KEY LEARNING POINTS
There are three key technical considerations when delivering serviced building plots for private homebuilders: -
- Good planning and layout
- Managing the installation of utility connections and road access to the plots
- Keeping the costs under control
This Briefing Note explains the main issues and the different approaches that can be used.
TYPES OF SERVICED PLOT DEVELOPMENT
There are three broad approaches: -
- Serviced plots that are directly delivered by a council - here the local authority uses its own land (or land it acquires), and takes the risk associated with the plot delivery (but not the building of homes). This typically means it hires contractors and co-ordinates the various utilities providers to service the plots, and then handles the design, planning, marketing and sales in-house. The advantage of this approach is that the council controls every element of the project and enjoys the direct benefits of development, such as the uplift in land value associated with improvements made to the land
- Serviced plots delivered in partnership with others – here a council uses its own land (or land it acquires) and then works with a partner or third party to deliver the project (such as a developer, a builder, a housing association or community group). With this approach the partners share the development risk and benefits
- Serviced plots delivered by others – in this situation a developer, builder, housing association or community group is the main promoter, and they will probably be the owner of the site. There is no development risk for the council, but it can still seek to proactively manage or influence the project so that the plots help to meet the local demand
See our Model Descriptors for further guidance.
PLANNING AND SITE LAYOUTS
The layout of a site is critical – if you get it right the installation of the services will be more cost effective, and it will deliver attractive plots that will sell quickly, and at a good price. Get it wrong, however, and it could take many years to sell the plots, and the project could be unviable.
Identify suitable land and be wary of land that could be challenging
Some sites are well suited to providing serviced plots; others are not. It can be challenging if a site is on a steep gradient, has difficult ground conditions, poor access arrangements or noisy neighbours, is a long way from utility connections, requires remediation, or might have ‘surprises’ underground. The best sites are straight forward to service and easy to sub-divide into plots.
You should also aim for a site that can take a reasonable number of plots, as the unit cost of servicing should then be significantly less. In most cases this means at least five plots; the majority of successful initiatives have ten or more plots on a site. Developments of 100 plots or more can deliver significant cost savings in terms of servicing, but also require relevant expertise to manage the increased risk.
Look at the case studies that form part of this Toolkit – there are examples of serviced plot projects in various Case Studies and these are listed at the end of this Briefing Note.
If you are planning a serviced plot development try to visit similar projects and talk to those involved. This will help you to evaluate the sort of sites that are best suited, and the ones that are likely to be progressed quickly.
Speed of delivery is especially important if a council is establishing a revolving fund to finance projects on an ongoing basis, either in-house or in collaboration with a partner. Remember, abortive feasibility studies and additional finance costs over a longer period can quickly deplete a fund.
Prepare a robust business case for any site you identify. This should include a realistic budget for the cost of acquisition, servicing, marketing, legal and other professional fees, overheads and at least a 20% contingency. Check the market price of similar plots locally, and how long they currently take to sell, and be sure that the plots you provide are going to be price competitive. You may be able to consult with a land agent to do this. If the sums don’t work, don't proceed.
This is one of many Briefing Notes that explain resourcing, planning, land, finance, demand, marketing, consumer support and various technical issues. To see the full range of guidance click here.
For the purposes of this Toolkit we have made the following definitions:
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This Briefing Note will be revised when the Regulations to support the commencement of the Self-build and Custom Housebuilding Act 2015 and the Government’s Right to Build policy are finalised.
Match the mix of plots and layout to the demand
Some people prepare a layout for a site, without really understanding the local demand. If you are from a council check your local demand Register to see what local people are looking for. You should also speak to local agents, and explore the Need-a-Plot facility on the Self Build Portal.
Only when you are confident you know the type and size of plots local people are seeking, should you consider the mix of types of plots on a site and start devising a layout. Remember that large plots will inevitably have a higher sales value than smaller ones, so if there is a lot of demand for low cost plots make sure you provide some more affordable compact ones.
In rural areas this might mean plots of 250-300 sq m; in urban areas this could be plots as small as 75 sq m. Smaller plots can be effectively mixed with larger ones to ensure there is choice. Plot prices can also be cross-subsidised, with the bigger plots being sold at a higher price per sq m, to help make the smaller plots more accessible.
Take into account practical issues – for example many current self build mortgages are only available on detached homes. If you want to include terraced homes explore some of the case studies in this Toolkit – for example the Nieuw Leyden and Isabellaland projects in the Netherlands, Elf Freunde in Berlin, the Heartlands scheme in Cornwall and HoUSe development in Manchester. There is also a section later in this Briefing Note that deals with terraces, apartment buildings and semi-detached homes.
