Enabling Development: Policies & Legislation – Understanding the Custom Build Homes Sector

Interview with Ted Stevens, Chairman NaSBA

The recent by BuildStore Financial Services Industry Conference – ‘Exploring the latest issues in the property development market, from finance to construction’ brought together developers, lenders and representatives from the construction industry to explore the latest issues, legislation, products and funding availability.

The housing market is now a major priority for the Government and the publication of its Housing Strategy last year presents a unique opportunity for developers to take advantage of the release of public sector land, the push to bring empty properties into use, and the New Homes Bonus Scheme for councils.  The Government is keen to see regional developers play a bigger role in providing new homes, and with commercial lending making a strong comeback through BuildStore, there are real opportunities for developers to profit in the current market.

We thought the presentation from Mario Wolf (DCLG) and Ted Stevens from NaSBA (the National Self Build Association) would interest our readers so we interviewed Ted Stevens Chairman of NaSBA, The voice of the self-build sector.

Enabling Development: Policies & Legislation – Mario Wolf, DCLG and Ted Stevens, NaSBA

What is the Custom Build Homes sector?

Ted Stevens: Custom Build Homes are really exactly the same as self build homes. Some people think a ‘self build’ project is one where you have to do all the building work yourself. In reality very few people do – the majority commission an architect or a builder to do it for them, or they buy a kit home. All these forms of ‘self build’ are included in the Government’s use of the words ‘Custom Build Homes’…essentially it’s a very wide ranging definition of self build. And increasingly people recognise it as a more accurate way of explaining the process.

What can you tell us about the Policy driver – the Government’s Custom Build Homes programme?

Ted Stevens: Since 2008 the National Self Build Association (NaSBA) has been lobbying the Government to try to persuade it to make it easier for more people to build their own homes. The current Coalition Government has been receptive to NaSBA’s arguments and, in 2011, it challenged the industry to come forward with an Action Plan to double the current levels of self building in the UK. (An Action Plan to Promote the Growth of Self Build Housing). This all culminated, in November last year, with the publication of the Government’s Housing Strategy document which contained a raft of measures that should all help to make it much easier for people to self build. The Government calls this its Custom Build Programme – in effect it’s a suite of measures that should help the self build sector grow by around 10,000 additional homes a year.

Ways in which builders can deliver custom homes

Ted Stevens: There are 50 ways in which you can skin a cat; and probably 500 different ways in which a builder can deliver a self build home. For example, a builder can submit a tender and then construct a home on behalf of a self builder (currently the most common way). But in the future we expect builders to take a much more proactive developer-come-enabler role. So, for example, they may offer serviced plots for sale to self builders (who in turn can then – say – get a kit home built on it); or they may offer plots for sale and give the buyers the option of using the builder to construct their custom designed home for them. Some may offer another option – where they build the home to ‘watertight’ stage – so the self builder can then finish it off. A lot of builders are attracted to this as it saves them messing around with the second fix stage (arguably the most fiddly and frustrating part of a build), and self builders like it as it can save them money and it reduces their risk on, from their perspective, the ‘scarier’ parts of the build.

For other builder/developers it could mean bringing together and managing group of self builders so that a larger development of self build (or self finish) flats is constructed on a site. This is how much self build is organised in continental Europe – and from the developer’s point of view it enables them to effectively pre-sell a whole site off plan. In today’s market that’s a terrific bonus. Another advantage of this is that you can organize a development like this so the self builders pay for their homes in stages – so its very attractive from a cash flow point of view.

What can we learn from the Dutch experience?

Ted Stevens: In Holland there’s been lots of interesting self build work done – much of it on a very large scale. The current project that is attracting all the attention is about 20 minutes from the centre of Amsterdam in the commuter town of Almere. Here more than 1,000 self build homes have been constructed in the last two years, and another 3,000 are in the pipeline. The town council was the main ‘enabler’ behind this scheme – offering land for sale by the square metre (at about £290 a metre). So people can buy a compact plot, or a bigger one dependent on their means. And then architects help them design and build their homes, or a number of developers/housebuilders offer more off-the-shelf solutions or kit homes.

The designs are all very innovative, and extremely cost effective – so the majority of the Dutch self builders are able to buy a plot and build a three bedroom home on it for less than £150,000. The UK Government is clearly impressed by this approach and there are strong rumours circulating now that they intend to pilot something similar in the UK.

What’s in it for developers?

Ted Stevens: Potentially quite a lot! In The UK builders have traditionally built homes and then tried to sell them. And in a downturn that’s a big outlay up front on the hope that you’ll get a sale. By offering a range of more flexible self build options builders can do wonders for their cash flow, and guarantee a buyer up front. And their profits margins are usually every bit as good.

There are other advantages too – if you offer the ‘self finish’ option you don’t get bogged down in all the snagging and last minute arguments over finishes. And if you’ve got odd sites sitting around doing nothing at the moment this could be a way of releasing their potential.

A growing band of UK developers have spotted the opportunity and are already working on projects – some of them small niche players; some of them very well-known national volume housebuilders.

About NaSBA

The National Self Build Association (NaSBA) is a network of companies and individuals with the common aim of promoting self build (or custom build) as a form of housing delivery that can make a significant contribution to home building in the UK.

NaSBA brings together developers, architects, planners, financial and warranty providers, manufacturers, self builders, community groups and local authorities to develop, share and promote best practice in self build.

Ted Stevens
Tel: 01452 610051
Mobile: 07860 336087
E-mail: chair@nasba.org.uk