KEY LEARNING POINTS
- Recognise that you need a range of skills to implement an initiative successfully
- Consider partnering or sharing resources with other organisations to create a cost-effective multi-disciplinary team, or outsourcing work to the private sector
- Wherever possible factor your operational costs into the sale of serviced building plots
- Remember that Government ‘new burdens’ funding has been made available to councils to support the Right to Build
Almost every initiative to promote private homebuilding will have resource implications – whether this involves setting up and maintaining the statutory Right to Build Register, monitoring the responses, developing and introducing planning policies, facilitating the delivery of serviced plots or supporting a group project. There are a number of ways councils can organise themselves to keeps costs down, and many projects will generate an income that should cover any additional costs that are incurred.
The Government has provided ‘new burdens’ funding to councils for both the costs involved in setting up and maintaining the Register and in delivering the requirement to ensure there is sufficient permissioned and serviced land to satisfy demand on the Register. The funding is not ring fenced but there is a clear expectation that it should be spent on its intended purpose.
This Briefing Note provides advice on how to set up your team, and the most appropriate structure to adopt.
WHAT SKILLS WILL YOU NEED?
This will depend on what it is you are aiming to do, and the scale of the initiative you have in mind.
For example some councils may simply want to focus on delivering their statutory responsibilities under the Right to Build legislation and preparing planning policies that help deliver more opportunities for private homebuilders , as advised by the National Planning Policy Framework. This would normally have minimal resource impact because of Government ‘new burdens’ funding and is within the remit of a local authority’s statutory planning functions.. This approach would normally have minimal resource impact as it will form part of a council’s wider policy-making function.
Other organisations may decide to directly facilitate the delivery of building plots on their own land, or by working jointly with landowners or enablers, and this will require a range of skills and expertise, including: –
- Land acquisition/property development
- Planning and development management
- Infrastructure and utilities procurement
- Marketing and land sales
- Finance, admin and project management
On a small project – say a development of 10-20 serviced building plots – the resource needed will typically equate to about one full time member of staff (working over a three year period). In reality though it will involve maybe six or seven people with different skills and expertise working for part of their time throughout the duration of the project.
For a much larger project or initiative, involving say 50 or more opportunities a year, it may be cost effective to establish a dedicated full time team, including a Plot Shop – see Briefing Note Setting up a ‘Plot Shop’.
In the Netherlands, where they have considerable experience on initiatives like this, the average ‘overhead’ cost for the team they create is in the region of £10,000 to £15,000 per plot facilitated.
This ‘overhead’ includes the salaries of the various members of the team, and the marketing and legal costs. It does not include the physical cost of servicing a site to create the plots. Technical guidance on the creation of serviced building plots and potential costs is available here – see Briefing Note How to deliver serviced plots.
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:
- ‘self and custom built homes’ are properties commissioned by people from a builder, contractor or package company (this is known as ‘custom build’ housing). When people physically build themselves, sometimes with help from subcontractors, this is known as ‘self build’ housing. We call all these people ‘private homebuilders’.
- ‘serviced building plots’ are shovel-ready parcels of land with planning permission, laid out and ready for construction with access and utilities/services provided to the plot boundary. Some private homebuilders just purchase a plot; others opt for a ‘shell’ home (that they then finish off), or they select from an extensive menu of options offered by developers/builders.
- ‘group projects’ mean homes built by private homebuilders who work as a collective.
Statutory definitions are provided in section 9 of the Housing and Planning Act 2016 section 9 which amends the Self-build and Custom Housebuilding Act 2015.
Resource to match your initiative
Recognise the range of skills you’ll need for the approach you adopt and the scale of your initiative. Don’t underestimate the resources required to bring forward an initiative; and don’t expect existing staff to be able to fit in the additional work around their current commitments
ASSEMBLING A COST-EFFECTIVE DELIVERY TEAM
THE MAIN OPTIONS
There are broadly three main ways to resource a delivery team: –
- Establish a shared multi-skilled team to handle all the opportunities for a number of councils across a wider area
- ‘Outsource’ the delivery to the private sector
- Assemble a dedicated in-house team of full/part-time staff
For smaller initiatives the first two options are probably the most cost effective. For larger initiatives (for example those aiming to deliver 50 or more plots a year) it may be worth building a (mostly) full time in-house team to manage the work.
A good example of where councils and housing providers have successfully pooled their resources to undertake a range of smaller projects over a wide area is the Highlands Housing Alliance. Here five small housing associations formed an alliance with the Highlands Regional Council to set up five-person team. On average this delivers around 200 new housing opportunities a year, right across the Highlands and Islands.
In Belgium 30 local councils across much of the Flanders region teamed up to establish a not-for-profit agency – Interleuven – which acts as an ‘Inter-municipal Service Association’ that provides expert support for all the councils on a wide range of infrastructure and construction projects. The agency has 70 staff with a mix of construction, property, road/transport infrastructure and planning skills. One strand of its work involves the provision of serviced building plots and support for group projects – in each case working in close co-operation with the council where the project is located. In a typical year the agency delivers 50-100 development opportunities.
In the UK public sector organisations could work together to establish similar structures to help pool resources and skills; perhaps working jointly with other councils, Local Enterprise Partnerships or organisations such as Improvement & Efficiency Social Enterprise (iESE).
Improvement & Efficiency Social Enterprise is a not for profit local authority mutual with members across England, Wales and Northern Ireland, and it is dedicated to creating improved public services that cost less to run. It has already worked with members to facilitate the use of Local Development Orders and has a strong track record of creating effective shared organisations. We believe it has the skills and capacity to help councils manage the creation and sale of serviced building plots and/or to help facilitate opportunities for building groups.
