Delivering More Homes with Small Builders

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1 Delivering More Homes with Small Builders South West Steve Smith October 2018

2 Context Small is beautiful? SMEs typically focus on smaller infill sites Many smaller SME developers were lost or went out of business in the recession Between 2007 and 2014 the NHBC recorded the number of builders delivering sites of 30 houses or fewer as falling from 5,156 in 2007 to 2,244 in 2014 SME builders in the 1980s were responsible for 80% of new houses In 2017 it was reported that two thirds of new homes were built by the top 10 housebuilders.

3 Context Currently, Homes England predict that 217,000 new homes will be built when the aim is for 300,000 new homes National housebuilders are maxed out and the last 3-4 years have demonstrated that exceeding 15,000 units per year for any one housebuilder is difficult Economies of scale are exceeded by the rising cost of managing the organisation Government and successive Housing Ministers are looking to SMEs to fill the gap

4 SMEs what are we good at? Early delivery willingness and need to get on site quickly! Quality closer control on design, materials and labour Local employment of workforce Understand the local market and economy and have access to local contacts and resources Access to local sites and opportunities

5 SMEs what are we good at? Relationships with local RPs and other stakeholders/las Do not need a complex decision making process by a PLC Board of Directors Able to be flexible, pragmatic and objective rather than push the boundaries on density Remain focused on the end goal a positive planning outcome Keen to build and maintain relationships at local level

6 Are all SMEs just greedy developers? True or False?

7 Does Change Equal Harm? NIMBYs would argue vociferously that it does How do we successfully overcome these barriers? Engaging with local parishes/town councils and members and an early stage in the process Winning trust and confidence that change will be of benefit to sustainable communities In particular, rural villages and brownfield urban locations understanding their concerns By demonstrating a clear message and track record

8 What Are the Barriers to SMEs? Planning process has become overly complex and onerous Compliance costs have risen considerably in recent years Numbers of specialist reports required has grown exponentially Pre-Apps concerns remain over inconsistent advice PPAs mixed reviews on the cost benefit? Notwithstanding the latest NPPF, financial risks to SMEs have increased

9 Specialist Reports: Topographical survey Site investigation Contamination/Remediation Strategy Mining Ecology Arboriculture Flood Risk Assessment Drainage Strategy, SUDs/Attenuation Highways Access Road Design/Transport Statement Acoustic Archaeology LVIA (Landscape Visual Impact Assessment) Heritage Viability commercial appraisal Asbestos/demolition Housing Needs Survey affordable Agricultural Land Assessment Architectural Design Panel Engineering Piling/Retaining Walls/Slope Stabilisation Energy Assessment/Statement Design and Access Statement Planning Statement

10 Compliance Costs The Barriers Many compliance costs have to be paid irrespective of site size, which means a disproportionate level of consultants fees for smaller sites Typically on our sites (between units) we expend between 75-90k per planning application Huge amount to a small SME developer Planning delays are very costly and can be catastrophic to SMEs cashflow

11 Sell off final homes = Developer s profit? Agree to a site purchase Commission Specialist Reports Pay off developer loans Risk v Reward Cycle Commission working drawings Sell new homes when? Obtain Planning Permission Complete homes to a high standard Penalties for delays (LADs) Build out units to a fixed price Start on Site

12 Where it went all well Rural Exception Site in Cornwall (2.5 acres) Greenfield within the AONB Very tight timetable Housing Association needed HCA grants to make it work PPA mix of 32 new homes 22 Affordable and 10 open market Strict funding constraints - large cross subsidy required Planning submission Extensive consultation with local parish Planning Officer attended parish council meetings Agreed within 12 weeks from submission Section 106 agreed and issued in 10 working days 2 hour viability consultation All conditions pre-dpc Planning permission issued late on Friday afternoon Works commenced on site on the following Monday morning

13 Production/Land Bank SME developers simply cannot afford to land bank 95% of our sites are commenced within 2 weeks of final discharge of pre-commencement conditions Production line cannot be controlled unlike volume housebuilders Lack of conveyor belt means small developers find it hard to re-deploy capital if delays in the planning process Much higher stakes or risks to smaller housebuilders who do not have the benefit of private equity backers or quoted shareholders to fall back on

14 The Latest NPPF Paradox In favour of sustainable development Need for a Development Plan or Neighbourhood Plan 5 year housing supply Removal of pre-commencement planning conditions Planning conditions should be kept to a minimum and may only be imposed where they are necessary and relevant to planning and for development to be permitted

15 The Latest NPPF Paradox By definition More detailed design is required More costs and risk to developer Uncertainty of securing permission Unwittingly leads to a slowing down of the process

16 Challenges Obtaining development land at competitive and realistic values Access to competitive and rolling funding Looking at ways of delivering different types of construction: Modular build Custom build Self-build Generating a pipeline of sites and permissions Speeding up the planning process

17 The Solutions A fast track process: Greater reliance on Pre-Apps Provided Local Plan compliant and support of the Parish/Town Council Applicable for all new sites under 30 dwellings Incentives for Planning Authorities to shorten the current 8 and 13 week process More resources from Central Government to support LAs in delivering increased planning output: More Planning Officers More consultation throughout the process

18 The Solutions Training of Planning Committee members Planning presentations/workshops to Local Parishes to explain the process from a Local Authority standpoint why sustainable development is needed Better communication

19 Conclusion No prizes for second place Positive planning is the lifeblood of the Housing Industry Joined-up thinking collaborative, positive, quality design leading to pro-active solutions Pre-Apps to be meaningful, reliable and consistent Joint ventures SMEs and LAs/RPs to work together to accelerate building programmes

20 Conclusion JVs to underwrite some of the upfront planning fees and costs Sharing of risk and reward Taking ownership and responsibility for positive change