The self-build market needs major structural and cultural change if it is to become a conventional housing option within the next decade, according to the Build-it-yourself Report from Lloyds Banking Group in partnership with the Centre for Housing Policy at the University of York.
The report found there is potential for growth in the self-build sector, but it is too early to conclude that the sector is yet on a growth trajectory or the likely extent of any growth.
At present, the UK self-build market lags behind other European countries; with around 12,000 self-build homes delivered per year it accounts for 7.6% of the new housing supply. This compares to Hungary (52%), France (38%), and the Netherlands (10%). The government’s stated aim is to double the output of self-build housing from 100,000 to 200,000 over the next decade.
If private sector organisations and housing providers are to be convinced of the demand and cost-effectiveness of self-build the government must signal its ongoing support for the key initiatives beyond 2015.
According to the report, the role of local authorities is pivotal in delivering a change in volume, but they continue to operate in isolation, do not always see self-build as a priority, and there is little sharing of experience.
Self-builders are primarily older and affluent, enabling them to draw on equity, savings, and mortgage loans to fund the build costs. As such easing access to finance for less affluent and younger households is fundamental if a step-change in volume is to be achieved.
The current ‘one product fits all’ approach to financial products is at odds with the variety of procurement methods in use, and also the different attitudes towards design, construction activities, and use of professionals. A more differentiated, explicit, and proportionate assessment of risk is required and would help all parties focus on the key areas for mitigation.
Led by developers, local authorities, and housing associations there is currently some impetus in the market, with new models of group self-build delivery and multi-plot individual schemes emerging.
There is evidence of their success in helping self-builders overcome problems such as limited experience and access to land, and also in the provision of project management support and help with securing planning permission. However, many are ‘pilot initiatives’ and it is unclear as yet which approaches have the capacity to deliver volume.
Government-Industry initiatives intended to ‘kick-start’ the market – such as the Revolving Loan Fund – have been welcomed, but the sector will need continuing support for some time. A longer-term commitment is needed if it is to prevent a ‘cliff-edge’ situation in 2015 and to continue to encourage the necessary structural and cultural change required to help make the market a mainstream proposition.
Local authorities are instrumental in delivering a change in volume, and several are currently testing the market by making provision for self-build through land allocations. However, despite national-led provision of guidance and support to planning and housing authorities there remains a mixed picture of responses to applications in terms of aesthetics and size, and differences between rural and urban homes. A solution would be for a Government-commissioned evaluation of emerging models of procurement to facilitate a coordinated understanding of their strengths and weaknesses, and their long-term viability, among local authorities.
A finance industry-wide working group would help lenders appraise risk-mitigating approaches such as insurance, guarantees and professional participation. This could result in the development of products to meet different risk profiles and could smooth lending processes to the sector.
The report concluded that lenders could help potential self-builders by providing more guidance about the criteria for funding and what can be expected from them as a lender.
Stephen Noakes, mortgage director at Lloyds Banking Group, said: “The recent Government-led initiatives have been encouraging, but they need time to work and if the outcomes are to be successful then these activities need long-term support.
“If the sector is to grow and become part of the mainstream market then more work needs to be done in terms of sharing information and standardising practices. We need to see more coordination between both national and local government and the lending industry if we are to achieve this.
“On top of this, a finance industry-wide working group would help generate a greater understanding of the risks and could encourage more lenders to enter the market. This would then increase the supply of accessible products which can be tailored to the needs of self-builders and the different models of self-building, boosting financial support for the sector.”
Dr Alison Wallace at the Centre for Housing Policy added: “The self-build sector has the opportunity to grow but self-build is usually a long and often circuitous process. Unlike the guidance offered to first time buyers, key agencies do little to inform self-builders of what is required of them and what they can expect from the process.
“If the sector is to become a mainstream component of the housing market, attracting younger, less affluent households, its structures and processes-along with the support provided – will have to be smarter and more co-ordinated. This suggests a greater focus on multi-plot sites or group provision associated with ‘enabled’ development. However, at the moment it is too early to assess which of the new models will prove to be effective. Ongoing Government support is required to sustain the current momentum.”
Richard Bacon MP, Founder, All Party Parliamentary Group on Self-Build, said: “Self-build shouldn’t be the preserve of the most affluent. It needs to become a mainstream part of our housing supply to give people more influence, choice and satisfaction in the provision of their own homes.
“We need to make people more aware of the tremendous possibilities of self-build. Lenders have an important role in developing the products which will help the sector to grow. Government must make sure that bad rules don’t get in the way.
“I am founding the All Party Parliamentary Group on self-build and Independent Housing to raise awareness and promoting a better understanding of the Self-Build sector among MPs. Parliament must play its part in promoting the step-change that is necessary to help tackle this country’s housing challenges.”