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Sam Howard

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Housing and the Climate Crisis

By Development Finance, Opinion

Walking past the Extinction Rebellion protest in Bishopsgate, a few weeks back, whether you agree with their tactics or not, brought the reality into focus, that our planet is in serious trouble. The onus is on every single one of us to do more and it will require a concerted effort.

Given that Magnet Capital’s focus is to support our SME Developer clients in building the right new build houses in the right places, it is pertinent to shine the spotlight on what new homes can do to help the country meet its target of reducing greenhouse emissions to net zero by 2050. The new and existing housing stock currently accounts for circa 20% of emissions.

Somewhat under the radar, the Government in its 2019 Spring Statement has turned its attention to residential housing emissions by including a commitment that, by 2025, they would introduce a Future Homes Standard for new build homes. This would include low carbon heating and world-leading levels of energy efficiency. The Government has now published a new consultation, setting out these plans, which is open to responses until 10 January 2020. This consultation marks the first step towards implementation of the 2025 Future Homes Standard, proposing to tighten the standards on energy efficiency and ventilation in new homes as of late 2020.

It includes two options:- the first is a 20% improvement on carbon dioxide emissions by ensuring new build houses have triple glazing and a waste water heat recovery system.

The second would result in a 31% improvement which require only double glazing but crucially low-carbon heating and/or renewables such as photovoltaic (solar) panels.

The government’s aim is for the housing industry to develop the necessary supply chains, skills and construction practices to deliver low-carbon heat, and highly energy efficient new homes by 2025. Crucially, it has been rumoured to include the banning the installation of fossil fuelled heating systems in homes built from 2025. Whether this means gas boilers will be banned for new builds is a matter for debate, given there are genuine concerns over whether alternatives such as air source heat pumps are viable because of their high initial cost and current ability to heat a home.

However, what is not in doubt is that new build house builders cannot bury their head in the sand, as the first raft of changes of increased efficiency standards will apply by the end of next year. These will have cost implications for house builders and SME developers need to be aware.

Changes are coming and some will be painful but ultimately we all have to up our game to protect our planet.

 

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The Bigger Issue

By Opinion

Our new Prime Minister, Boris Johnson, is highly skilled at generating headlines and positive soundbites, which certainly generate interest and coverage. However, trying to figure out what his polices are on any particular topic is never easy.

One minute, we are preparing for a no deal Brexit and then next that the odds are a million to one against there being a no deal Brexit. Perhaps, this ambiguity is both designed to confuse the enemy and simultaneously provide backside covering if things go wrong or perhaps it is a clever way of playing the cards he was dealt or more accurately dealt himself.

Anyway, as you know my interest lies in the housing market, so in these early days of the Johnson premiership, I want to try to figure out whether his new government has what it takes to make meaningful change and also hazard a guess at what their policies will look like.

A new Prime Minister heralds a new Secretary of State for Housing, Communities and Local Government. Robert Jenrick is in and James Brokenshire out. Likewise, a new Chancellor, Philip Hammond is out and Savid Javid is in. Savid Javid was a previous Secretary of State for Housing, Communities and Local Government, oversaw the White Paper for Housing on 2017 and has previously spoken about borrowing £50bn to fund new housebuilding. So there are possible clues in a selection of a team that may be inclined to provide the fiscal fire power to invigorate the housing market, whether that is tax cuts and/or increased spending/borrowing.

Boris Johnson has been a long term believer in home ownership. He realises that as a counterweight to Jeremy Corbyn, homeowners will tend to vote Conservative and to appeal to younger voters, he needs to persuade them that the dream of their own home is attainable. So it is not surprising then that Robert Jenrick has already raised the possibility of the controversial Help to Buy scheme being extended beyond its expiry of 2023. This is not the column for an analysis of Help to Buy but it has contributed to the sale of more than 50,000 new build homes a year and clearly does enable first time buyers to get on the market.

