Land Led Development has become a key feature of the affordable housing market in recent years, offering a low-risk route for Housing Associations and Registered Providers to meet Government imposed targets for delivering new homes. However, at what cost to the quality of the product?
Paddock Johnson gathered together experienced and knowledgeable leaders from across the housing sector to discuss how Land Led Development in the form of the ‘package deal’ could be improved to reduce risk and at the same time give Registered Provider’s more control and deliver improved quality resulting in better value?
In the experience of Paddock Johnson the land led process is usually instigated by a developer with an option on a site. They approach an architect to develop a ‘quick feasibility layout’ to establish numbers, which is then used as the basis to enter into negotiations with a Registered Provider. This ‘package deal’ approach has seen control shift from the hands of the Registered Providers to private developers and contractors - and with that, also control over the end product. In a sense the end product is fixed at the outset with Registered Providers having limited ability to influence the design. The ‘quick feasibility layout’ all too often becomes the only option explored and once a deal is agreed there is a reluctance to make changes.
This shift in approach was high-lighted by Nicolette Cullen, C2K Developments, Limited “Registered Providers aren’t able to find the sites themselves as it would mean more resource and cost to the Association on an already busy development teams who are chasing pipeline and delivery. In the past RP’s would purchase the land (or be able to obtain land from the LA’s), they would then control the design stages “upfront” by funding the architect and consultant teams to complete a feasibility and progress the phase 1 and phase 2. The developments were then driven by design with the architect whereas now it’s very much developer led and more often RP’s don’t get to talk to the architect.”
But is this really a good thing for the quality and design of affordable housing, and how do we ensure that quality is retained in the final product?
Whilst Registered Providers have developed Employer’s Requirements documents with the aim of setting the minimum standards in terms of quality, which they expect developers to sign up to as part of the ‘package deal’, in our experience these documents are often too specification focused and struggle to articulate the more intangible aspects of good design.
So how can the land led approach to development work better for all RP’s and what needs to change?
With many demands on Housing Associations and Registered Providers it’s a challenging time. Housing needs are greater than ever, and national targets for new homes remain ambitious to meet this. Costs are soaring both for new build and retrofitting to ensure new and existing stock meets Net Zero Carbon targets. All of these challenges are set against a backdrop of rising running costs and rent caps remaining in place.
How do the boards of the Registered Developers balance the need for more control over the quality of the build and invest fully into building sustainable and desirable communities without adding costs to the bottom line?
The issue of cost is a significant factor and is undoubtedly encouraging RP’s to be more risk adverse.
Stuart Belfield, PLP commented: “For boards it's the route of least resistance and registered providers have a low risk mentality”.
However, the issue of costs, a significant factor, cannot be ignored as shared by a number of our guests:
Annette Dennett, Weaver Vale Housing Trust commented: “There are many pressures and issues coming down the line like rent caps and rising costs. At the predicted levels it will be difficult to make future projects viable. Procurement is an area that should be looked at alongside the risk registers.”
Paul Humphries, Atticus Land and Developments added: “Viability is a challenge grant rates haven't gone up to match costs so there is a gap.”
Sarah Houghton-Grimshaw, Torus asked: “How do we keep the knowledge within the registered provider and make land led schemes work within the grants available. There is a shortage of funding.”
The general cost of developing, and the constrained opportunities that enable affordable development to be funded, seems to have become one of the driving factors in making the decision to sign up to package deals. This implies that the decision is driven by the need to meet the numbers that the RP’s have made commitments to deliver. And additionally, the current development cycle has been impacted by delays brought on by the Covid pandemic, resulting in a shift in focus and a failure to build a strong future pipeline beyond 2024 (when the delayed schemes are likely to be completed).
Giles Brook shared this view: “Clients development programmes have been delayed by covid and this linked into planning delays, increasing costs, contractors in administration and demand for asset investment will put pressure on future new build pipelines. It is important though not to base future models of development against the current backdrop as this is the wrong perfect storm of covid, Brexit and the Ukraine war. This scenario has never happened before and will hopefully not happen again and in 12 months’ time development scenarios will be different.”
However, the general consensus around the table was that we need to try and find a way, or ways, for RP’s to work towards taking back some control and subsequently, to minimise their reliance on the delivery of new housing being led and controlled by developers. During the discussion it was raised that the RP’s are missing out on making their own deals on land but actually, paying more in the long run. This is exasperated by board approvals taking too long to respond to potential land deals, with the land being ‘snapped’ up by a developer.
The delivery of improved quality and better value housing is something that everyone around the table aspires to. However, it was generally felt that the typical scenario created by developers through land led development is impacting design quality, leading to the end product often being watered down to reduce cost, which does not benefit the RP as any profits lie with the developer.
How have skills sets within the Registered Providers changed over time as a consequence and is this creating more reliance on Package Deals?
From a RP’s perspective, the increase in ‘package deals’ has also impacted the retention of skilled people within their organisations as key people are leaving to join the private sector. This means the RP’s are less able to develop their aspirations particularly if they are not able to retain experienced development managers and keep the skills and knowledge in-house.
