Thinking outside the box on housebuilding

By Paul Broadhead, Head of Mortgage & Housing Policy at the BSA

By Paul Broadhead, Head of Mortgage & Housing Policy at the BSA. This article was first published in Mortgage Finance Gazette

Looking at my calendar for the next couple of months, it’s good to see there are number of appointments and diary notes relating to places providing alternative new housing to the volume housebuilders.

Last week it was exciting to be visiting the BRE Innovation Park in Watford. This development was set up initially to demonstrate different modern-methods-of-construction (MMC), but has since developed into a facility full of innovation, with a dementia friendly home, a flood resilient repair home and net-zero and low carbon homes – all developments that we can all recognise as requirements for tomorrow’s world.

Also early in the new year, I’ll be joining some of our members on a tour of the L&G Modular Homes factory. Here we’ll be able to see the construction process and have the opportunity to build our understanding of the methods, materials and assembly of these types of properties.

I have no hesitation prioritising these trips ahead of the many other calls on my time, as any potential solutions to our current low supply, high demand housing position should be a priority.

At the first National Custom and Self-Build Association (NaCSBA) conference last month, Michael Gove, the reappointed Secretary of State for Levelling Up, Housing and Communities, confirmed the government’s lofty ambition to delivering 300,000 new homes a year and recognised the key contribution Custom and Self Build (CSB) properties will be in helping to achieve this.

Richard Bacon MP, the author of the Bacon Review which was published last year and outlined the vision for scaling up self-commissioned homes, also spoke at the conference.  He applauded government’s completion of a number of the recommendations he’d made on how the CSB market could be scaled up across all tenures. And indeed there have been some good interventions, including the creation of the Self-Commissioned Homes Delivery Unit within Homes England, the funding of the Right to Build Taskforce and funding for the Help to Build: Equity Loan Scheme.  However, whilst these are steps in the right direction, which is always good to see, there are some fundamental gaps that must now be tackled:

  1. More serviced plots to be made available from Local Authorities, including brownfield sites

This isn’t all local authorities, some are very engaged and are actively looking for ways to encourage more CSB properties, including as affordable housing or on a community-led basis. But others, possibly due to lack of resource or understanding, are not yet driving this agenda.

  1. Reform of the planning system

The process for CSB properties is naturally different, and planning processes need to be reflective of this, with improved efficiency and capacity to meet demand.

  1. Review of the process for managing self-build registries, which are legally required

Some local authorities require a lender’s mortgage offer or an Agreement in Principle before allowing somebody to be added to the register, clearly an unattainable ask at this stage of the project. Others impose significant fees that make the process inaccessible for many.

  1. Review of the mortgage valuation process for CSB properties

One of the major strengths of CSB properties is that it drives innovation in the use of materials and construction types, particularly in low carbon building. While this is a positive in terms of achieving carbon emissions targets, it can also present challenges as the properties are often unique and may not have any straightforward comparables for mortgage valuation purposes, meaning specialist valuation expertise is required. It is therefore generally small and regional building societies, who have a more bespoke approach to underwriting, who are the most active in this market. It’s hard to see how any real scale in CSB can be achieved until a more streamlined valuation process is in place.

CSB properties have the potential to make a significant contribution to the UK house building target, with the Bacon Review suggesting this could be anywhere between 30,000 and 100,000 a year. And there’s no lack of consumer appetite, with one in three people interested in building their own home according to NaSCBA research in 2021.

If the true potential of CSB is to be realised, as it is in other countries, we need a collaborative approach amongst government, local authorities, valuers, insurers and lenders to simplify and streamline the process.