around the special considerations required and dedicate staff members solely to this type of conveyancing to ensure a good workflow. Building a good name with developers and agents when it comes to new build is likely to result in more referrals and repeat business. On-site sales teams will be happy to find a conveyancer who understands the pressures their developer faces to keep to a rapid turnover and ensure deposits are received on time.
There are also opportunities to act on the acquisition and sale of part-exchange properties for builders who offer this service. Again, this is a specialised service, as the seller will have no personal knowledge of the property and will need to complete as a matter of urgency to release locked-in funds.
Summary
There is much to be positive about in the realm of new build, with increases expected in all areas of residential construction and improvements in the planning system anticipated. As sustainability issues become increasingly important, builders will need to consider environmental impact as well as whether their designs are aesthetically pleasing and suited to the community they serve.
It promises to be an exciting time for developers, as pressure to stop building identikit homes, reduce carbon footprint and the requirement to best utilise available space forces more innovative thinking. For those prepared to take on the challenge of building the homes that people really need, the future looks bright.