Conor McGuigan, Great Places Housing Group commented: “The skills of the development teams at the Registered Providers have changed over time and will need to change again. We need development teams that can appraise risk quickly and perhaps move back to previous ways of working with a strong design focus and tendering construction. Demand for more shared ownership requires a particular type of land, sites that private developers won’t want, but not the awkward pieces of land that are given away in £1 land deal transactions.”
Many people in the sector will agree that the most successful developments are those where lessons learnt are passed on to the next project and where the time has been taken to understand the RP’s requirements. Engagement with end users and communities is key to shaping inclusive, affordable, desirable and sustainable places, a skill that typically used to form part of the early-stage project delivery driven by the RP’s. Collaborative working has been proven to bring successful outcomes and there are many other ways to build communities and deliver well-made places. The general experience of land led development means this is no longer a key driver.
Sarah Houghton-Grimshaw added; “Package deals put a barrier in between the architect and the Registered Provider, meaning the design often becomes watered down”.
And this view was also supported by Conor McGuigan who added: “If the vision and product is fully within our control then absolutely we want all the bells and whistles. With Section 106 you have zero control, no choice and the quality isn’t the same. In really well-designed places you have low turnover, and low antisocial behaviour.”
So, the benefits are quite obvious. Developments are likely to deliver more fulfilling results for the RP’s, and ultimately the occupiers, if there is a clear commitment to influence place-making through the delivery of high quality design to achieve the RP’s requirements. Something which is not featuring as a significant driver when the RP’s are purchasing the land led deal from the developers.
Design v Cost
One of the challenges in creating high-quality, thoughtfully designed homes comes back to costs, but not necessarily reducing costs, as stated by Giles Brooke, Savills: “Registered Providers want better design, but want to pay fixed prices and influence design, so the solution is to pay for design up front and then you can influence.”
RP’s want fixed prices, they want to know how much something is going to cost, but often it is necessary to pay more up-front to generate the financial benefits a bit further down the line. Maybe the process, rather than the particular procurement route is due a rethink as shared by Simon Halliwell, Paddock Johnson who added: “In the current market Design and Build is becoming more like traditional procurement because it’s become impossible to fix prices.”
Although as a general rule traditional procurement might not provide the client with a firm price early enough in the process, it is possible to achieve this, but it is likely to require more money spent up front, and in truth, the money would have to be spent anyway. This then comes back to the RP’s needing to agree to increase their exposure to risk which will ultimately lead to them reclaiming back control. Currently, instability relating to costs associated with development is not enabling clients to gather fixed prices, but this is irrespective of procurement route and a problem that is likely to be relevant for some time to come. In this economic climate it is likely a misconception that land led development is low risk.
The housing delivery shortfall is recognised by Homes England, and the impact that the current situation is likely to have on the next delivery round from 2026. Guidance from Homes England is that RP’s should adopt a land led approach to achieving numbers, including an element of Section 106 to supplement this.
What can be done differently?
It seems that a change in approach is needed if the delivery of new housing is to shift from just meeting numbers, to allowing the RP's to return to their aspiration to create homes that people and communities want to live in, the basis for successful place-making.
This also suggests that the RP’s and their boards will need to appraise their perception of risk and agree a formula to establish, site by site, where they sit with the potential risks presented by each site and what they are prepared to accept and work with, and subsequently agree a plan for managing risk and the associated mitigation. Afterall, this is why, architects and other consultants aim to work collaboratively with the RP’s to help them establish their project brief and assess the site constraints with a view to meeting the objectives and deliver a successful project. Consequently, this refers back to the motivation for this round table discussion.
So how can this be done differently? Or maybe we should ask, how can we revert the process to align it with how we used to do it?
Interestingly, some RP’s in other parts of the country are taking the initiative and acquiring land themselves, to meet their delivery programmes and retain control, as shared by Sharon Kenny, Homes England added: “There are many examples of Registered Providers adopting a successful land led approach. As a result they retain control of the procurement process.”
A more private sector mentality and approach is working for some. These RP’s are more responsive to the challenges they are faced with and have recognised the need to behave in a more commercially driven way. But generally, while the appetite for most remains low, there is a missed opportunity to potentially save money in the long run.
Helen Brown, Brabners added, “We have Registered Provider clients who have been acquiring sites and moving to buy land in and start the process themselves. When they don’t manage to purchase the land they ultimately pay more for the land at a later stage from the developer.”
The key is to unlock funding and respond when the land opportunities become available. With the process initiated by the RP’s, appropriate and meaningful control can then be invested in the pre-planning stages of the project, with the client’s aspirations to deliver inclusive, affordable, desirable and sustainable places for people to live. A whole-life cost approach. Importantly it will cost the RP less in the end.
Nicolette Cullen, C2K Developments had this to say: “In the market at the moment there are sites becoming available and it’s a great time to land bank. If the Registered Providers are able to create a land banking budget, they would not miss out on competitively engaging to acquire these sites at the lower prices. The land availability is there to be purchased but Registered Providers are unable to be as nimble as the developers due to auditory processes they must follow along with the inability to pay option/lock out fees to landowners which leaves them lagging behind and exposed to higher land prices later on.”