Consider how a larger site could be split into smaller phases for marketing purposes (it is generally more effective to sell in phases, rather than to open up all the plots across a large site to everyone at the same time).
You may want to integrate some affordable/social housing plots or properties as part of the overall layout, which could be cross subsidised by including some higher value plots. Although it is important to ensure that affordable housing is well integrated into any scheme, it is also important to consider how this can be effectively achieved without impacting on plot viability.
Some councils have found that plots that adjoin affordable housing areas can be more challenging to sell. This can be avoided by providing separate access points, integrating smaller, lower value plots alongside affordable housing, or through careful landscaping. Similar considerations may also apply when allocating plots for self build development and plots for custom build, to ensure that site build-out and marketability is not compromised. A good layout can significantly improve the marketability of a serviced plots development.
Identify suitable land and be wary of land that could be challenging
Some sites are ideal for serviced plots; others are not. Learn how to identify the ones that are well suited, and be wary of anything that has the potential to be challenging
Match the mix of plots and layout to the demand
Think hard about the mix of plots and layout you want to achieve on a site – and ensure it matches the local demand. Consider plots of varying sizes; smaller plots will appeal to those with lower budgets and larger plots can sometimes cross subsidise more affordable opportunities
Clearly define each plot and spell out who is responsible for what
A clear definition of each plot is necessary if is to be successfully marketed. The definition should set out the physical boundaries and the level of servicing that will be provided. It should also be very clear about: -
- Who is responsible for connecting to or extending the utilities to each home
- Exactly what fences or boundary treatments are required, and who is responsible for installing them (and by when)
Plots therefore need to be clearly set out on site. A simple fence helps a purchaser visualise the extent of each plot. Stakes can also be used to mark the corners of plots, but these are prone to being moved by contractors or even prospective purchasers. Monitor the position of stakes or markers carefully, and correct any irregularities. You may even want to concrete them in so they stay in place.
Clear drawings will also be needed for a simple buyer’s information pack. Be aware that sales of land can fall under the same legal framework (Consumer Protection from Unfair Trading Regulations 2008 and the Business Protection from Misleading Marketing Regulations 2008) as the sale of homes and so appropriate legal advice should be taken.
The drawings should be easy to read as well as technically accurate and define the precise boundaries, as well as the location of utility service ducts and site drains. They can also set out access points for vehicles, and they can identify any materials storage areas for deliveries. The pack should be very clear about who is responsible for connecting to or extending the utilities to each home. Most of the projects we examined required the plot purchasers to be responsible for the agreed fences or boundary treatments.
On smaller developments if may be possible to minimise, or avoid any communal areas – this will make it simpler, as there will be no on-going shared maintenance issues.
Plot Passports are increasingly being used to guide what can and can’t be built – these may be worth considering for larger developments, and you can find further guidance in Briefing Note 5.2.
Grant planning permission that provides security, but also preserves flexibility
Organisations that initiate serviced plot developments may wish to control some aspects of the buildings’ appearance and how the homes are arranged on a site, but they should recognise that a large part of the appeal for private homebuilders is the freedom and opportunity to create something that suits their own tastes and needs.
Design Codes are an effective way of dealing with this – see Briefing Note Examples of how councils use the planning system to encourage opportunities.
Be very clear about each plot
Boundaries should be clearly marked, and you need to set out who is responsible for the different elements of the utility connections
Access roads usually comprise two parts - a ‘base course’; and a ‘wearing course’ (or ‘top coat’). Most plot providers initially install just the base course while the self builders and their contractors are constructing their homes. The wearing course is only usually laid when all the building work is complete. The road is then usually finished to a standard where it can be adopted by the local highways authority. Mortgage providers for a serviced plot may require evidence of the original landowner’s obligation to complete the works, so it may be necessary to sell the plots with a copy of the infrastructure contract.
Some plot providers require a Bond payment from purchasers, to ensure that any damage done to the road and kerbs during construction can be recouped. The Bond can be extended to cover the development as a whole – for example, to repair damage to drains if a builder pours left-over cement down them. The Bond encourages honesty, as everyone’s money is collectively at risk for any liabilities incurred by individuals during construction.
Avoid laying a wearing course on any access roads until all building work is complete and consider asking for a Bond from plot purchasers to pay for any damage done during the construction phase
There are usually four common utility connections: -
- Water and sewage connections
Each utility is normally provided to a disconnecting chamber on or just within the boundary of each plot. Connections should be clearly identified and labels should not use short-hand (for example ‘W’ could mean ‘waste’ or ‘water’).
