Building Talk:Yesterday Leeds housing boss Coun Peter Gruen accused builders of being ‘too slow’. Today, volume housebuilders hit back. interviews by Neil Hudson
Plans to build 5,000 new homes in Leeds are on the brink of being realised but councillors say if the East Leeds Extension is to happen volume house builders must commit to a £100m extension to the ring road, a scheme known as the East Leeds Orbital Route (ELOR). Added to which Leeds housing chief Coun Peter Gruen accused them of not building quick enough on approved site.
Miller Homes said...
Steve Birch, Area Managing Director for Miller Homes North, commented: “We were disappointed to read Councillor Gruen’s comments about the pace of building in Leeds and the lack of quality new homes available as in our experience it is in fact the onerous planning process and lack of decision-making by the local councillors which is greatly exacerbating this problem.
“It is always our intention to get on site and begin building as quickly as possible, but unfortunately the planning process in Leeds often takes much longer than the standard 13 weeks it should. This has been the case with our proposed development at Boston Spa, submitted in July 2013 and remains undetermined, and also in Wetherby, where our application for a brownfield site has yet to be determined despite being submitted in January this year. The appeals process is both costly and time consuming but we are simply left with no alternative.
“The Councillor also has misinterpreted housebuilders’ financial model. Housebuilders need a 20% gross profit, but much of this is used to cover overheads and interest. Reinvestment in new sites to sustain the business and the future of new homebuilding is also essential. Homebuilding is one of the only sectors where our raw material – land and, more specifically, land with planning permission – is restricted by external factors sometimes well beyond our control. In addition, what many local councils and councillors fail to grasp is that home building is a cashflow business with significant land and development costs up front before we can sell a single house. Comparing housebuilders with other businesses in Leeds is not comparing like with like. A 20% gross profit is accepted by central government and the planning inspectorate as being satisfactory; and it is also accepted by most local authorities when scrutinising viability proposals, including the District Valuer.
“To help ensure potential homebuyers can make a move onto or up the property ladder, we offer government-backed schemes, such as Help to Buy, and have also developed a number of our own incentive schemes for those who meet the qualifying criteria. As Councillor Gruen will know as it is his Council’s own policy, planning consents on housing sites require a percentage of affordable homes and we work closely with housing associations to provide homes for all sectors of the housing market. However, without the planning consents we cannot help Leeds meet its requirement.
“The homebuilding sector is a major source of new jobs and the benefits of new homes go well beyond each individual scheme, invigorating the whole housing market as people move and invest in new purchases for their home and make use of local services. Furthermore, housing is the key to wider economic growth and prosperity. To attract good inward investment to Leeds, good quality housing across the spectrum is needed both for local people and for people moving into the area.
“We fully recognise the benefits more homebuilding provides to communities both economically and socially and are willing to further engage with leaders to expedite this, but it is our view that Leeds City Council is simply not facilitating the building of enough new homes and despite the rhetoric from Councillor Gruen on this matter we do not believe the situation will improve until significant changes are made to the planning process.
“The government’s National Planning Policy Framework states that Local Planning Authorities should maintain a five year continuous supply of housing, and Councillors must ensure that they are taking this responsibility fully on board.
“It was reassuring to hear that the government has obviously recognised the difficulties being experienced in delivering development and has consequently launched a wide-ranging consultation designed to bring reform to the planning system. We hope the outcome of this will bring about the changes required to improve the process for everyone involved.”
Persimmon Homes said...
Wayne Gradwell, managing director at Persimmon Homes West Yorkshire believes the company has at both a national and local scale successfully weathered the turbulent housing market storm of recent years and is focused on building new homes to meet increasing public demand.
He said: “Trading for the Persimmon Group’s first six months of this year has been strong with total revenues increased by 33 per cent to £1.2bn compared to £0.9bn in 2013.
“Nationally, the business legally completed 6,408 new homes in the first six months of 2014, a 28 per cent increase on the same period last year and this success has been mirrored in West Yorkshire
“This is welcome news, and here in West Yorkshire the mood is optimistic. We have already begun building at four new developments across the region this year with construction starting at an additional four sites in Wakefield, Castleford, Penistone and Morley later this year; provided of course that the respective local planning authorities make a positive decision on submitted applications.
“Every extra home we build leads to more employment, both directly at Persimmon Homes West Yorkshire as well as within a diverse range of suppliers across the region.
“Until 2011 Leeds City Council had resisted new development of allocated greenfield sites, which has had a direct impact upon the supply of new and affordable homes within Leeds. Now the planning situation has changed so we have sought to increase our capacity to reflect this and the market’s demand for new homes. It is important to note however that the group’s capacity to increase production is also limited to the ability of our suppliers, both in respect of materials and labour, to match such increases. In criticising the pace of development commentators are seemingly placing the blame at the door of the volume house builders without thought as to the wider supply chain.
“The notion that a developer actively holds back land and housing sales is nonsense – during 2013 in the Leeds area alone we sold 88 new homes at just our Robin Hood and Swarcliffe developments. With the launch of our new developments at Whinmoor and Morley earlier this year we expect to deliver 170 new homes to our purchasers by the end of 2014 in the Leeds urban area. This figure includes a challenging target of in excess of 50 new and affordable homes at our Daisy Hill development in Morley.
