MIND THE GAP | Industry calls on govt to rise to viability challenge at spending review

As far as the government’s 1.5m housing target goes, a lot hinges on what Rachel Reeves says or does not say in the House of Commons tomorrow afternoon, according to the North’s development community.

The eagerly anticipated spending review is a little over 24 hours away and industry professionals from across the North have made a final plea to government to do more to help them get on site.

A significant package of grant support to solve the viability crisis stalling development, as well as a focus on SMEs and further simplification of the planning system are among the suggestions coming from frustrated developers.

Place North’s Mind the Gap campaign, conducted alongside Cavendish and Lichfields, has garnered signatures from hundreds of senior public and private sector decision-makers for whom the viability gap is the number one issue they face today.

A £15.6m investment in public transport across several city region areas was announced last week and while that was welcomed, developers and local authorities are hoping for more good news tomorrow when the chancellor addresses the Commons.

Harinder Dhaliwal, managing director at Step Places, said: “I think the viability gap is a key point in the spending review and enabling every local authority across the UK to access viability funding such as brownfield and infrastructure funding or grant.

As we have faced unprecedented challenges through the planning system, Building Safety Act, BNG, labour and material inflation, wage inflation, skills gaps, we need the government to tackle all the problems one by one and enable the funding is accessible to all SME developers.”

Flexible solutions

David Cross, director at Sky House, said the viability gap impacts SMEs more than most and wants Rachel Reeves to announce initiatives to help them play are larger role in addressing the housing crisis.

“It’s crucial for the UK to stop thinking of all developers, housebuilders, and place-makers as mini-PLCs, and understand the difference between how small, medium and large sites are financed and delivered and the nuanced benefits of all of them,” he said.

“We want to see more emphasis on SMEs with a relaxation in planning reports and complexity, especially with regards to brownfield and urban sites.

“In addition to this, we have already been vocal around additional Homes England assistance with finance in terms of interest rate levels, LTVs and speed. We would also like to see more flexibility in terms of buying land unconditionally, using the loans for exit finance for unsold plots, and also to build and hold commercial properties as part of the placemaking agenda.”

Edward Milner, managing director at Hive Homes, explained that his company’s pipeline is sourced from “challenged brownfield sites in marginal locations”, which impacts viability.

“I feel that there should be a realistic reduction in planning policy expectation on smaller, brownfield sites of, say, 100 plots or less,” he said.

“Aside from striking a workable balance between ever increasing build costs and relatively low GDV’s, our biggest challenge on viability without doubt is addressing the raft of financial contributions sought by the planning system.

“These contributions can often compound into a sum greater than the actual purchase price of the land and, although some elements can be challenged by a viability study, the accepted metrics used in this process are arbitrary at best and bear little resemblance to real world costs.”

Local authority perspective

Hull City Council has recently adopted its latest Housing Growth Plan, which sets out ambitions to deliver 840 new council homes by 2031.

However, Cllr Paul Drake-Davis, portfolio holder for regeneration and housing at Hull City Council, said delivering housing is becoming more difficult due to the volatile economy.

He said: “To this end the council is hoping to see a robust Affordable Housing Programme [from the spending review] that provides more long-term certainty with grant rates that reflect the challenges faced by the sector, for example, higher grant rates in areas where viability is constrained through both high build costs and lower revenues.

“In addition, any new AHP should look to work with providers at a local level to recognise delivery constraints which vary massively even between neighbouring local authorities. Failure to do so will result in difficult decisions that may see the quality of new homes compromised in order to ensure delivery of much needed affordable homes as we try to wrestle with increasing viability constraints.”

Thomas Brown, regeneration and development project manager at Lancaster City Council, is asking for more understanding from Whitehall of the challenges facing the regions.

“The bottom line is that policy is made in London,” he said. There is no comprehension of the challenge faced by areas of market failure.”

“Up to a point, very low or zero land value can help, but no development will occur if the market price ceiling for houses is below the construction cost. Although regional construction costs vary, it is not to the same degree as house prices. This is not a complex equation, but if Westminster policymakers can’t comprehend the challenges faced by areas of market failure, they will continue to struggle to deliver the housing the country needs.”

Help us close the gap

It is vital ministers recognise that increased access to grant funding for sites in the North will be essential in meeting the ambition to build 1.5 million homes during this Parliament.

Back Place North’s Mind the Gap campaign by adding your name to the signatories. We have signatories from the following companies:

CERT Property, Genesis Homes, Placefirst, Turner & Townsend, Cityheart, Cushman & Wakefield, Hill Dickinson, Richborough Estates, Fairhurst Architects, Step Places, Mansell Building Solutions, Caro Developments, Hive Land & Planning, Casey Group, JLL, Persimmon Homes, Sheppard Robson, Chancerygate, Deetu, Alderley Group, BA Commercial, Cassel & Fletcher, Gleeds, Roberts Real Estate, OMD, WW+P, Story Homes, Mott MacDonald, Oakmere Homes, Brabners, Walker Sime, BDP, Sigma Capital, SimpsonHaugh, NJL Consulting, CBRE, Jarron Investments, Mosaic Town Planning, Progressive Living, Morgan Sindall Construction, Cole Waterhouse, BXB Land Solutions, MCI Developments, Maro Developments, Kirklees Council, Hull City Council, Savills, DLA Architecture, Layer.studio, Enabl, Manchester City Council, Ollier Smurthwaite Architects, Ion Property Developments, Aecom, Urban Green, NPL Group, Britannia Group, Wain Homes, Torsion Developments, Inacity, Benjamin Property Company, SCP Investments, Donald Insall Associates, HAUS Block Management, Broadway Malyan, Bury Council, Westchurch Homes, Keepmoat and many more.