Diversification: Matching small sites with housebuilders

Tuesday 8 August 2017

How can small, often complex sites be better unlocked for development, with relationships forged between local authorities and smaller-scale housebuilders? A think tank organised by NLA sought to find out.

Unlocking small sites

The session was kicked off by Lev Kerimol, Principal Regeneration Officer at the GLA, who took the definition of small from the London Plan to be below 0.25ha, an area which contributes a quarter of London’s housing output. But a look at completions from this section of the market and on sites below 0.1ha shows they have been dropping since 2004, and the number of small developers – producing fewer than 100 units per annum – has been declining since the 90s and had suffered a real drop off in the last 10 years. That, though, has led the GLA to think there may be a real opportunity here, especially with organisations like TfL having 300 small sites.

Access to land, finance and difficulty in securing planning permission appear to be the biggest barriers, said Kerimol, the GLA has been trying to come up with a programme to give public sector landowners the ability to bring forward sites and support and reinvigorate the small builder market. ‘We’ve been trying to find this careful mid path that is just outside of procurement’, said Kerimol, adding that it aims to give as much control as with a development agreement and a little more than going down the auction route. The GLA is developing a standardised set of contracts, is looking at permission in principle, has some funding to unlock sites and will be producing a map of all public land ownerships.

For James Stevens, Cities Director at the Home Builders Federation, the relationship of the London plan Strategic Housing Land Availability Assessment (SHLAA) was an important one which merited greater attention from some London boroughs. ‘The key to delivery really is diversity of sites’, he said. But people need to be given the incentive to develop sites, said Igloo Regeneration Chief Executive Chris Brown, and particularly to give community groups the right to develop sites they ‘dig out’. The public sector, though, is nervous on this whole area – how do they know the first person is necessarily offering the best value or idea, and what if an unsuccessful bidder turns up and says they could have paid more?

It all comes down to perceptions of risk and procurement conditions, said GL Hearn Development Director Paul Clark, but there are provisions [under the Local Government Act 1972] for local authorities to take less than best consideration if there is an agreement that creating construction capacity at the smaller end of the market is a good outcome in and of itself. ‘I think it’s about political leadership’, he said. 

For Marc Vlessing, whose Pocket organisation has bought more small public land sites than any other developer in London over the last two and a half years, one of the major worries is about judicial reviews. Pocket is particularly aware of the challenges action groups can pose to the acquisition public land sites. Vlessing said legal departments within local authorities could also do more to make the process more streamlined and less bureaucratic.

In Croydon, where Colm Lacey is leading the Brick by Brick movement that develops housing to bring a profit back to its single shareholder, the council itself, it is active on 50 small sites, 30 of them with planning consent. These range from 4 units to 60-70 and the outfit is working with ‘some great architects’. But there needs to be a ‘huge change in attitude’ at board and development director level, and particularly at the funder level on what constitutes a site, said Lacey. ‘Personally, I think mainstream developers, large housebuilders are in no way the solution to micro sites’, he said. ‘I don’t think they have the capacity to be interested.’ New entrants are necessary, and a new attitude necessary to release small sites, with Brick by Brick adopting a more informal, fine-grained approach to working out what potential sites might look like. Small and micro developers need access to debt rather than strategic relationships with funders, he added. But although many people suspect that Brick by Brick’s work is a ‘stitch up’ or a done deal between it and the local authority over planning permission, in fact it’s often the opposite. ‘Managing competing interests can be a total nightmare’, said Lacey. Being a local authority development company is more onerous than being a straightforward private developer. Indeed, said Stitch Founding Director Sally Lewis, it was spending more time on a small four-unit scheme for the organisation than on a major town centre regeneration project.

Pocket has done better on sites which had stalled in the public sector, said Vlessing, because the public sector struggled with the public consultation exercises, one such site had been stuck for over 15 years. He said it could take a considerable amount of time for the public sector to recruit suitable teams, conduct successful consultations and see results.

Richard Lavington, Founder / Director, of MaccreanorLavington, said he was ‘enormously enthusiastic’ about what the GLA was trying to do, especially given that the industry has got itself into a situation where it seemed only capable of doing big sites. When Lavington tried to build four houses for himself and a group of friends a decade ago, one measure that helped was that the local authority didn’t require payment until those houses were completed.

Chris Brown said his own experience of community-led projects, however, was of ‘zero objections’, and that treasury guidance is that public sector landowners are supposed to take social benefit into account. ‘But they don’t know how to do it so they just look at the cash. 

But one measure that the GLA could do ‘tomorrow’ to stimulate more SMEs and small sites coming forward, said Vlessing, would be incentivize or ‘calibrate’ innovation for people and small firms that do more than the 35% affordable housing provision, perhaps speeding through conditions discharge or Section 106 agreements in return. ‘I do a minimum of 70% on all sites’, he said. ‘The truth of the matter is that I don’t get any planning advantage for that.’ Unfortunately, the planning system benefits the big boys disproportionately, he added.

At least there was a trend emerging, said Pegasus Design Director John Nordon, for companies being interested in smaller sites, offering not just capacity but products for particular markets. 

One innovation that is patchy in its use in smaller sites, though, is modularisation. Inhabit Homes Development Director Martin McElreavey said small developers like his can see the benefits of modern methods of construction like speed of construction, quality through standardisation and economies of scale. But the benefits were hard to access, with challenges on interfaces and a lack of buying power rendering it all out of financial reach. And although politicians love seeing the speed of a building going up in a day – without seeing the 18 months of pain that developers have gone through before – conflating modern methods of construction and small sites was ‘just wrong’, said Brown. However MMC also presented challenges, said MSMR Director James Bell.  It is not necessarily synonymous with quality and should not become shorthand for design. It can also increase the risk of limiting design work to the planning-stage. ‘For us, the problem is definitely at the assembly end of the process. There currently isn't enough capacity or commercial flexibility to deliver modular on typical infill sites in Croydon or elsewhere’, said Lacey. What is the problem MMC is trying to solve anyway, he asked. Wouldn’t we be better off encouraging actual builders to build things?

By David Taylor, Editor, New London Quarterly 

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