The UK’s self build market requires significant further 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.
It says that 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. 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.
The report points out that in the last few years, new agencies and innovations in procurement routes focussed on group and multi plot individual self build have emerged to support self build activity in a more integrated way. However, it is too early to tell if they can deliver the step change needed and if the current momentum will be sustained.
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, it adds.
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,’ the report says.
‘A more differentiated, explicit, and proportionate assessment of risk is required and would help all parties focus on the key areas for mitigation,’ it adds.
At present, the UK self build market lags behind other European countries with around 12,000 self build homes delivered per year, just 7.6% of the new housing supply. This compares to Hungary at 52%, France at 38%, and the Netherlands at 10%.
The UK government has stated it wants to double the output of self build housing from 100,000 to 200,000 over the next decade but self build remains a highly bespoke activity, with considerable variety in the way it occurs. It can often take up to two years to access land and, with numerous design, construction, and funding methods available, it can take a further two or more years to complete a build.
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, the report points out.
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.
‘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,’ said Stephen Noakes, mortgage director, at Lloyds Banking Group.
‘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,’ he explained.
He believes that 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,’ he added.
According to Dr Alison Wallace at the Centre for Housing Policy 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,’ she said.
‘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,’ she explained.
Richard Bacon MP, founder of the All Party Parliamentary Group on Self Build said that it 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,’ he added.
The report concludes that a longer term commitment is needed to encourage the necessary structural and cultural change required to help make the market a mainstream proposition.
It recommends the creation of a finance industry wide working group that 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. In the short term, 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,’ it adds.
