There has been much talk recently from the Government about the future of custom-build homes in the UK. A variety of stimulus packages have been announced as part of the Government’s Housing policy (Laying the Foundations: A Housing Strategy for England) and so Samuel Joy takes a closer look at the policy initiatives and how they will affect the average self builder.

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What is a Custom Build Home?

In as much as the term ‘self build’ is an imperfect fit to describe the broad church of people who commission one-off homes for themselves to live in, ‘custom-build’ is a far from ideal way of describing, well, pretty much the same thing. Indeed, Housing Minister Grant Shapps told Homebuilding & Renovating editor Jason Orme when they met in May that “the two are largely interchangeable” and that the Government may well use the term ‘self build’ too.

However, with the growing interest in increasing the scale of self build to include sites catering for dozens of one-off homes, the term ‘custom-build’ is beginning to be associated with this new vision of self building.

The Government’s Custom-build Policy

The Government’s housing strategy, released in November 2011, focused on two key issues that currently blight the UK housing market; the severe shortfall in homes in certain areas of the country, and the current unwillingness of mortgage lenders to provide loans that would stimulate building. Whilst the lion’s share of ‘A Housing Strategy for England’ focused on the mass developer side of the housing market, the two issues highlighted equally affect the self build market and have shaped the government’s policies toward it.

With a realisation that the UK seriously lags behind the majority of western states in terms of the number of self builders (see Mark Brinkley’s blog post on this issue), by encouraging people to build their own homes the government aims to reduce the housing shortfall without having to rely solely on the large-scale developers.

Prior to the announcement of the housing strategy, the Government, in conjunction with the National Self-build Association (NaSBA) and industry leaders, produced a Self-build Action Plan that formed the basis of the Government’s plans for the sector. For more details on the Action Plan see Jason Orme’s blog posts on the subject.

The Announcements

Before looking at the recently announced details of the housing strategy’s policies, it makes sense to have a quick recap of the broad policy statements that were released last November:

  • councils will be required to research demand for self builds and take ‘positive steps’ to facilitate it;
  • it will be made easier for self builders to access land which is being disposed of by central Government, including allowing self builders where possible to make use of the Build Now, Pay Later model;
  • ease the finance and land supply issues that many self builders face;
  • the establishment of a £30million ‘enabling fund’ which is going to be aimed at group self build schemes – using the continental model of individual serviced sites sold by an enabling developer.

The Enabling Fund

The actual details of the policies above have recently been made available, most notably in regards to what public land is being made available for custom-build homes, and the way the £30million ‘enabling fund’ will work in practice.

According to the HCA, the aim of the enabling fund is two-fold:

  1. To stimulate the self build sector by enabling the building of more multi-home self build projects and attracting commercial/high-street lenders and investors to the market.
  2. To convince commercial lenders the self build model is sustainable and can be continued without government support – to coincide with the close of the fund on 31 March 2015 – by focusing solely on multi-home projects and presenting sufficient numbers of successful, completed schemes to commercial funders.

The fund can be used to cover eligible costs such as:

  • Land acquisition costs;
  • Site preparation costs;
  • Construction of supporting infrastructure/utilities directly related to the construction of the homes;
  • S106 planning obligations, Community Infrastructure Levy charges and S278 agreements;
  • Construction costs for the homes; and
  • Associated professional fees related to the project after planning permission has been granted.

To find out more on the fund and to download the prospectus, which includes details on how to apply click here.

It must be noted though that this fund does not apply to the London area, since in April the HCA transferred their powers to the Greater London Authority in regards to housing and land holdings.

To coincide with the Government’s announcement however, the Major of London Boris Johnson has announced his own similar scheme which, in effect, mirrors the national one. The ‘Build Your Own Home – the London Way’ fund is an £8million scheme that is aimed at self build projects also, albeit with a few differences to the national scheme.

Unlike the national scheme, the London Way will accept applications for small-scale self build schemes – the minimum custom-build homes per scheme being two, as opposed to the national five. Five of the eight million pounds available will be aimed at these small-scale projects, with the other £3million going to organisations interested in applying for Community Right To Build Orders. For the custom-build schemes, the funding will be available to cover up to 75% of the development costs of the project, whilst for the community right to build schemes, funding will be for 90% of the cost of applying for a Community Right to Build Order, as well as feasibility studies.

To find out more about the London scheme, including how to apply click here.

An important point to note is that these two schemes are not independent of each other financially, in that the Government’s £30million fund includes Boris’ London Way, hence the non-London section of the fund amounts to £22million.

Release of Land for Large-Scale Custom Build

To coincide with the launch of the enabling fund, the Government has also taken steps to fulfilling its commitment to providing land for self builders in the shape of previously-used public land that is now surplus to requirements.

Seven sites have been announced that will be made available exclusively for self builders. The first is Trevenson Park in Pool, Cornwall, with the number of custom build homes planned for this site being sixty. The other six sites are as follows:

  • Kingsweir and Torpoint, Bristol
  • Spencers Park, Hemel Hempstead
  • Pleasley Colliery, Bolsover
  • Upper Tuesley Milford, Surrey
  • Wilson Road, Hanford, Stoke-on-Trent; and
  • Chase Avenue, Walton Park, Milton Keynes

Making these sites available is part of the HCA’s wider ‘Land Development and Disposal Plan’, which also makes provision for the selling of land to large-scale new-build developers. Whilst making land available is obviously a step in the right direction, it is important to remember that it does not signify a large swing towards the self build sector away from the large developers. If the six sites mentioned above are of a similar size to the Trevenson Park site, then their total potential homes number of 420 compares quite insignificantly to the 16,226 potential homes the HCA has earmarked its disposable land for – 2.6% of this year’s available land for self building when last year self build contributed over 10% of the total number of homes built in the UK.

Conclusions

Both recent announcements are obviously good news for those wishing to build their own home. The wording of the announcements, however, hint at the deep-rooted problems that self builders are still facing, despite increased awareness of the industry.

The HCA has stated quite clearly that the principal aim of its enabling fund is to provide support for multi-home self build projects to be built. Once these schemes are completed they can be, in effect, shown off as good examples of the sector to try and convince mortgage lenders that they are a viable alternative to the lending of standard home-owner mortgages. The Government realises it cannot bank-roll the self build sector hence why the enabling fund will cease to exist by April 2015. It is obvious therefore that self build’s big problem is still mortgage availability from the big lenders, who have not yet accepted – unlike many smaller building societies (see current mortgage rates) – that self build is a safe option.

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