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In depth with Inside Housing’s Biggest Builder
Following two mergers in quick succession, Bromford Flagship LiveWest has topped Inside Housing’s Biggest Builders survey. Grainne Cuffe speaks to the landlord’s chief investment officer and executive director of development and investment about how the landlord got here and how it can achieve more
Following two mergers in quick succession, Bromford Flagship LiveWest has topped our Biggest Builders survey. Grainne Cuffe speaks to the landlord’s chief development officer and executive director of development and investment about how it got here #UKhousing“The premise for this merger wasn’t one of financial difficulty – it was three high-performing, financially resilient organisations joining together to increase or to create capacity to invest in new and existing homes.” Clear words from Russell Baldwinson, executive director of development and investment at Bromford Flagship LiveWest (BFL).
It has been a transformational 18 months for the organisation. In February last year, Midlands-based Bromford merged with Flagship in the East of England to create an 80,000-home landlord. Just 11 months later the landlord merged again, this time with South West housing association LiveWest.
Inside Housing is speaking to Mr Baldwinson, formerly executive director of development at LiveWest, alongside Martyn Blackman, formerly chief investment officer at Bromford. Now they lead development at the 126,000-home mammoth association. Published yesterday, Inside Housing’s Biggest Builders places BFL at the top of the list, with nearly 2,900 homes completed in one year.
Last year, Bromford Flagship ranked third in our Biggest Builders data for completions, fourth for starts, and second for pipeline. LiveWest ranked 13th, ninth and 11th respectively.
Following the merger, BFL has come out on top for total completions (2,871).
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And not only did it come out on top for pipeline, it led by a lot. BFL expects to deliver 3,116 homes this coming year, an increase of 8% compared to the year before, and 1,181 more than the landlord in second place (Places for People).
It aims to reach an annual delivery of 4,000 homes in around seven years. Given the significant regulatory and financial pressures on social landlords, how is it managing to keep up this momentum?
Mr Baldwinson is at pains to make clear that BFL’s development ambitions will not get in the way of providing residents with a good service.
“That’s a really important thing for us as an organisation, and a big part of that is having a place-based approach to working and investing in homes and trying to create an environment where our customers thrive,” he says.
On average, BFL will be investing £200m per year in its existing homes and £1bn in development.
“We’ve brought three really strong organisations together,” says Mr Blackman, who is now BFL’s chief development officer.
“Government and Homes England asked housing associations to be ambitious in their bids. We’ve been ambitious in that bid and government now needs to stand up and support organisations that can deliver”
The organisations were “well established” in a significant geographical area that includes the South West, the Midlands and East Anglia, and they already had a track record of delivery, which makes for “strong market conditions,” he continues.
Mr Baldwinson says mergers often bring together one very strong organisation and one that is not performing as well, but that wasn’t the case here. “Each organisation was strong in its own right before it came together, so it’s one plus one, plus one, equals four,” he says.
Altogether, the mergers have created about £3.4bn worth of additional capacity. That equates to about 14,000 homes, at least half of which would be for social rent, he says.
Speaking of capacity to build homes, the government’s new £39bn Social and Affordable Homes Programme (SAHP) closed for initial strategic partnership bids in April. Successful applicants will be announced in autumn.
What can BFL share with us? Mr Baldwinson says it “won’t be a secret” that the landlord has put in a bid for the Strategic Partnership Plus (SP+) route. SP+ partners must commit to building at least 1,000 homes by 2029 and 4,000 per year by 2036. Bids have an initial cap of £700m, which will not fully fund BFL’s development programme.
“We’ll be looking at ways that we can subsidise homes, and obviously we’ll be buying homes which are delivered through the planning system through Section 106,” he says.
Mr Blackman adds: “Government and Homes England asked housing associations to be ambitious in their bids. We’ve been ambitious in that bid and government now needs to stand up and support organisations that can deliver.”
In May, the Greater London Authority (GLA) and Homes England asked applicants to the SAHP to re-profile their bids. This was down to the programme being oversubscribed.
Did BFL have to re-profile?
“We did,” Mr Baldwinson confirms, but he says the change will not reduce BFL’s overall ambitions: 50,000 new social and affordable homes by 2040.
But it will mean fewer grant-funded homes in the first three years of the programme, which might have to be “flexible” in terms of timing.
He says BFL would “obviously” like further funding and be able to deliver more grant-funded homes so it is “not so reliant on the planning system, but that’s not the space that we’re currently in”.
