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Built to adapt

SPONSORED ARTICLE

How can the demand for more homes be fulfilled against the backdrop of a continually uncertain policy picture? Inside Housing and H+H brought together a panel of development experts to consider possible answers to this tricky question. Photography by Simon Brandon

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When the housing policy environment changes at the bewildering speed it has recently, how should social landlords increase the number of homes they build when it’s a safe bet the rules will change again in some unpredictable way?

For example, Starter Homes became and then ceased to be Whitehall’s obsession, a rent increase beyond 2020 has been unexpectedly confirmed, and another £2bn was found for affordable homes. There is even a Conservative government using the term ‘social housing’.

At a round table event held by Inside Housing and H+H – the UK’s largest manufacturer of aircrete blocks and systems – a group drawn from development debated how they could meet the government’s demand for more homes against such a changeable backdrop. They concluded that the sector should plan on the assumption of continuing unpredictability in policy.

Tough climate

Emma Maier, editor of Inside Housing, asks: “How do you do strategic planning with all this volatility? In an environment unlikely to get less volatile, do organisations need to make their own weather?”

Many of the participants expect ambitious expansion, but know their plans must be flexible as to which tenure a home may end up in.

Pete Bojar, executive director of growth and assets at Great Places, says: “The strategy has become: flexibility, build and then decide.”

This means building homes and then assigning them whatever tenure proves viable. “This is about where people enter the market, not ‘that site for shared ownership, that site for affordable rent’,” Mr Bojar adds.

Peter Martin, group director of development at Sanctuary, agrees. “Social rent, intermediate and shared ownership homes are pretty much the same thing. It’s not like the car market with different models – our product should be the same however it’s sold, as we know the policy will change and so we have to change with it.”

Oliver Boundy, director of new business at Southern Housing Group, adds: “If things become bleak, we can hunker down and convert homes from sale to rent. We are lucky we’ve got that flexibility.”

No matter which tenure is ultimately used, increased output is certainly being planned by many of those organisations represented at the table.

“If things become bleak, we can hunker down and convert homes from sale to rent.”
Oliver Boundy, director of new business, Southern Housing Group

Joyce Ferguson, development director at Clarion, says the formation of the landlord from the merger of Affinity Sutton and Circle Housing Group had among its aims “a financially stronger organisation to increase capacity to develop and increase to 5,000 homes a year from just over 2,000”.

Ms Ferguson characterises this as “a big step change” for the association.

Aster plans to increase output from 1,000 to 1,400 a year over five years, according to Amanda Williams, group development director, while Vivid – described as “another pro-development merger” by its development and new business director, Mike Shepherd – seeks a 60% increase to 1,200 homes a year.

The London Borough of Ealing also hopes to boost its development programme, says Dave Baptiste, head of housing development at the council.

“Like a few local authorities, we have pushed private rent as prices in Ealing and parts of London are too high for people to purchase, even shared ownership,” he says.

“In private rent we can improve standards and acceptability and we are learning a lot; going all out on sale and shared ownership keeps us in the mix.”

Orbit hopes to raise its 1,800 to 2,000 development programme to between 2,500 and 3,000 beyond 2020, the association’s development director Maggie McCann tells the meeting, while Mr Boundy confesses that his organisation had been a “sleeping giant” that has avoided risks but now plans to build more.

One potentially risky activity that increasingly interests housing associations is developing land-led schemes for themselves, rather than waiting for Section 106 opportunities through planning gain.

This approach, though, would not only demand some new skills in finding and negotiating for land, but put landlords in direct competition with volume house builders for sites, with a potential clash between the latter’s deep pockets and the former’s ability to borrow money cheaply.

Sanctuary’s Mr Martin warns: “You’d better understand that if you want to be commercial and national house builders, then national house builders are who you would be up against and they will not sit back and let you be in competition.”

Mr Boundy says Southern is looking at land acquisition, and notes that house builders pursue option agreements with landowners while “we tend to buy things that are consented, so we want to shift approach to buying land, and enter option agreements and promote sites through the planning system”.

“We have pushed private rent as prices are too high for people to purchase.”
Dave Baptiste, head of housing development, London Borough of Ealing

House builders employ people to find them promising sites, but Mr Bojar says: “We have recruited land-finders for the first time but with varied success.” It can be a hard sell to persuade the best people to join a housing association, he notes.

Alex O’Keeffe, senior development manager at Home Group, says understandable caution from finance staff means that promising land deals might be missed as “there is not the ability to decide quickly”.

“It’s difficult with the structure of housing associations compared with the private sector,” he adds.

Others hope for better experiences and see buying their own land as a way to make their programmes independent of the vagaries of Section 106.

