KEY LEARNING POINTS
- It is possible to deliver group private homebuilding projects on high value city centre sites – provided the council is willing to offer opportunities to groups, and the groups have a good ‘enabler’ on board to steer them through the process
- On major sites councils should consider reserving a portion of the land specifically for groups. This will help to broaden the mix, tenure and affordability of housing that is built, improving the design quality and diversity of development and speed up housing supply
- Think carefully about the size of any plots that you reserve for groups – if they are too large it can take a long time for a big group to recruit members and get its finance in place. It may be more effective to split opportunities into a number smaller plots
- Time limited ‘exclusivity options’ on reserved plots enable groups to competitively tender for land and bring forward their projects.
Hamburg is one of Germany’s most desirable and expensive cities to live in.
In 2013, the average cost of a flat was €268,000 (a 49 per cent increase since 2004) and the average price of a detached home was €411,000 (up by 39 per cent during the same period). In Germany, these price increases are second only to those being experienced in Berlin.
On average Hamburg homes now cost between €3,700 and €5,600 per sq m (for comparison this is higher than most UK cities, but lower than London).
The City of Hamburg is very supportive of collective projects as it sees them as a way of diversifying the housing mix in the city and it helps improve housing affordability. This type of development also gives residents a greater say in the design and layout of their homes, and they can often be built for up to 20 per cent less than market housing built by developers.
The council’s Agency for Building Groups has overseen a large number of group projects - many of them in its flagship HafenCity dockside regeneration area. Annex 2 explains more about HafenCity and how the city council and the HafenCity development corporation supports private homebuilding.
So far around 2,000 homes (across 80 projects) have been built in the city by building groups (‘Baugruppen’ or ‘Baugemeinschaften’) and there are currently a further 20 projects in the pipeline that will deliver another 450 homes.
This case study illustrates a recent example – Baugemeinschaft Hafenliebe – in the HafenCity neighbourhood. The project was initiated and organised by Iris Neitmann, an architect and experienced building group enabler, via her development company – StadtLandFluss.
Hamburg is Germany’s second largest city (population 1.7m). The HafenCity neighbourhood is located right on the banks of the river Elbe, close to the historic centre.
HafenCity is currently the largest urban development project in Europe. The 150 hectare zone extends between the southern edge of the city centre and the Elbe and will eventually be home to between 10,000 and 12,000 residents, with jobs for around 40,000 people.
The Baugemeinschaft Hafenliebe project is located on the junction of Dalmannkai and Am Sandtorpark, right in the heart of the area.
This 54 apartment project demonstrates that it is possible for building groups to deliver financially viable projects on high-land value city centre sites. Initiatives like this work especially well alongside conventional developer-led projects, as they can broaden the range and tenure of homes that are provided.
Initiator: Public Sector and Private Sector
Built Form: Apartments
No. Units 54
For the purposes of this Toolkit we have made the following definitions:
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PEOPLE AND RANGE OF HOMES
The project provides homes for 93 adults and around 36 children in 54 apartments ranging from 35 to 170 sq m.
A one-bed apartment costs approximately €94,500 (about £71,000) to build and a four-bed apartment costs around €459,000 (about £346,500).
There are also eight commercial units and garage parking for 49 cars.
Apart from two rented apartments, the project is 100 per cent owner-occupied.
All the apartments are designed to low-energy standards and organised into four clusters - each with a common room with direct access to the shared garden as well as its own dedicated lobby with access to street and garden.
All ground floor flats have their own direct access to the garden, and on the upper levels each home has a balcony or access to a terrace.
The commercial spaces are between 40 and 260 sq m and include an art gallery, a café, offices and practice rooms (some are double-height with a mezzanine level).
On the eastern part of site, the council agreed a policy with the HafenCity development corporation that required a fifth of the parcels of land to be reserved for projects involving groups of private homebuilders – called building groups (‘Baugemeinschaften’). Only registered building groups can tender for these parcels, and groups must work with an experienced building group development manager (‘Baubetreuer’), and they need to be built out by a developer/contractor.
When the development corporation releases a parcel of land it specifies the required tenure mix according to its overall Master Plan. Sometimes parcels are subdivided into smaller blocks to make it easier for groups to bid. The public tender process is weighted in favour of the quality of bids: land is sold on a fixed-price basis.
The Hafenliebe development is located on a 14,000 sq m parcel of land that was allocated for mixed-use. Three groups were initially keen to tender for the land that overlooks a small park, but did not proceed given its proximity to a busy road. A local Baubetreuer (StadtLandFlus, led by architect Iris Neitmann) decided to apply to acquire half the parcel (7,000 sq m) to build a smaller, more manageable, mixed use development with commercial space that would benefit from the prominent location.