Different options for funding models might help the process and guide the delivery in the direction we all want to see it happen. There does seem to be a difference in attitude and approach across the UK, and therefore, we should look to the success storeys to explore the options and understand the benefits. With reference to an earlier comment in our discussion, retention of the skills and knowledge within the RP organisations can be key to driving forward a renewed approach to acquiring land on which to build houses. Having an in-depth understanding of acquiring land for development and having the knowledge and experience to work quickly and commercially is likely to provide the positive benefits the RPs are actually aiming for.
We also know that collaborative working methods bring beneficial results in the long-term, so working in partnership and sharing the risk, because there will be some risk, might be one way forward.
And this can work successfully as shared by Sharon Kenny, Homes England: “There are a number of Registered Providers who have successfully adopted a shared risk: reward contract model with SME contractors.”
Depending on the model there is also evidence that public – private partnerships can work. This is something understood by Torus as commented by Sarah Houghton-Grimshaw, who added: “Public Private Partnerships can work but you need a construction, financing partner and an RP but critically you also need a local authority to be involved who understand why it’s important and why it’s needed”.
Should Registered Provider’s review their risk profiles?
Whichever approach is taken by RP’s, the need to act quickly is something boards, should seriously consider, alongside developing their approach and agreeing the level of risk they are prepared to take. More recently it would seem some RP’s are recognising there is also risk associated with the delivery of the land led ‘package deal’ approach, and potentially there is a wish to find alternative ways to deliver new housing.
Paul Humphries, Atticus Land and Developments is aware of some recent changes in the industry for some as his comment suggests, “There’s a general change in the risk profile. Up until recently boards and development teams are looking at package deals and realising that they take more risk.”
However, many of the challenges faced by RP’s in acquiring land and being in control of delivering residential projects are being encountered by the not-for-profit RP’s and potentially the small sized RP’s.
Alex Bodie, Together commented: “For profit RP’s are finding the funding, land banking and driving forward quickly. Could they be working with NFP RPs’ is that on the cards? A couple of years ago this was probably a non-starter but we are now seeing more and more partnerships between FPRP and NFP RP’s which is great to see”
This gives consideration to addressing options that aim to share both the risk and the profit. And creating the opportunities for the RP’s to do this within a potentially low risk environment and doing it together with like-minded industry organisations might help them start to take the first steps to bring back control, and subsequently, the delivery of high quality place-making.
Maria Killick, Paddock Johnson commented: “Through our work for our RP clients we never lose sight of the ultimate goal, and we always strive to deliver the expected requirements and objectives set out by our clients.”
Victoria Millward, Paddock Johnson added: “Our clients often talk about wanting something, innovative, forward thinking and different from the standard product but at the end of the day most developers and contractors can’t and don’t want to build, innovative and different so you end up with the same standard product and the vision is never realised.”
“As part of the project team, we can help deliver this, but we cannot do it if the RP is not in control of the land, design, planning and funding. What initially seems like a good deal, is often not likely to be viewed as a good deal by everyone. In our experience there is always going to be something that will suffer, probably due to compromise, and probably due to cost. These are likely to be the schemes that are delivered just for the numbers, the ones that are unlikely to meet the key objectives that deliver vibrant, high-quality homes and neighbourhoods in a sustainable way.”
All Not for Profit RP’s have the same goals and come from a genuine place of wanting to create quality and well designed, affordable homes that shape sustainable communities and places that people want to live in and look after. However, delivering communities through package deals is not necessarily conducive to meeting those goals.
A reticence from the registered providers to invest funds into land and their board's general attitude towards risk is limiting development opportunities and this needs to change.
Simon Halliwell, Paddock Johnson concluded: “There’s a place for a blend of ways to create the housing that we need in the UK. Working with both package deals and being more proactive with smaller sites. Registered Providers could be using architects and designers more to act as the link with the developer to ensure the vision and quality is realised.”
To gain back control over design and ensure design quality, Registered Providers need to be prepared to invest more in design up front and ensure they have the skills in house to engage in discussions over design . There are good examples like Marmalade Lane and Goldsmith Street where design led the development. The creative approach in Goldsmith Street achieved 20% more units on site, low antisocial behaviour and low turnover.
Sharon Kenny, Homes England commented: “Despite all the challenges we are still starting on site with 25k homes across the country. Money is going to get really tight so now more than ever we will need affordable housing.”
It’s important that we don’t lose sight of the vision to create well designed, quality homes and we should be looking to Registered Providers and the wider industry to respond to opportunities to invest in different ways to ensure decision making is based on quality not just quantity.
CONTRIBUTORS TO THIS ARTICLE INCLUDED;
- Alex Bodie - Together
- Annette Dennett - Weaver Vale Housing Trust
- Conor McGuigan - Great Places Housing Group
- Giles Brooke - Savills
- Helen Brown - Brabners
- Maria Killick - Paddock Johnson
- Nicolette Cullen - C2K Developments
- Paul Humphries - Atticus Land and Developments
- Sarah Houghton-Grimshaw - Torus
- Sharon Kenny - Homes England
- Simon Halliwell - Paddock Johnson
- Stuart Belfield - PLP
- Victoria Millward - Paddock Johnson