There can be inconsistencies in the approach of different utilities providers – for example, electricity companies will usually install a ‘rabbit hutch’ to house the connection, while water companies generally take a duct right to the plot boundary, accessible via a man-hole. Installations also vary company by company, region by region and even site by site.
It can take several months to get all the utility providers to conduct surveys and provide cost estimates. If you accept the estimate utility providers often also require significant advance notice before they undertake the work. Start the process at least six months before the connections are required. If you need temporary connections during the construction phase (a Temporary Builders Supply), this will need to be organised many weeks ahead of your start date. Sometimes utility connections require a highway closure, and this can result in additional costs and delays. Utilities providers may also require a commitment to pay for larger infrastructure features (like substations) up front, which needs to be budgeted for in the overall servicing costs.
Co-ordinating multiple utility installations
Liaising with utilities companies can be challenging with many operating formal, centralised processes for which there is often an administration charge. As the process takes so long it is important to start early to minimise delays.
For sites with fewer than 20 plots it will usually be cheaper for the development’s project manager to co-ordinate the work of the different providers rather than to ask one provider to coordinate the others. For developments of 20+ homes it can be more convenient to let one provider manage the installations. This can save you having multiple discussions and onsite meetings to decide the routes for pipes.
- Water – visit Ofwat: ofwat.gov.uk/consumerissues/watercompanies/map/
- Electricity – visit Energy Networks: www energynetworks.org/info/faqs/electricity-distribution-map.html
- Gas – visit Energy Networks: energynetworks.org/info/faqs/gas-distribution-map.html or British Gas New Home Connections - http://www.britishgas.co.uk/content/britishgas/products-and-services/gas-and-electricity/new-connections.html
- Telecoms – visit BT: productsandservices.bt.com/
Re-routing or removal of existing services and contaminated land issuesIt can be very expensive if you have to re-route an over-head or underground cable, or a main water pipe or sewer. Sometimes a pumping station or electricity sub-station may need to be re-located. Existing infrastructure is almost always present on brownfield sites, so check, check and check again, and if necessary commission appropriate surveys and ground scans. Land that may be contaminated and might need remediation can also be very expensive to deal with. Make sure you carry out appropriate surveys to establish the viability of each site.
Crossing other people’s land
Installing utilities can be especially challenging and costly if it involves accessing services across someone else’s land. Legal issues can be particularly complex, especially if the owner has no interest in your development, or decides to try to secure a fee for letting you cross. Be aware that problems like this can have a significant impact on viability and programme.
Try to organise an easement (a one-off payment) rather than a Way Leave (an annual rental). A typical easement should cover legal fees and any one-off payments to a land owner. If possible, seek legal advice at the earliest opportunity and try to negotiate a deduction from the original asking price of the land to account for these additional costs.
Utility companies are notoriously slow, so approach them at the earliest opportunity
TIMEFRAME, COSTS AND PRICING
Once a site has been secured for the provision of plots it can take between one and three years to prepare it ready for sales to commence. This time is needed to agree the design and layout, secure planning permission, prepare the site, provide access and install the utilities. On bigger, more complex sites, or those that require the acquisition of land, it can take longer.
Sales rates will depend on local demand – where there is low demand it may take months, or even years to sell some plots. However, if demand is strong you may be inundated with requests and be unable to provide enough opportunities on a single site. Projects in the Netherlands have had people queuing for weeks to get the plot they want.
Once a plot has been purchased most private homebuilders will take about a year to secure any further detailed permissions or approvals that may be required, and then another year or two to get their home built. Delivery timescales can be significantly improved where plots are sold with planning permission and may be improved further if there are local builders or custom build developers engaged in the project that understand the serviced plot model.
Speed of sales
It can take time to get a site ready for plot sales. If there is high demand the plots will usually sell quickly; if demand is weak it could takes years
What does it cost to provide serviced plots?
Based on market testing site servicing should, on average, cost about £10-30,000 to service each plot depending upon the size of the overall development. This includes access roads and utilities brought to a single point on the boundary, and all project management and administrative expenses. This assumes there are no significantly abnormal site conditions and that plots are of a modest size.
In some rural areas in continental Europe, plots are serviced for as little as £5,000 each – although the road specification is often very simple, and some continental utility companies do not charge for laying their services to the plots.
Costs need to be carefully controlled. There are several common pitfalls, including: -
- Unforeseen ground conditions - initial cost estimates can sky rocket when unexpected issues are discovered below ground, or land remediation or unplanned water/flood alleviation measures are necessitated
- Additional consultancy costs - beware of consultants that produce reports that aren’t always needed, or those that ‘over engineer’ a project
A contingency of at least 20 per cent should therefore be built into all budgets.
