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L&Q’s projected development costs cut by £1.8bn as home starts plummet
L&Q, one of the biggest builders in the UK social housing sector, has cut its expected development costs by more than a quarter as home starts take a hit from the coronavirus pandemic, its latest financial accounts show.
L&Q, which owns and manages 105,000 homes, said the projected cost of its entire development pipeline until 2040 had fallen from £6.9bn in quarter two of 2019/20 to £5.1bn in quarter two of 2020/21 – a drop of 26%.
The G15 landlord, which completed 2,433 units in 2019/20, said £4.1bn (80%) of this is currently committed, down from £5.2bn in the first half of last financial year.
Inside Housing understands the falling costs relate to greater emphasis on social housing output and moving away from higher-value areas in the South East. An L&Q spokesperson said the landlord’s development ambition of 100,000 new homes in the next decade has not changed.
Over the same period, L&Q saw its home starts fall by 37% from 2,454 units in the first half of 2019/20 to 1,598 in the same period in 2020/21.
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The fall comes after chief executive David Montague put a pause on new projects in September 2019 because of a downturn in the housing market owing to Brexit uncertainty. Mr Montague announced in September this year that he will be stepping down from his role at the end of the financial year.
L&Q’s completions in the period also dropped by 53% over the same period from 1,505 units to 700 in the first half of this financial year.
Waqar Ahmed, group finance director at L&Q, said: “As expected, our quarter two results continue to reflect the decisive actions that we have taken during the onset of the COVID-19 pandemic to conserve cash flows while fulfilling our commitments to our customers, outlining the resilience and flexibility that we have in our business and the strength of our core rental operations.
“While all construction sites are open and have been operational since the summer, their initial closure at the onset of the COVID-19 pandemic has led and will continue to lead to handover delays of new residential units as we adjust to revised working practices.”
