The Living sector is fast growing, with tens of billions having been invested into the sector in the last five years alone. It is made up of build-to-rent (BtR), single family housing, affordable housing, co-living, student accommodation, and retirement living.
The UK is experiencing an acute shortage in the delivery of all types of housing which is thankfully something the new Labour government seems to have understood. With a landslide victory, the newly elected government has moved quickly and formally announced that it will 'get Britain building again' by making a commitment to deliver 1.5 million new homes within the next five years including affordable and council homes. The ambition and focus from the government is much needed in what has been a difficult period for the Living sector. In order to achieve the delivery of this essential housing ambition (something that has not been achieved for many decades) a package of focussed measures will be required.
Planning Reform
Planning is often seen as the major blocker to the delivery of housing. Worryingly, we are seeing a downward trend in the number of houses being built but also in the number of planning applications being submitted. To get 'Britain building again' we are expecting a consultation on the NPPF by the end of July 2024 to restore mandatory targets which were abolished by the last government, amongst other things. The detail of the new NPPF will be a key indicator on the likelihood of the government achieving its bold target to build 1.5 million homes. The government has also committed to introduce a new taskforce to unlock large development sites which have stalled as well as providing an additional much needed 300 planning officers.
The most controversial aspect of the Labour reforms is to review the green belt with a focus on building homes on the "grey belt" i.e. the "ugly" brownfield part of the green belt. The definition of "grey belt" will be central to the success of this policy and determinative of how many homes should be able to be built on this land. While developers, housebuilders and investors remain hopeful there is a deep understanding and caution regarding the challenges this new government is likely to face in delivering 1.5 million new homes.
Development
The promises to "turbocharge housebuilding" and deliver the "biggest boost to affordable housing for a generation" have now be set out in the King's Speech. While we wait for the detail of how the policies will be implemented, there is caution (with sprinkles of optimism) from developers and investors but a unanimous acceptance that the development sector will be re-energised to deliver on the Governments agenda.
With inflation coming down and, the recent welcomed news that it is stabilising, the development sector will be looking to ride the wave of confidence that the Government is projecting with its large majority in Parliament and numerous bills focused on housing and infrastructure. SME developer clients continue to face challenges with the burdensome and costly requirements of getting consents whilst national developer clients are frustrated by the slow planning process before a spade can be put in the ground. The Government looks to tackle both with its proposed reforms but whether they've hit or missed the mark will be seen over the coming weeks.
Building Safety Requirements
New building safety requirements have added an additional layer of regulation in the planning, construction and occupational phases of higher-risk buildings to ensure the safety of buildings; a concept known as the three gateways. It is increasing build lead in times, with construction programmes significantly delayed lender's financial models are having to be adapted and developers are having to take account that the building cannot become an income producing asset until the regulator issues a completion certificate. The Labour reforms are proposing increased and wider powers for the Regulator to meet the prescribed approval time frames. However, in the absence of private entities wanting to take on the risk of a new regulatory framework, which carries criminal sanctions in the event of breaches, it remains unknown how the new government will incentivise organisations to take on this risk. Absent this resource and the new government may struggle to meet its mandate of building 1.5 million new homes.
The Living sector is on the edge of potential change. The Labour government need to action their manifesto promises and make change happen. We look forward to following how it evolves with you over the following months and share thoughts on the myriad of other challenges, and opportunities that we face as the Living sector.
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