Be aware of the costs of servicing
A straight forward site should cost between £10 – 30,000 per plot to provide the access roads and utilities. Be wary of projects where the costs are much higher than this
A clear fixed price should be set for each plot, and this will usually be the normal market rate. In most cases, a first-come-first-served approach is then the fairest and most effective way to handle sales.
Across Europe we consistently found that this was the preferred option, as it enabled potential purchasers to clearly evaluate what they could (or couldn’t) afford to buy. Developments that sought to get the highest possible price for plots often resulted in disappointed and disillusioned purchasers.
In exceptional circumstances auctions or sealed bids could be explored, although the consensus is that a fixed price (based on the local market rate) is normally the best approach.
Some examples of serviced plot schemes are:
Initiator: Local authority
Approach to planning: Plots sold with outline planning permission; purchasers responsible for obtaining detailed planning permission.
Sales method: Private auction; but in future would use a general open-to-all auction.
Range of plot sizes: Six plots of 365 – 956 sq m, on a 0.4 hectare site
Servicing costs: £450,000, including £130,000 on drainage issues, so the cost per plot was £50-55,000 each (high)
Sales prices: average of £98,500
See Case Study on Stoke-On-Trent, here.
Orkney Islands, UK
Initiator: Local authority
Approach to planning: Area allocated for housing and a Housing Development Brief sets out what sort of homes are likley to be permitted/required; purchasers have to then secure detailed planning permission
Sales method: Fixed minimum price (though offers are invited above this); first-come-first-served; advertised through site boards, small adverts in the local press, and on the council’s website.
Range of plot sizes: Smaller, affordable plots at 400 sq m, larger plots at 600-800sq m (compared to ‘market’ plots at 600-1000 sq m)
Servicing costs: Typically £10-15,000 per plot
Sales prices: £30-37,000 per plot (to market plots at £50-90,000)
(Eller IV expansion)
Initiator: Local authority
Approach to planning: Land Use Plan designates plots for residential use; plots sold with a design code (known as a ‘B-Plan’) which establishes principle of development; purchasers are responsible for getting own detailed permission.
Sales method: Local waiting list; top of list has first refusal on plots that match their stated preference.
Range of plot sizes: Typical plots are around 750 sq m
Servicing costs: Average of £14,000 per plot (on a green field site)
Sales prices: Average of £33,600
See Case Study on Oberleichtersbach, here.
Initiator: Parish council
Approach to planning: Site zoned for housing with light-touch design guidance; purchasers required to submit their own detailed planning application.
Sales method: Fixed-price per sq m; site-boards
Range of plot sizes: Seven plots of 2,000-2,500 sq m
Servicing costs: £9-10,000 per plot
Sales prices: £15,000-20,000
See Case Study on Lusignac, here.
Initiator: City council
Approach to planning: Plots sold with Plot Passport that sets out development restrictions
Sales method: Plots are marketed through the council’s Plot Shop; purchasers pay a €300 reservation fee, then 10% of the plot price as a deposit. There is an option to lease the land.
Range of plot sizes: More than 70 plots from 108 to 522 sq m
Servicing costs: £3.5m (€4.8m) across the whole site, including infrastructure, roads, utilities, the shared spaces and full marketing, legals, administration and other project costs; this is an average of £49,000 (€67,000) per plot.
Sales prices: Plots were sold for between £35,000 (€48,000) and £158,000 (€216,000). The total generated was £3.74m (€5.1m)
See Case Study on Isabellaland, here.
Sell at a fixed price
Set a clear fixed price for each plot (usually the local market price). Don’t try to sell to the highest bidder. Experience in Europe suggests this doesn't work
SERVICED PLOTS FOR SEMI-DETACHED, TERRACED AND APARTMENT BLOCKS
Many people think serviced plots are primarily aimed at people that want to build detached homes. This is often the case in rural areas. In towns and cities more compact plots are often provided, and private homebuilders have to build their homes abutting other properties.
There are essentially two ways of facilitating this: -
- Purchasers build their ‘standalone’ homes up to the plot side boundary line, with a very small gap between adjoining properties
- Purchasers co-operate with their adjoining neighbours, and build a party wall between their homes. For apartment block type developments this is usually the only realistic option.
There are advantages and disadvantages of each approach. If ‘standalone’ homes are built (with small gaps) purchasers can get on with constructing them at their own pace. The downside is that this often costs more, and arguably this is a less efficient solution in terms of materials. It can also result in vacant gaps in the frontage, until all the homes have been built.