Aster’s Ms Williams says: “We have a programme dominated by Section 106 delivery and we are looking to take more control of our programme and try to access land.”

The end of Southern’s ‘sleeping giant’ approach has seen Mr Boundy charged with increasing its output – at present a pipeline of 2,000 homes in which “85% of the programme is land-led and we do not really do Section 106”.

Mr Baptiste, however, welcomes the government’s renewed use of the term ‘social housing’. He hopes it might help provide more homes as it could alter views among “Section 106 developers who think social rented housing is just for people with mad dogs; we’ve got to change that”.

Weathering the storm

But there is concern among participants about the capacity of the construction industry to take on the increased programmes planned by landlords.

Mr Boundy says Southern is establishing an in-house contractor, while Ms McCann says Orbit has found “Section 106 has already tailed off and we have our own contract build business to deliver land-led market housing”.

She says: “We have got to deliver more of our output as the contractor pool is considerably diminished. For smaller jobs, getting contractors is incredibly difficult and so we have to grow that part of the business.”

“We have a programme dominated by Section 106.”
Amanda Williams, group development director, Aster

Mr Bojar agrees: “We’ve had some good relationships with contractors but we find the pool is shrinking in terms of numbers we deal with and it’s increasingly big corporates, not regional builders.

“For us that impacts on quality and time, and rather than talking to builders about building, [we find ourselves] talking more about joint ventures. [It] is a route we’re quite happy to go down but in terms of capacity in construction that is a major issue.”

Social landlords might undersell themselves in joint ventures, Mr Shepherd suggests, noting that “our cash strength buys us a position”.

“Don’t underplay our role,” he suggests, “as we bring quite a lot to joint ventures and may be able to get more out of it”.

There is also a need to improve landlords’ development skills, says Clarion’s Ms Ferguson. “New posts are coming in [that] we would not have had in a traditional development department. “Our main objective is to increase size and quality and we’re looking to recruit from the construction sector and some people who have worked as employers’ agents.”

The construction industry’s perennial skills shortages are felt by many to be a factor holding back development.

Mr Martin suggests that the answer lies in offsite manufacture of components that could be assembled on site by staff who, while skilled, would not require the lengthy training needed for traditional construction trades.

“Skills shortages will mean we have to use factories. The hotel and student accommodation industries have already gone over to that with standardised products,” he said.

H+H’s experience suggests there are training and cultural challenges to overcome, warns John Churchett, director of social housing and construction. “From a manufacturing point of view, using offsite affects not just people who make products but filters right down the supply chain. Some systems have not worked because of labour on site who want to do it one way and who do not want to change. We have an offsite system but issues with labour have restricted us with bringing new systems to the market.”

No matter how land is acquired or how homes are built, everything must pass through the planning service, which is an acute source of concern for participants.

Ms McCann says: “We haven’t got the planning skills within local authorities and they do not have the capacity to offer reasonable packages that keep planners in place. Turnover is one of their biggest challenges. The time period spent dealing with conditions can be two years between permissions to starts, and you can allow three years from permission to completion.”

“For smaller jobs, getting contractors is difficult.”
Maggie McCann, development director, Orbit

Mr O’Keeffe echoes the point: “The time we spend ploughing through planning permissions is lost time.”

This wasted time erodes the financial advantage that social landlords enjoy through cheap borrowing, Mr Boundy says. “Development is a conveyor belt and the longer [it] takes to get planning permission [the more it] erodes that discount. You’re discounting your assets all that time and that is limiting our ability to invest in other things.”

Pushing ahead

Planning should not be seen as an enemy, says Scott Cardwell, assistant director for development (regeneration) at Doncaster Metropolitan Borough Council, a professional town planner now also in charge of housing and economic development.

“With planners, all too often there is pressure for a decision so you end up with a lot of inexperienced staff who take comfort from piling on conditions to cover their backsides, so it elongates it,” says Mr Cardwell.

“There is a decision in 13 weeks, but it takes three years to sort out Section 106 and planning conditions. We are stripping out conditions in Doncaster. With planning inspectors you can count on one hand the conditions they put on compared with what local authorities do, so something is wrong.”

Ms Ferguson says that however sympathetic Doncaster is to growth, in pressured areas of the South East there are “local authorities that do not want more housing no matter how we work with them”.

Mr O’Keeffe says he is “astounded” at how many obstacles there are to planning housing and infrastructure across local authority boundaries, but cites Cambridgeshire as a rare example of
progress.

Participants feel landlords spend too long worrying about potential complications rather than thinking about how to work round them. The sector should “just get on” with helping to solve the housing crisis, the group argues.