The 300,000 new homes Britain urgently needs every year simply won’t get built without developing large sites. However, as Savills notes in a new report, creating great places with their own identities where people really want to live takes more than building houses.
Savills’ report builds a financial case for investing in placemaking, with an analysis that shows additional early investment raises land values by 25%. However, investing more early on increases development risk and can act as a barrier to successful placemaking.
Savills sets out five key recommendations that will smooth the path to better placemaking.
THE RIGHT PLACES
We need more land to come forward in areas of high housing demand or connected to strong markets where investing extra in placemaking is viable. A greater availability of sites would keep land values stable allowing more scope to invest in non-residential uses, public realm and infrastructure.
THE ROLE OF PUBLIC LAND
Public land disposal, including central government’s target to release land for 160,000
new homes over the course of this Parliament, can play a large part here. However, public sector landowners must consider their objectives when releasing surplus land such as whether they prefer a capital sum, a long-term income stream or a mix of both.
The latter particularly lends itself to working in partnership with developers to create new places that can provide steady income over longer time frames. The new Accelerated Construction scheme will help ensure land release is put to use more effectively for housebuilding.
PATIENT, LOW COST MONEY AND LAND
Investing early in quality placemaking and facilities can deliver higher land values in the right locations. But if landowners look to extract maximum funds at the earliest opportunity there is less scope to make the additional investment. Investing more earlier on also increases development risks.
The solution comes in the form of patient capital and/or JVs with landowners willing to take a longer term view and draw funds at a later date once sales start. The role of pension funds looking for steady income should also be considered.
GOVERNMENT INFRASTRUCTURE SUPPORT
There is some help from government. In last year’s Spending Review, the Treasury extended the £40 billion UK Guarantees Scheme to cover housing and regeneration and new school building plans. Such guarantees can help reduce development risk, with loans repayable only as homes are completed.
Given that private investment is key to delivering infrastructure and housing, it’s crucial that Government support continues to help developers raise finance from banks and capital markets at low rates and where possible repayable against sales.
SUPPORT FOR HOUSE BUILDING
Uncertainty throughout the period of Brexit negotiations risks a negative impact on the economy and less availability of finance. The recent announcement of the £3 billion Home Building Fund, designed to speed up house building should help mitigate these risks provided funds are easily accessible and not mired in red tape to ensure take up.
The package includes cash from existing funding streams and provides £1 billion of new loans for small builders, custom builders and innovative developers. A further Accelerated Construction scheme will use £2 billion of public sector borrowing to make public land with outline planning permission available to builders.