If neighbours co-operate and build together they can save £5,000 to £10,000 per home on construction costs – and, generally, the more of them that collaborate the bigger the savings, as simpler foundation configurations can employed. In most cases the purchasers will also end up with slightly more internal space.
In Europe terraces and semi-detached homes are often constructed using both these approaches.
When standalone homes are constructed they usually employ cantilevered ground-beams and piled foundations. The homes can be built independently so it doesn't matter if the plots on either side are vacant, or have already been constructed. At Almere in the Netherlands, the local authority believes this approach helps when it comes to marketing and selling plots – as buyers believe they can then get on without having to wait for their neighbours.
In The Hague the council takes a different view - it encourages buyers to work together once they have purchased their plots. In these circumstances, neighbours often share advice or materials sourcing, and sometimes form a building group to commission the design and construction of their homes collectively, even though they have each bought an individual plot. Over the last three years three out of four plot buyers in The Hague have opted to work together.
If a custom build developer is planning an urban scheme they will often opt to provide ‘shells’ that individual purchasers can then fit out to their own specification. This makes it very straight forward to provide a terrace or apartment block type structures. A good example is the Blenheim Grove project in London, where Inhabit Homes is constructing self-finish shells as a terrace – see our detailed case study here, in 56-64 Blenheim Grove, London.
Larger parcels of serviced land can also be sold to groups that want to build collectively. For example, in Cambridge the K1 Cohousing scheme will deliver 40 custom designed homes in one go on a 0.86 hectare plot on the edge of the city. The homes should all be completed by the end of 2016.
Consider different options to achieve more compact development, and explain them clearly to plot purchasers. In most cases it will save them money if they co-operate with their neighbours
Consider making part of a site available for group projects; plots don't just have to be suitable for individuals that want to build a home for themselves. One in four would-be self builders like the idea of building collectively
OTHER COMMON CHALLENGES
The team delivering the project will need a range of skills – in land acquisition, valuation, procurement, construction management, administration, marketing, legal and finance. If you are a council looking at a relatively modest development on your own land, outsourcing all or part of this work to a partner or third party may be worth considering. Alternatively you could work with other local councils to resource a central team to co-ordinate the work across a number of sites in a wider area – see our Briefing Note on Resource implications and organisational options.
Communal or Shared Facilities
On smaller schemes try to avoid communal spaces or areas of landscaping that will require future maintenance.
Larger projects are likely to require maintenance arrangements for any communal play facilities, parking areas and amenity spaces that form part of the project. Some providers of serviced plots try to minimise this by providing low-maintenance amenity spaces, such as wild-gardens and woodland instead of play-equipment that requires regular maintenance. Alternatively, responsibility for maintenance can be taken on by a council, or perhaps apportioned to a management company with contributions sought from home owners on the site.
Briefing Note Effective marketing techniques provides further advice on the marketing of serviced plots.
The VAT position for serviced plots is very complex and it is important for councils to seek tax and legal advice at the earliest possible stage of the project. See Briefing Note Taxation.
Managing the home building phase
Plot providers should consider how they can encourage the speedy construction of homes. They may also want to develop rules that set out if private homebuilders can live temporarily on site during the construction phase. Another area of concern is how material deliveries may need to be managed, where materials can (or cannot be stored) on site, and any time limits on when construction activity can take place on site.
Typically most private homebuilders should be able to start building within 12-18 months of purchase, and complete within two to three years. In Europe councils sometimes impose fines if projects are not completed on time.
In most built up areas it is rare to allow private homebuilders to live temporarily on site; in rural areas attitudes are more relaxed.
Briefing Note Controlling the build-out of projects sets out further details.
Site security and Health and Safety
Site security and Health and Safety are also important considerations as numerous private homebuilders may be working near to each other. An overall site manager may be needed to help co-ordinate the private homebuilders, remind them of their health and safety responsibilities, schedule deliveries or arrange space to store materials. Those who service plots will also have legal obligations under the Construction (Design and Management) Regulations 2015.
Private homebuilders will also have different site access requirements to commercial developers – such as at evenings and at weekends – so it may be necessary to arrange for temporary fencing and a lockable site gate during the construction phase. Briefing Notes Controlling the build-out of projects and Health And Safety provide further details.
Managing build out
Be clear upfront about any rules you want to apply that govern the deadlines for completing construction work, living temporarily on site and permitted site working hours
The following Case Studies offer useful insight into the issues discussed in this Briefing Note:
The NaCSBA Research & Development Programme is funded by the Nationwide Foundation and aims to promote the self-build and custom build sector as an affordable route into housing for a greater number of people in the UK.
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