Bristol Planning Law & Policy Conference

November 2016

“The House Builder – a practical response

Jennie Daly

UK Land & Planning Director

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Topics for discussion

• What makes a home builder tick!

• Government policy direction & initiatives

• Capacity of the home builders

• Myth busting:

• Lets talk about Land-banking?

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What makes a home builder tick?

Home building – a business like any other ?

A business which is successful by being:

• Sustainable in the short, medium and long term

and

• Profitable

• With responsibility to our customers, shareholders and employees

• Working within policy environment

• Revenue generation• Improved Return on Capital Employed• A secure pipeline of raw materials

For the home builder all of the above are sensitive to:• Location• Planning Constraints• Volume• Price

Sustainability achieved by:

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Monitoring the fundamentals:

• Population projections

• Household formation projections – no. of new homes required

• Housing Supply

• Mortgage affordability (multiples of combined salary)

• Mortgage affordability especially for FTB

Other drivers include:-

• Disposable income

• House price inflation indices

• Land price as a % of gross development value

• Build cost movements

• Overall inflation - RPI

• Interest rates movements

Managing the cycle?

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Government policy direction &initiatives

Post War Housing Completions

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DCLG Live Tables

Planning & Regulatory changes?

Recent announcements…

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• A package of measures announced at the Conservative Party Conference 2016 :

• Homebuilders Fund & Infrastructure Fund - £3billion

• £1bn short term loan funding for SMEs

• £2bn for infrastructure funding to bring forward development

• Accelerated Construction Fund - £2billion

• Use of public land and different models to attract new entrants

• Urban regeneration

• Promoting brownfield development

• Also:

• Direct commissioning to support Accelerated Construction Fund

• Modern Methods of Construction (MMC)

…& more to come

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• Autumn Statement – 23rd November 2016

• Housing White Paper

• Secondary legislation required for much of the Housing and Planning Act

• Clarify the future of Starter Homes

• CIL review outcomes

• LPEG review outcomes

• Future of PRS policy

• Affordable housing and revitalised RSL sector

• More on MMC

Capacity of the home builders

Capacity of the homebuilders?• How far can the Majors expand?

• The role of SMEs

• New entrants?

• Housing association capacity

• Other home builders (e.g. Build to Rent )

How has the sector performed?

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Materially improved output…

Circa 171,000 net new additions to housing stock in year to April 2015 (England)

Overall output has increased up to a third in two years & was up 20% in 2014/15

The Major Home Builders have increased output by circa 60% since their low points

Sector predicted to deliver in excess of 180,000 net new additions when reported in November 2016

BUT;

Government is seeking still more output from private sector and RSLs

Renewed focus on increased delivery starting to re-emerge:

Use it or lose it

Planning delivery rate

SoS seeking market “Disrupters”

Constraints on Production

Source: Housing Market Report17

Change in the number of SME home builders

Source: NHBC18

19Source: NHBC Quarterly statistics

Land Banking !

Oh no, not this again…

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Barker Review 2004

Calcutt Review 2007

Office of Fair Trading 2008

What is a land bank?

Achieving implementable planning consent

Delivery & Absorption rate

Resourcing in the industry

Resourcing in LPAs

Land availability

…and all this in a cyclical market

Home Builders Volume Commitment

• Building frustration and pressure from Ministers for the industry to increase supply throughout 2015 and early 2016.

• Driven by–

• Perception of homebuilders overly benefiting from Government initiatives such as Help to Buy,

• Government’s target for 1 million new homes and ,

• Local Government pressure regarding inability to maintain a 5 year housing land supply despite their perception of issuing permissions.

• HBF Majors Commitment published on 11th May 2016:

• Build out at speed

• HBF’s larger members have committed to go conduct reviews of all large sites to see where build out rates can be increased further

• HBF will report back to Government on the initial outcomes of these reviews

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• Local need

• Improve the accuracy of the five year housing supply process

• Commit to increasing transparency around build out rates on a site by site basis by providing annual returns to local authorities on actual and projected build out rates of current and future sites making future decisions better informed

• Local authorities, members of the community, and the Government will monitor the delivery records of individual builders and the roles of other key stakeholders in ensuring homes are built at a suitable rate

• Support for small builders

• Increase access by small builders to developable sites

• HBF to set up a Land Exchange service which will enable house builders to advertise or purchase sites, including phases of large sites

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Jennie DalyUK Land and Planning Director

Taylor Wimpey UK

E-mail: jennie.daly@taylorwimpey.comtwitter: DalyJennie