If the situation improves or changes, BFL can be “adaptive” and “very fleet of foot”. Mr Blackman adds that the “key is that we’re ready to go”.
“We’ve been ambitious in the bid, and if the government released the cash we can crack on and help build the 1.5 million homes by March 2029. We’re there to help with that part of the solution.”
Funding aside, what more can the government do in terms of policy that would help encourage development? Mr Baldwinson says the “single biggest barrier to increased development in the sector is the cost of debt”.
“If the cost of debt were to reduce, then that would create capacity, or further capacity, within organisations. Because for every pound we spend on development, because we borrow to develop, we’re paying increased borrowing costs, and that takes capacity out of the overall pot.”
He acknowledges that it is not “necessarily within government’s control at the moment because there are too many external [factors at play]”, but it would create further capacity within organisations.
Mr Blackman highlights the work the government has done on the 10-year rent settlement and planning, but agrees that low-cost loans would be a great help.
The National Housing Bank, launched by Homes England in April, offers low-interest loans – although London landlords are expected to get two-thirds of the £2.5bn available. Mr Baldwinson says that “any tool or opportunity” to help stimulate development has “got to be welcomed”.
“I think the challenge is probably there’ll be more demand on the facility than they’ve actually got cash,” he adds.
2,871
Number of homes BFL completed this year
£3.4bn
Additional capacity created through the mergers of Bromford, Flagship and LiveWest
48%
Percentage of BFL homes completed this year through Section 106 agreements
And new funding aside, the operating environment isn’t easy. Social landlords are grappling with increased regulation, building safety and net zero targets, alongside a turbulent economic climate. What challenges will this pose for BFL’s development ambitions?
Mr Blackman says the landlord has the highest credit rating of any housing association in the country, does not operate out of London and owns predominantly low-rise homes, which means it does not face the same building safety challenges as others.
It also has its own development company, historically part of Bromford, giving it different routes to market to deliver homes, while its lack of dependence on market sale homes also helps.
However, build cost inflation can be a challenge, he tells Inside Housing, along with the “uncertain” political landscape having “some impact on buyer sentiment for shared ownership and open market sale, but also around policy”.
The conversation turns to planning. The government recently overhauled the planning system, including modernisation of planning committees, extra powers for development corporations and a new nature restoration fund.
It pledged that the new legislation will remove blockages and accelerate the development of tens of thousands of new homes in every region.
Mr Baldwinson says the planning system is “definitely improving”, but “it’s still a challenging one to operate in, and it’s very drawn out and time-consuming”. The planning system should expedite affordable homes, he argues.
“That helps solve the crisis, because it takes away some of the delay between identifying homes which could be delivered as affordable housing, [and puts] a spade in the ground.”
Overall, Mr Blackman says that the diversity of BFL’s development programme helps it manage these risks.
“Whether that be through partnerships, through homes we build ourselves, [or] through homes we work on with house builders, we’ve got that resilience in our programme that we can flex and be agile if need be.”
On partnership working, 48% of BFL’s expected completions this financial year will be through Section 106 agreements, up 12% in a year. This is at a time when there are an estimated 8,500 to 17,000 uncontracted Section 106 homes. The government announced in January that it was introducing emergency reform in this area to tackle the growing issue.
Mr Blackman calls delivering homes through Section 106 a “really important” part of providing affordable homes. “Always has been and always will be,” he says, but adds that BFL “won’t do it with everybody”.
“We’re really pleased that we’ve come out [on top in Biggest Builders], but for us, that’s not the important thing”
“This is about us working with like-minded developers that value our customers and work with us to deliver a quality of home in the timing that we need.”
Last month, BFL announced that it had formed a strategic partnership with developer YTL Developments to deliver Brabazon, a 6,500-home new town north of Bristol.
“One of the key things that we’re doing from a scale perspective is creating new places,” Mr Blackman says. “Being able to work on much larger place-based development is also a really important part of our future.”
As the interview wraps up, Mr Baldwinson swings back to the point that BFL’s development plans will not come at a cost for its residents and existing homes.
“First and foremost, we’re a landlord and we’re here to provide great services to our customers,” he says. “We’re really pleased that we’ve come out [on top in Biggest Builders], but for us, that’s not the important thing.
“The important thing is that the financial resilience of the organisation creates the capacity for us to impact more lives of those people who are in desperate housing need.
“That’s the real positive of this. The fact that we’re able to do that as an organisation, that gives you a sense of purpose and means that more people are benefitting as a consequence of our approach to being a landlord and delivering new homes.”
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