In his first week in Downing Street, Boris has talked about abolishing stamp duty on houses below £500,000 and reducing the top rate of stamp duty from 12% to 7%. George Osbourne’s stamp duty increases have arguably achieved the stated aim of taking the heat out of the housing market but have done a lot to clog up the housing market, especially at the higher end, which invariably has trickled down. Tax on transactions typically reduces housing market activity. However, stamp duty is extremely politically charged and any cuts will be seen as a tax cut for the rich. Given that by the end of the week the Conservative government’s majority in parliament might be whittled down to 1, I doubt whether he will risk trying to reduce stamp duty in the near future.

However, these proposed fiscal measures are really only cosmetic if we are to build the number of houses we need in this country. This will take the Johnson government dealing with amongst other things the real skills and materials shortage in the building industry, the effects of Nimbysim and a broken and under-resourced planning system Further, can Britain adopt modular housing, can it create the infrastructure necessary to support this new housing and can it curb the power of the power of the major housebuilders and enable SME housebuilders and local authorities to build the right houses in the right locations. Only time will tell, but to make a real difference will take more than soundbites.

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Quality not quantity for UK housebuilders

By Opinion

Maybe it is because like me, he used to be a lawyer, but I am rather impressed by James Brokenshire, the Secretary of State for Housing, Communities and Local Government. In a relatively short period of time, just over a year, and in a febrile political environment paralysed by BREXIT, he is trying to get to grips with the significant issues facing the Housing Market.

There have been a number of positive steps, including: lifting the council borrowing cap which enables councils to be able to borrow billions of pounds more for housebuilding, changes to the National Planning Policy Framework and the £1bn Housing Delivery Fund to finance small and medium-sized developers to deliver new homes across the country.

He has also pledged to speed up the planning process, which is a quagmire for SME developers who can get tied up for months or even years attempting to get planning. I am not holding my breadth but he wants councils to be able to approve planning applications more quickly under radical new measures to remove bureaucracy from the system. He said that a new accelerated planning green paper, to be published later this year, will dramatically improve the planning process. Let’s wait and see and the reality is that it comes down to ensuring planning authorities have the resources they need to act quickly.

However, it his focus on calling to account the large housebuilders that has really grabbed my attention, especially on cracking down on poor quality housebuilding and the leasehold scandal.

Last week, he announced that all new-build homes are to be sold as freehold and to reduce ground rents on future leases to zero, in a move to tackle unfair leasehold practices, which has been a shameful exploitation of consumers, with the consequence that their homes will be incredibly difficult to sell in the future.

In terms of housebuilding, the large housebuilders are able to build large numbers of units at a cost that smaller housebuilders simply can’t build at, given their economies of scale and the significant preliminary costs involved before construction even starts.

However, it is often eye opening to see the lack of quality in these cookie cutter style housing developments, who often leave new build buyers with a nightmare of faults to fix as opposed to their dream house. The supposed remedy of a 10 year warranty, in reality does very little to rectify snagging and can leave buyers badly exposed.

Mr Brokenshire has been a vocal proponent of building better homes and is considering forcing housebuilders to sign up to a code of conduct if they want to benefit from the Help to Buy scheme, and is pushing ahead with plans for a New Homes Ombudsman to give buyers of new-build properties greater protection.

In my time in the specialist finance industry running development finance companies, we have literally funded SME developers and builders to construct hundreds of houses. I am struck by the care and attention that SME developers take in their building. It is often the exact opposite of the big housebuilders, where our clients see the houses they build as a labour of love rather than just churning out another unit. This tends to lead to the right houses being built in the right areas and happy purchasers. Don’t just take my word for it – an award winning surveyor who has overseen many developments by both SME developers and big housebuilders said that pretty much every time the quality of houses being built by the client’s of Magnet Capital is superior to the big housebuilders.

There has to be an emphasis in the country on not just numbers of properties being built but the right type and quality of houses in the right place. So, you might not have heard much about James Brokenshire but I think he is doing a good job so far.

 

Sam Howard