Different plots suit different groups
On larger developments try to provide a range of opportunities on different plots to fit the spectrum of groups that may be interested – for example identify plots that could suit families, older people, or people looking for live-work units. The mix within plots can be specified in the tender documentation
This project was initiated and organised by Iris Neitmann from StadtLandFlus – an experienced building group development manager (‘Baubetreuer’). She was invited to apply by the HafenCity development corporation due to her track record of delivering similar projects across the city.
In Hamburg all building groups need to be registered with the Agency for Building Groups and they must compete with other groups to acquire the land. Neitmann’s winning concept provided for three groups of people who typically find it hard to access good quality housing in Hamburg: -
- Young families on low incomes
- Older single people with limited funds
- Self-employed people, who have problems accessing finance
As the ‘enabling developer’ Neitmann recruited the group. Her architectural practice also designed the building and provided development management services.
Her development company – ‘StadtLandFluss’ – has retained a long-term interest as it rents out the commercial spaces and two of the apartments. She also personally owns one of the apartments and runs a small art gallery from one of the commercial spaces.
The vast majority of the apartments are owner occupied and contractually they cannot be rented. This is specified in the terms of the land disposal by the HafenCity development corporation.
Don’t offer blocks of land that are too large
Building groups often struggle to recruit enough members, and therefore generate enough funds, to bid for large sites. Plots of land that are suitable for groups seeking to build 15-30 homes are ideal. Larger plots can be split and tendered for separate group projects- making them more deliverable
DEMAND AND MARKETING
StadtLandFlus secured an exclusivity option (‘Anhandgabe’) to develop the site before the members of the group had been recruited.
Neitmann outlined the basic ‘concept’ set out in her original tender submission to the development corporation – the style of architecture, shared facilities, location and opportunities for customisation – and she used this to recruit group members. Brochures that showcased some of her company’s earlier projects also helped to convince people to join the group.
As they came on board she worked with each member to develop a personalised apartment layout (within a pre-determined structural system).
PLANNING, DESIGN AND CONSTRUCTION
The planning and development process
The site forms part of the wider HafenCity Master Plan and is allocated/zoned for mixed use and residential development in the legally binding B-Plan for the area. The B-Plan sets out the building lines, car parking provision, heights and the maximum permissible floorspace ratio.
StadtLandFluss initiated the project and forward-funded the work required to secure an exclusivity option from the development corporation. This gave it control of the development process and the initial design concept. Exclusivity options are a well-established tool used in Hamburg to enable building groups to bid for allocated publicly owned land.
The initial design set out the overall form of the building but left room for customisation by each buyer.
Once the exclusivity option had been secured – which took around 18 months –the private homebuilders were recruited and established themselves as a legal entity called ‘Hafenliebe GbR’ – the equivalent of a limited company.
The exclusivity option to purchase the site was then transferred from StadtLandFluss to Hafenliebe GbR at a point just prior to the application for a building permit, which would fix the design.
After the granting of the building permit by the city council, the group of private homebuilders became the ‘developer’ - supported by Neitmann in her continuing capacity as architect and project manager. The project started on site in March 2009 and took around 15 months to complete. The private homebuilders moved in August 2010.
The decision-making process during the design stage
As the project involved more than 50 families, design discussions were very structured – with some high-level decisions made by the developer, architect and representatives of the group as a whole, while others were made at lower levels, where details could be cost-effectively varied on a flat-by-flat basis.
Each of the four clusters of apartments that made up the scheme had its own ‘scrapbook’ of materials and layouts that set out the limited choices members could make. Neitmann says in her experience this is the most effective way to facilitate choice for private homebuilders – on some of her earlier projects she offered unlimited options and this made construction difficult to co-ordinate.
Members of the group had freedom to plan their own floor layout within a pre-defined structural system, and collectively they decided where the utilities should be located, as this required a common route through all the floors of the building.
Neitmann facilitated the process through to the application for a building permit. She says it is important to ‘freeze’ the design at this point, and to be very clear with the members that no further changes can be made after this stage.
An architectural competition is usually required for all blocks built in HafenCity – but Neitmann designed two of the four Hafenliebe clusters of apartments herself. This was a special permission granted by the city to encourage her to develop in the area. She collaborated with the neighbouring developer on the design and construction of the shared car park and podium garden - and together they managed the build phase, including sharing contractors. Neitmann says that this process was easy due to the detailed urban design specifications used across HafenCity, which is applied through the B-Plan process.
All of the architects involved in the Hafenliebe project worked with the architect of the neighbouring block across the street to the west – who they knew informally - around planning and daylighting issues.
The apartments are typically 12m deep, except along the eastern edge where they are 9m deep – this was modelled to provide the best sun penetration into the homes. All the bedrooms face the shared courtyard, protecting them from the surrounding roads.
The homes are very energy efficient, using about 33 kWh per sq m per year – this allowed the developer to access funding from KfW, a Government-owned bank which specialises in financial support for the construction of low-energy homes.
