LendInvest: Now is the time for action

Now is the time for action




Like London buses, two separate inquiries into addressing the housing shortage have come along at once.

Over the summer, the Communities & Local Government Committee began an inquiry into the capacity of the homebuilding industry, while the National Housing Taskforce launched a call for evidence on supporting new sources of housing supply. Both closed to submissions last month.

It is enormously encouraging to see both organisations taking the issue so seriously and looking for practical answers to a problem that has been allowed to go on for far too long.

LendInvest has submitted responses to both, emphasising our belief that if the government is to deliver on its promise of one million new homes by the end of this parliament, it has to do more to support small-scale housebuilders.

Einstein said that the definition of insanity was doing the same thing over and over again and expecting to get a different result. Yet that is exactly what is happening in the housing market. Year after year we fail to build enough homes to satisfy demand in the UK. And year after year we look to the same small number of large housebuilders to build us out of this crisis.

This strategy is doomed to failure. That both of these inquiries specifically look at diversifying the sources of housing in the UK is a clear sign that the penny has dropped. More has to be done to encourage new, innovative firms to pick up the slack left by the building behemoths.

As we see it, there are three key areas that need to be addressed if we are to see small-scale developers flourish.

The first is access to land. Small-scale developers struggle to access land, and while the government has made positive noises about opening up public land for housing development, progress has been very slow. The pace of the release of this land to small builders needs to drastically improve.

Meanwhile, an investigation by The Guardian last year alleged that the nine largest builders have “landbanked” more than 615,000 plots. Developers should be compelled to allocate a portion of the plots from their larger strategic sites to small housebuilders, helping to stimulate the growth of smaller developers, while bringing forward the delivery of landbanked plots.

The second big issue is access to finance. Small-scale developers have precious few lenders to choose from, particularly since the credit crunch. If we are to have a competitive, fair and open market, then we need greater government support for alternative finance sources.

The final issue holding back the expansion of the number of small-scale developers in the UK are the prospective developers themselves. Property development is not easy – you have to keep dozens of plates spinning at any one time, and if one falls, it risks derailing the entire project. But building the full suite of skills and knowledge that you need to make a success of your project is not as simple as it should be.

At LendInvest, we are taking steps to address that skills gap. In November, we will be holding the first ever LendInvest Property Development Academy. This has been designed to provide those with some experience of the property market with the missing pieces they need to become property developers.

That means giving them the tools they need in order to accurately evaluate potential development sites and carry out the correct due diligence. It means guiding them through the planning system minefield, named by small builders surveyed by the National House Building Council in 2014 as the biggest business challenge they faced.

It also means giving them insights into budgeting, the different types of construction contract and project management options available to them. The fact that the course has attracted so many applicants already shows that there is a real desire to build homes.

Momentum is clearly building behind the small builders’ cause at the moment. It is vital that the government capitalises on it. Now is the time for action.

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