KEY LEARNING POINTS
- The total cost of all the infrastructure works on the first site was significant – around £450,000; if the council was doing it again it would find a simpler/lower cost solution to the drainage issues
- There were some challenges with VAT. The council did not want to have to charge 20 per cent VAT on top of the sale price, as this uplift would put many people off. On this project the council was able to resolve this, but on future sites it will use a third party to manage the sales so that it can avoid charging VAT
- On future schemes Stoke will not have ‘private auctions’. It feels – on balance – that it would be better to have more prospective purchasers present, to get the best return on the plots – even if it might mean more administration later on and a few (potentially) failing to proceed
- Greater clarity over precisely what is meant by a serviced plot, and who is responsible for what would help ‘novice’ self builders understand what they have to do (and pay for). A single site project manager might help to co-ordinate the work better
Stoke-on-Trent City Council has enabled serviced-plots for individual homes on land it owns in the Penkhull area of the city in order to attract inward investment from wealth creators and add to the diversity of new housing in the area. The council sees the plots as a way of helping to stimulate economic/regeneration activity.The first site produced six plots and all have been sold.
The council has identified 72 hectares of underused amenity space on its patch and has recently committed to provide a further three development sites for custom and self build. It is anticipated each will deliver between ten and 15 homes.
NUMBER OF PLOTS AND RANGE OF SIZES
This council-led initiative provided serviced building plots to attract wealth creators to the area. Six plots were delivered in this pilot scheme, and three further developments are now in the pipeline. The plots were sold at an average price of £98,500, and there was strong demand. Most of the homes are now complete and occupied.
Initiator: Public Sector
Affordability: High Cost
Built Form: Detached
No. Units: 6
For the purposes of this Toolkit we have made the following definitions:
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On the initial site at Penkhull six plots were provided: -
- 365 sq m (with a maximum footprint of 154 sq m for a new home)
- 393sq m (max 140 sq m home)
- 457 sq m (max 186 sq m home)
- 661 sq m (max 157 sq m home)
- 679 sq m (max 155 sq m home)
- 956 sq m (max 180 sq m home)
The City Council commissioned a report in 2010 to examine the potential for an ‘Executive Housing Market’ in the City. The idea to develop sites for Self-build was born out of this report.
The serviced plots initiative began in early 2012, when the council organised an open day/exhibition to explain the opportunity – more than 100 people attended this.
The formal planning application – which gave outline permission for the plots - was obtained in June 2013 and sales were conducted in December 2013 at a ‘private auction’ attended by people who had been pre-vetted to ensure they had the financial capability to buy the sites that were on offer. Around 20 people attended the auction.
The successful purchasers had to promise to submit their individual planning applications within six months, and they were required to complete the construction of their homes by the end of 2015.
Purchasers were responsible for submitting their own detailed planning applications for their individual homes. During the first half of 2014 these were all lodged with the local planners, and permission was obtained straight forwardly. The first home started on site in late summer of 2014.
All six homes had been build by early 2016.
There were some delays during the planning/getting-ready-to-build phase when one or two of the purchasers struggled to understand what a ‘serviced plot’ really is. So, for example, there were queries raised over the location of some of the utility service ducts that had been installed by the council, and debates over precisely who was responsible for linking to (or extending to) these. Greater clarity and really simple diagrams/explanations would resolve misunderstandings like this in the future. And an overall site project manager would have helped co-ordinate and streamline the process too.
LEVEL Of ‘SERVICING’ PROVIDED
The council provided a tarmac access road, (for the construction phase) with a simple kerb. Once all the homes are complete, block paviers will be installed. There are no pavements or communal areas of landscaping etc.
Water, electricity and gas services were provided to the edge of each plot. Foul drainage connections were also installed. Telecoms/data was not provided. The cost of the utility services was higher than anticipated – probably because it was a smallish site with only six plots. The provision of gas was complicated, with each of the six purchasers having to (initially at least) sign up to the one company.
Significant foul and surface water drainage works were required, and the attenuation measures required were extensive (and expensive too).
A simple post and wire fence was erected so the purchasers could visualise the extent of each plot. And temporary fencing and a lockable site gate was provided for security during the construction phase.
The council commissioned BuildStore to help ‘pre-vet’ those keen to be involved – to ensure they had the financial capability to fund their projects. At one stage the council considered hiring Buildstore to project manage the six plot purchasers – but for cost reasons it didn't proceed with this.
The approximate cost per site for the roads and servicing was roughly £50,000 to 55,000 each. This is high (typically one would expect to pay nearer £10,000 to 15,000 each).
The higher cost was partly due to the exceptional drainage works (which accounted for about £130,000 of the £450,000 total), and partly due to the high specification of the road (for example brick paviers). Utility connections were also more costly than anticipated. On future projects the council would aim do something much more cost effective.
Greater clarity over precisely what is meant by a serviced plot, and who is responsible for what would help ‘novice’ self builders understand what they have to do (and pay for). A single site project manager might help to co-ordinate the work better.
Be wary of servicing costsThe cost per plot of servicing the land was very high in this example – more than £50,000 each. Check very carefully beforehand and we wary of unknown problems below ground
The one-acre site was originally acquired by the council for a road scheme that is now no longer progressing. As the land had been bought many years ago its value/cost was not considered in the overall budget for this initiative.
The council installed an access road (that has been adopted) to connect to another section of land to the south, so that this can be developed for additional housing in the future.
The council spent £450,000 on the infrastructure - there were some complex water/drainage issues to resolve, which accounted for about a third of this cost.
The site was surrounded by residential properties, and although it didn’t feature in the Local Plan there were no issues involved in getting a change of use to residential.
More than 100 people attended an initial open day that launched the initiative.