A simple menu of design options makes group projects easier to manage
Consider offering members of a group a limited menu of design options; and explain to them that the design has to be ‘frozen’ at a key stage. If you offer lots of flexibility, and try to take on changes after construction begins it could slow down project delivery and prove costly with contractors
Use Local Development Orders or Design Codes to give building groups clarity
LDO’s and Design Codes can clearly set out how a parcel of land should be developed to get planning and building permission - this helps building groups understand what they can and cannot build, and the mix of tenures they need to provide on a site to receive planning permission
FINANCE AND COSTS
The build cost was around €2,700 (just over £2,000) per sq m – so the total development cost approximately €15.9m (about £12m) for 5,900 sq m of floor area
When we visited in the summer of 2015, the project was valued at around €6,000 (just over £4,500) per sq m. To prevent property speculation, the legal agreement for the sale of the land restricts the resale of apartments above the development cost for a specified period (usually 30 years), and rental is prohibited.
About 90 per cent of the development funding came from commercial development finance from banks, with the rest topped up with an ‘energy efficiency’ loan from the KfW.
We understand that StadtLandFluss funded the construction works through commercial borrowing, with help from Hamburg’s own development bank (the IFB) and the group members obtained individual mortgages to buy the properties upon completion. We also understand that pre-development work was effectively done for free by StadtLandFluss, which accepted a deferred payment until development finance was secured. This was possible largely because of the reduced planning risk and absence of a requirement for detailed design work to be done before the site could be secured – a notable difference to conventional practice in the UK.
StadtLandFluss initially applied to purchase the site in 2005 and the development was completed in 2010.
ANNEX 1 - PROFESSIONAL SUPPORT
The project was facilitated by a Hamburg-based custom build development manager (‘Baubetreuer’) Iris Neitmann - a qualified architect who has worked on this kind of project since the mid-1980s. She describes her role as more like a ‘teacher’ than a technical consultant – and operates through a development company called StadtLandFluss.
In Hamburg, groups must show that they have appointed a Baubetreuer, who must be registered with the city council’s development bank (the IFB) and the Agency for Building Groups and have a proven track record of delivering projects. A range of consultants can fulfill this role, including architects, project managers and developers. Consultants like Neitmann are also allowed to provide design and project management (’Projektsteurung’) services on the same project.
The Baubetreuer’s objective is to secure an exclusivity option (‘Anhandgabe’) on behalf of the group of private homebuilders.
The Baubetreuer also facilitates the design process – including running workshops and briefing sessions for the private homebuilders. According to Neitmann the most important skill required is to make sure the development sticks to programme - as failure to do so is often the biggest perceived risk for lenders. She also says that Baubetreuer sometimes need to be the ‘bad guy’ who say ‘no’ to things that the group cannot afford.
Neitmann charges a fixed price for the work required to secure a site – the point at which the option for the land is signed.
She believes there is around 25 per cent more work required to organise a building group for ownership compared to a rented co-operative development.
For more about this kind of professional support you might want to refer to our Briefing Note on Help and support for groups.
An experienced group enabler should be a good ‘teacher’
Custom enablers need to be able to explain and clearly communicate the development process to groups
ANNEX 2 – HAMBURG’S APPROACH TO HELP GROUPS
City Council support for building groups
The City of Hamburg has maintained a municipal department – called the Agency for Building Groups (‘Agentur für Baugemeinschaften’) – to facilitate group private homebuilding opportunities since 2003.
The Agency provides the central point of contact for all building groups and asks groups to register their interest before they can apply to buy any land that is sold by the city. It also maintains an active online list of new groups looking for members, including contact information and project descriptions. The Agency also meets with groups regularly to understand their needs and to disseminate information about new land disposals, tender processes and eligibility criteria.
In addition the Agency advises on financial support and works with the planning department to steer planning applications through the consent process once groups have secured an exclusivity option. It also helps groups to find land and administers the disposal of council owned sites in co-operation with the estates department.
The chances of groups finding suitable sites have improved in recent years as the council applies a ‘20 per cent rule’ across larger development projects like Mitte-Altona and Baakenhafen-Quartier/Eastern HafenCity. This means that a fifth of the city’s larger projects are effectively ‘reserved’ for building groups.
The Agency also facilitates exclusivity options for groups to buy land from private/institutional investors.
HafenCity - which translates as ‘harbour city’ - is a redevelopment of a former dockland site. Regeneration is on a large scale, involving 155 hectares of land around €5bn of private investment and some €1.2bn of public money.
The initiative is internationally recognised for its innovative approach and the quality of the end result.
The overall HafenCity development is led by a council-owned development company – HafenCity Hamburg GmbH. This organisation is also responsible for land assembly - about 70 per cent of the area was originally in city ownership.