‘Outsourcing’ to the private sector
When a council does not have the skills or resources to manage a project itself one option is to outsource the work to the private sector. This can be done in a number of ways. For example you could hire a project or construction management consultancy to organise the delivery of a serviced plot initiative on your behalf. Alternatively you might just want to encourage local builders, developers and custom build enablers to get directly involved in the provision of serviced plots – either by directly bringing forward developments of their own, or by commissioning them to service land that you own, and then marketing the plots afterwards.
There is a separate Briefing Note on how to convince others to consider developing serviced plots – see Briefing Note Working with partners to facilitate opportunities.
Cherwell District Council decided to initially outsource the bulk of the infrastructure planning and services delivery work on the 1,900 home Graven Hill project to one of the UK’s biggest project management firms. The council has also commissioned marketing consultants to provide specialist support.
As the project developed the council initially set up its own in-house team and then established the Graven Hill Village Holdings Limited Ltd and Graven Hill Village Development Company Ltd to own and deliver Graven Hill.
Graven Hill Village Development Company has the same responsibilities as a standard development body, with the same onus on it to be commercially successful. In terms of finance, beyond the initial support funding from Government, the council acts as the banker for the development company, as it can borrow from the Public Works Loan Board when required, and then lends this on to the company at aid-compliant rates to ensure the council has no commercial advantage.
Creating an in-house team
In Europe councils have had more than 20 years’ experience of setting up teams to facilitate large-scale initiatives to help private homebuilders.
For example, in Hamburg the city council created a dedicated agency to facilitate and support building groups. This organisation identifies land and administers the disposal of it to groups, in cooperation with the council’s estates department. The agency has the equivalent of 2.5 full time staff. Since 2003 the team has successfully delivered 1,500 homes, and it has another 900 in the pipeline.
The ‘new burdens’ funding provided by Government – provides a useful resource to build a team around and should be seen as an opportunity to build the in-house expertise that can make a big difference to delivering more private homebuilding.
Berlin has established a similar agency that has four to five full/part time staff, and an annual total budget, including salaries, of approximately £200,000. Since the agency was established in 2008 this team has helped to facilitate around 300 building group projects that have collectively delivered approximately 3,000 new homes (this is more than 10 per cent of all the city’s new housing).
Amsterdam city council has six staff involved in its private homebuilding initiative – which is now delivering roughly 500 homes a year. The team consists of two full time managers, plus four part-timers with skills in planning, marketing, help desk/events and web.
The city council in The Hague has recently established a team of eight staff that is delivering 200-300 new private homebuilding opportunities every year.
Explore setting up a shared resource
Check what neighbouring councils are planning to do, and if it makes sense, cooperate to form a shared team
Hire in expertise
If you don’t have all the skills in-house it may make sense to hire in expertise from the private sector
Learn from others
Look at how other organisations have done it and work out the approach that is going to be right for your initiative
RECOVERING COSTS FROM THE SALE OF PLOTS
There are three main elements to the cost of delivering serviced plots: –
- The initial cost of the land
- The cost of servicing the land by providing access roads and utilities
- Your team’s overheads – covering everything from planning and legal costs, to marketing/promotion, and your team’s salaries
Clearly you need to be able to sell plots at the end of the process, but if the cost of these three elements adds up to more than the market value for a building plot in your area, you are going to be in difficulties.
It is therefore vital to develop a good understanding of the cost of plots across local area. When you come to sell your plots they must be competitively priced; indeed you may want to provide lower priced plots to service a local need for more affordable homes. This can sometimes be achieved by selling some of the larger plots at a higher cost per square metre, to cross-subsidise the more affordable plots.
The basic maths works like this. If a typical 500 sq m plot currently sells for £150,000 in your locality, and your overheads work out at about £15,000 per plot, and servicing/infrastructure costs come to another £15,000 per plot (these are broadly the target costs you should be aiming for), then you must be able to acquire the land for your plots for less than an average of £120,000 each.
It is also recommended to include a contingency budget of at least 10-20 per cent– as unforeseen extras are not uncommon when it comes to servicing building plots. So, in this example, your target might be to acquire land for the plots for a maximum of £100,000 each.
Prepare a costed business and resources plan
Gain a good understanding of local building plot prices, so you can develop a fully costed business and resources plan for your initiatives. Remember that two adjoining plots can have very different values, and that the cost of servicing plots can vary (and it can be almost impossible to calculate accurate estimates in advance)
GOVERNMENT SUPPORT THAT MAY BE AVAILABLE
In addition to ‘new burdens’ funding to support the Right to Build, there are a number of programmes that the Government has set up to support the creation of plots and private homebuilding projects – for example the
£3 million Home Building Fund, which makes large and small loans available for custom build projects involving 5 of more homes. It has also made available some £23 million community support funding under a new Neighbourhood Planning Support Programme which is available over the next four years, from 2018-2022.
A further £25 million is available through a Planning Delivery Fund to boost council planning capacity for the 2017/18 and 2018/19 financial years. The first wave of the new fund is administered through three funding streams which are available for councils to bid into – a joint working fund, a design quality fund and an innovation fund. Some £15.8 million was awarded in February 2018.
The Scottish Government has also made available a new £4million self build loan fund following a successful pilot of the scheme in the Highlands. In addition, a challenge fund is now open to support projects that will help planning departments develop ways to better respond to the needs of people undertaking a custom or self build home.
Briefing Note Government loans and grants provides more details.
The following Case Studies offer useful insight into the issues discussed in this Briefing Note:
Beauly, Scottish Highlands
Isabellaland, The Hague
Nieuw Leyden, Leiden
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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