The really keen ones were put in touch with specialist self-build mortgage broker BuildStore so it could check what they could realistically afford to spend.
Twenty people went on to attend a private auction, having been financially vetted for their ability to pay.
At the time the local authority did not have a formal Register in place.
Millions of people want to build a homeThere was lots of interest in the plots, with around 100 people attending an exhibition and 20 bidders for the six plots on offer
Each plot had a reserve price of £75,000. This figure was suggested by the agents handling the sales. A total of £591,000 was raised across all the plots: -
- Plot 1 secured £105,000
- plot 2 went for £89,000
- plot 3 raised £124,000
- plot 4 sold for £117,000
- plot 5 achieved £81,000
- plot 6 went for £75,000
The prices achieved where mostly around £180–250 per sq m (though one large plot – Number 6 - went very cheaply – at just £78 per sq m).
This particular plot had more challenges than the others – for example a number of trees, and it was on a slope. Nevertheless Stoke feel the price achieved for Plot 6 was lower than anticipated, and in future it would sell the plots via general open-to-all auction.
Plot purchasers also had to pay 20 per cent VAT on the plots (and Stamp Duty on the plots that sold for more than £125,000). The VAT is expected be reclaimed by the purchasers at the end of the construction phase.
The council found the VAT issue challenging because, in delivering infrastructure works where it incurs VAT on the costs, the tax could be seen as being attributable to a VAT exempt disposal of a “serviceable development plot” to a self builder. Consequently, the VAT incurred on such infrastructure works may have caused a breach of the Partial Exemption de minimis threshold for some authorities.
On future sites, the council may use a third party to manage the sales so that it can avoid charging VAT.
MARKETING AND SALES
Most of the marketing was co-ordinated by BuildStore, who charged £15,000 (this included the pre-vetting of potential purchasers to check they could fund their projects). BuildStore relied mainly on PR to promote the scheme, plus the public open day/exhibition.
The plots were disposed of at a private auction that was run by Butters John Bee, who charged the council a negotiated fee. Purchasers were required to pay a ten per cent deposit on the day of the auction. They then had to pay the rest when they got planning permission for their homes (rather than the normal 28 days). The council offered to buy back plots at the cost paid (minus any legal costs) if a purchaser failed to get planning, or couldn’t raise the funding required, or if similar unforeseen set backs were encountered.
On future schemes Stoke will not have ‘private auctions’. It feels – on balance – that it would be better to have more prospective purchasers present, to get the best return on the plots – even if it might mean more administration later on and a few (potentially) failing to proceed.
All of the original purchasers have managed to progress their projects and everyone has paid for the land.
The council didn't have to fund the purchase of the land – it had been in its ownership for many years.
The total cost of all the infrastructure works on the first site was £450,000; this was funded out of the council’s capital works account (and re-paid when the plot purchasers were completed). The cost of servicing each plot was about £50-55,000. As explained earlier, there were some good reasons for this and in future the council would expect to do it for a lot less.
There were no special discounts or subsidies for local residents or key workers, or people on low incomes/housing waiting lists.
The Hanley Building Society was supportive of the project and a number of the purchasers ended up with mortgages with the Hanley, arranged by Buildstore.
The local planning department was supportive of the project. There were some anxieties raised about the prospect of six quite different homes being built on the same site, but the planners were relaxed about this, recognising this diversity is what you get with individual home builders.
Four of the homes are fairly traditional in style; two are more contemporary. Two are arguably a bit ‘ordinary’ and show limited design flair.
There is no Design Code, but the areas where the properties could be built was identified on each plan and there was a two to three storey height limit.
There were no requirements to build to a certain minimum Code for Sustainable Homes level – just to comply with Building Regualtions. However, most of the new homes will be well insulated, above Building Regulations standards, and there is a strong commitment to air tightness, passive solar gains/high thermal mass and quality workmanship. All of the homes are being built using brick and block construction techniques – there is no offsite/modular/kit home construction involved.
Purchasers were not allowed to live on site (eg - in a caravan) during construction. But they have worked with their neighbours to ‘borrow’ space off each other to store materials during the construction work. And the group has also jointly commissioned some surveys and reports (to save costs). So, for example, they had one ground survey done, and one ecological report – and they’ve used these documents to support all their individual detailed planning applications.
Encourage design diversityMost people who want to build a home want something that is bespoke. The planners here were quite relaxed about the wide range of homes that were built
OWNERSHIP AND LEGALS
The purchasers all own the freehold on their plots – although the six owners have had regular meetings most weekends and have co-operated well and supported each other.
There are no communal facilities or shared areas of landscaping – the council was keen to avoid these as it didn't want to have an on-going responsibility for maintenance. The main access road has been built to the requisite standard so that it can be adopted by the local authority.
The owners fall into two broad sub-groups – couples in their 30’s or 40’s (still with children living at home) and those in their late 50’s/60s (some still with live-at-home children, some without). All are on incomes levels higher than the norm for Stoke on Trent.
None of the families are doing a DIY self-build – all have hired an architect, and then a main contractor to deliver their project. Two of the families have a link to the construction sector – one is a builder, one a construction consultant.
Three families could be described as ‘novices’ and they have taken longer to climb the learning curve and get their projects on site. The two with a link to the sector were among the first to start building work. The other family found a good consultant to assist them and this has helped them to get on site briskly too.
Purchasers of the plots could be from anywhere (no prior local connection was required), but they were expected to commit to stay in the Stoke area. They could not build and then let/rent out their new homes – there was a covenant attached restricting this. There was also a restriction that limited the acquisition of just one plot per purchaser.
Purchasers were responsible for carrying out all necessary searches, and surveys.
This case study was compiled with reference to the following sources:
Phil Brundrett – Programme Manager, City Renewal, City of Stoke-On-Trent
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