The city-state parliament passed a new law that allowed for the creation of a ‘City and Port’ special fund, for both the HafenCity redevelopment and the creation of a new container terminal further along the Elbe River.
The city’s land was transferred into this fund. HafenCity Hamburg GmbH was then able to secure borrowings (using the land as an asset) to finance the construction of the new container terminal.
The fund finances the infrastructure – road building, bridges, public space, flood defences, marketing and relocation costs for existing businesses – while a subway line extension, schools, university buildings, a concert hall and museums have been financed by various city-state departments.
Land sales within the new development area are used to finance the running costs of HafenCity Hamburg GmbH, and to pay back the borrowings.
It is estimated that this approach has resulted in public investment of around €2.4bn, which has leveraged in additional private investment of around €8.4bn.
Building groups are considered an essential element of HafenCity. As part-builder and part-homeowner, groups are seen as important stakeholders because they help develop community cohesion. They also build homes for their own use, not for rent or for resale to third parties.
Two types of building groups are encouraged: -
- Private building groups who own their own property
- Building groups who set themselves up as a co-operative, or work in partnership with an existing co-op
The City’s role
HafenCity Hamburg GmbH is operationally independent of its owner, Hamburg city council.
The city council’s role is to devise legislative and policy measures to enable HafenCity Hamburg GmbH to function effectively. A state commission within the city council is responsible for the approval of development plans, urban design guidelines, and building permits.
The model of financing is very robust in the long-term – as rising costs can be recouped, for example, by increasing future building densities – and this allows the state-owned development company to operate confidently without the need to change course substantially in the face of short-term changes in economic conditions.
The intention is to use public investments and institutions to deliver an acceptable rate of return for private developers within a template that safeguards social and environmental objectives such as the provision of public spaces.
The Master Plan
The HafenCity Master Plan identifies and locates different quarters, and defines plot sizes and permissible building densities. The plan was prepared jointly by the city council’s departments for economic and urban development and has been modestly adjusted over time as sub-districts have been further developed.
Competitive tendering – concept over price
In HafenCity plots are not auctioned to the highest bidder but are awarded on a points system with 30 per cent of the points linked to the price offered.
The other 70 points are awarded depending on how well the design responds to the tender document specification - for example, such features as energy efficiency, public space, the proportion and mix of affordable homes provided and the scheme’s architectural quality.
Site-specific tender documentation clearly sets out the selection criteria. For example, the criteria in the Baakenhafen quarter are: -
- The sale of plots is based on the best consideration principle of 70 per cent concept and 30 per cent price
- Bids below €430 per sq m gross floor area are not accepted
- Funding guidelines of the Hamburg IFB apply (for example, restrictions relating to tenure types and income thresholds of group members)
- Open market sale prices of private homes in building group cannot exceed €3,300 per sq m of living space
- Rental of homes is only permissible where specifically provided for in the Master Plan and tender documentation for each plot
The Agency and HafenCity has set up a digital "Building Group Exchange" which enables groups to jointly bid for larger sites and exchange information.
Option to Build
Once the preferred bidder has been identified an exclusivity option to buy is granted, conditional upon the payment of a non-refundable deposit of one to three per cent of the bid price.
The successful bidder then usually has between 18 and 24 months to fully complete the land purchase and commence development.
Key elements of the exclusivity option are: -
- Groups apply to the Agency to be considered for a plot using a standard form (agents/private investors/developers cannot apply)
- If several applications come forward for a specified site, the Agency selects the preferred group according to the criteria established by the council, as well as any site-specific criteria
- When a preferred group is selected the council’s estates department works with the Agency to prepare the contract for council approval
- If approved the group secures provisional ownership of the site so that it can bring forward a detailed project design. Groups select an architect to develop a design for their building. An architectural competition is only applied in exceptional cases, such as for plots in the HafenCity or other sensitive areas
- The option is generally valid for one year. This gives the group time to secure finance and building consent
- To access finance the Agency appoints a building group development manager (Baugemeinschaft Baubetreuer)
- Land sale takes place immediately before the start of construction (once planning permission and funding is in place). The sale is administered directly with future homeowners (not through third parties)
Funding the infrastructure
In HafenCity infrastructure and public space is financed by the development as a whole, and recouped through the plot sales price – with contributions assigned on a plot-by-plot basis proportional to the advantage its developer is likely to achieve.
Offer opportunities based on quality as well as price
Councils have flexibility to sell land at less than best consideration, which means they don’t need to achieve the highest price for land they want to dispose of. Consider selecting proposals that are based partly on the price offered, and the wider qualities provided by the scheme
This case study was compiled with reference to the following sources:
Frau Neitmann – StadtLandFluss/Neitmann Architektin
Marcus Menzl - HafenCity
The following Case Studies offer useful insight into the issues discussed in this Case Study:
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.
For further information, please visit:www.nacsba.org.uk or www.selfbuildportal.org.uk