Q What impact will Housing Strategy measures have on housebuilding? 

A A host of initiatives have been announced by the Government to promote housebuilding in England, alongside parallel initiatives in Scotland and Wales. Mortgage Indemnity Guarantees (MIGs) will see the Government and developers share the lender’s risk on 95% loan to value (LTV) mortgages on new build property, with provision made to facilitate up to 33,000 new home purchases each year until the end of this Parliament. 

In addition, the £400 million ‘Get Britain Building’ fund is designed to support building firms in need of finance. The intention is to unlock development of up to 16,000 new homes. 

By 2016 we expect to see new housing completions increase to 125,000 per annum, as market capacity increases slowly, together with support from Government measures, partially offset by a lower volume of affordable housing under the new system of affordable housing (see Graph 5.1).

Q …and what influence will these fresh measures have on land value? 

A Increased levels of housebuilding should increase demand for land. While this will continue to focus on smaller, more easily fundable sites, new housing strategy measures recognise the constraints on viability preventing many larger sites from being developed. 

Proposals to allow developers to require local authorities to reconsider section 106 agreements that were agreed in more prosperous markets may unlock more land for development, while the £500 million 'Growing Places' fund will aid infrastructure delivery on land in Local Enterprise Partnership areas. 

It is these large, infrastructure-heavy strategic sites that have suffered the greatest falls in land value. These initiatives should make more of these sites viable, in turn boosting market value to a point where development can take place. 

Q Should the Community Infrastructure Levy (CIL) be considered an opportunity or a threat? 

A The new CIL will be charged at a flat rate across a local authority, or at rates that vary by either type of development or defined market area. It is potentially a very good way of funding the major infrastructure that is needed for development, to include roads, hospitals and schools. 

However, if it is set at too high a level it will stifle development, as once set it is non-negotiable at a site-specific level. This ‘one size fits all’ approach means charging schedules will have to be tested with a robust viability assessment before being finalised. These assessments are proceeding now, as the existing Section 106 system for pooled funding of infrastructure cannot be used by local authorities after April 2014. 

Those with an interest in seeing development happen, from both the public and private sectors, must ensure the viability assessment is based on realistic assumptions that reflect market realities.

Taken from
Residential Property Focus Q1 2012