Affordable housing – how do we get more of it?
The latest figures from the National House Building Council show the biggest quarterly fall in the number of new houses since 2012.
New builds in the first three months of the year fell by 14%, with the 2017-18 construction count dipping by 2% and coming in around 100,000 homes down on the government’s annual target of 300,000. And 38,247 homes were registered in the affordable sector (compared to 39,818 in 2016/17). So how do we get more affordable and social housing as both are in short supply. Well let’s go on a journey through the planning process. Lets assume we own the land and wish to build between 150 – 250 homes and we want 30% to be affordable.
So the next step is putting together the plans and designs, undertaking the ecology report, noise report and archaeology report among many others matters which make up a planning application. This costs money. Then we have to register our application and for this we have to pay a fee to the Local Planning Authority. Then it has to go before the Planning Committee to decide upon. There is no guarantee the Committee will vote yes for your development. And if they vote no, you spent all that money with no return whatsoever. Now if your Taylor Wimpey or Persimmon, no problem, but if you’re a small independent developer how many hits can you afford to take? Now we know of a developer who did not get three of their last developments approved and lost approximately £1.2 million, due to all the costs which HAVE TO BE PAID. How much longer can they go on before their company goes down the pan and people lose their jobs, if planning permission is not forthcoming for the schemes they are proposing? Is it any wonder developers try to stack the odds in their favour by donating to political parties. Not that we agree with that.
Now for those of you who do not know the benchmark for a house is the classic three bed house. The average 3 bedroom house at 1,050 square feet would sell in East Kent for approximately £290 per square foot which equates to a sale price of £304,500. Of course they do sell for more, much more.
The costs below will come out of that sales price which then leaves you with the house builders profit.
Land – £50,000 per house this includes the cost of recreation land, open space, ecology corridors, suds corridors, suds areas which normally equates to 30-40% of the land take
Site Prep or Remediation – £2,000 per house
Utilities – £4,500
Drainage – £3,000
Section 106 – £14,000
Highways – £5,000
Build Costs – £147,420 = £130 per square foot of the gross (1134 square foot against a net figure of 1050 square foot represents an 8% difference between the two)
Landscaping – £3,000
Sales Costs – £4,500
Legals – £1,000
Marketing – £2,000
Total Costs: £236,420
So the House Builders Profit = approx £68,080 – this equates to 22.3% of the sales price.
So how does this affect “affordable” housing. Well, regarding the affordable housing element, the average amount the house builder will receive from a registered affordable housing provider or charity is between 60-65% of the sale price. If we generously took the 65% of the £304,500 sales price that would mean that an affordable housing provider would pay a house builder £197,925 for this house which based on the average cost of a 3 bedroom house of £236,420 would result in a loss of circa £35k to £40k per affordable house for the house builder.
Now if we take the developments at Sellindge being undertaken by Quinn Estates (QE) and the Bucknell Trust and Taylor Wimpey (TW), they are committed to and signed up for 30% affordable units which equates to 75 for TW and 49 for QE.
So both QE & TW will lose money on the affordable housing, now we doubt anyone’s heart will bleed because of that as the other houses will bring in a handsome profit. However, if you are a small independent developer can you afford such a hit?
But just so you realise, the figures as set out above are probably a key reason why so little affordable housing comes forward in Kent, especially when affordable rented housing let by local authorities, or private registered providers of social housing get the house/flat at a price cheaper than it cost to build.
They also illustrate what a joke London’s affordable housing delivery is when you consider that the average sale price is closer to £900 a square foot which equates to £945,000 sales price. This means on any affordable housing – using the 3 bed example, you’d have to lose £330,750.
We are NOT trying to defend developers. What we are trying to do is explain why so little affordable housing comes forward and why developers eradicate affordable housing via financial viability assessments. So how would our local political parties encourage and ensure more affordable housing will come forward than at present? Accept more of those donations?
The Shepwayvox Team – Dissent is NOT a crime
Well unfortunately ‘affordable’ housing isn’t is it?
So Mark Quinn isn’t the Darth Vader of the Construction world in Kent. He is simply stacking the odds in his favour by making political donations. Makes a whole lot of sense to me. I think I would do exactly the same if I were in his position.