“As part of the East Leeds Orbital Route (ELOR) Persimmon and two other parties submitted an application to develop a new community which will include 2,000 houses, a primary school, local centre and open space in June 2012. More than two years later discussions are still ongoing with the council.
“Although that application is not yet approved, alongside our development partners we would anticipate delivering around 150 houses per year, which is more than double the 70 previously quoted, in the current market condition. This rate of sale is required in order to ensure that we meet the demand for new homes and delivery of the necessary infrastructure and the council are aware of our proposals in that regard.
“The property phasing, infrastructure and community gain will be clearly defined as part of the planning process agreed by the council and the developer at the outset; both parties are working hard to ensure that this opportunity for the city to expand its housing stock and community infrastructure is realised within the short term.
“This is an exciting project creating a new community which will benefit Leeds as a whole. We are hopeful that construction can begin in late 2015.”
The Federation of Master Builders said...
“Housebuilders can only build at the rate people can buy – to do otherwise would present a huge risk to any business….”
“It could also threaten the wider housing market. The key to increasing build rate is increasing demand through policies such as the Help to Buy equity loan scheme that allows people who can afford to buy with a 5 per cent deposit.
“The biggest constraint on supply in recent years has been the large deposits required to secure a mortgage that were simply unaffordable for most people – and if people can’t buy, builder can’t build.
“The other key factor is delivering enough land through the planning system to meet the increased level of build of new homes. This includes ensuring there are an adequate number of outlets in a particular region, so providing choice for home buyers and allowing builders to increase build rates on more sites.”
Leeds North West Lib Dem MP Greg Mulholland said...
“There is certainly a need for more housin, but the right balance must be struc k- the planning system as it is does not work for local people and is heavily tilted in favour of developers.
“For a start, developers simply should not be allowed to landbank. The National Planning Policy Framework’s requirement for councils to show a five-year supply of housing land then leads to green belt land being threatened, while developers are still building nothing or little on sites they have already received permission to build on.
“With Leeds City Council planning to build 70,000 houses, Green Belt land is being threatened while many brownfield sites around Leeds remain untouched. This was the very green space we proudly showed to the world as the backdrop to the start of the Tour de France. So we need to look at amending the planning system to penalise developers who are building too slowly and also to incentivise them to build on brownfield sites first. On the latter, currently you have no VAT charged no new builds while VAT is charged on renovations, so this needs to be looked at.”
He added: “Developers also need to plan for infrastructure - otherwise schools, roads and GPs will be completely congested if you suddenly have hundreds more people living in a particular town or village.
“Iironically we need to tighten the planning system to ensure we get the houses built where they are needed, not just expensive homes on greenfield sites.
Luke Gidney from Let-Leeds said...
“I can appreciate that there could be some improvements to the way in which house building is carried out.
“But I do not think the house builders are looking to drip feed houses onto the market. House builders are building to sell. Nothing else.
“Having worked in the house building industry, I know that if these firms have invested in a site, a workforce and materials to build houses then all they want to do is build them and sell them. They invest a huge amount of time and money in building houses and, for that reason, I do not see why any of them would deliberately slow down sales. It would be a dangerous approach to take and I don’t think it is a business model that would work.
“As regards a 20% profit margin on houses, I do not find that a major problem. Considering everything that has gone into creating the house and the risks the house builders have to take when making such huge investments, I can’t say that a 20% profit is unjustifiable.
“What does need to change is the situation where we only have six or seven large, national house builders and no real opportunities for smaller firms to find a place in the market. Smaller firms are finding it hard to secure funding and it would be good if the government and the banks could address this.
“At the moment, we have the big builders looking to build homes in huge numbers on very large sites. Yet there are smaller, brown field sites that are going unused because the big companies are not interested in building on them as they cannot create enough homes on them. Such sites would be ideal for smaller firms – if they could gain the funding.
“It is also worth noting that a large proportion of the issues created, and the immense backlog of homes required, is actually due to local councils and stringent planning laws that have turned down a large number of good, quality sites. This has caused a shortage of housing which has then helped create huge house price inflation.”
Responding to a query about Government funding for the ELOR, Coun Gruen said...
“The Leeds City Region (LCR) Growth Deal was agreed between government and the LCR Local Enterprise Partnership in July 2014. The deal includes Local Growth Funding for investment in housing and regeneration projects across the city region including in Leeds £1.1m to assist the remediation of brownfield housing sites in Seacroft and £4m to assist in the relocation of the Red Hall Nursery and Depot, which will provide land for the route of the East Leeds Orbital Road (ELOR).
“The City Deal also confirmed funding for the ‘West Yorkshire Plus Transport Fund’, a £1bn fund to support the delivery of strategic transport schemes across the region that will contribute to economic growth. The ELOR is identified as one of the initial priority schemes in this programme, though the funding to be made available will still be subject to a detailed business case, work on which has been started by the Council. This follows on from initial feasibility undertaken in 2013, which estimated the scheme cost at £74.5m. The feasibility work and further work to enable the business case to be developed and submitted has been pre-funded by Metro (now part of the West Yorkshire Combined Authority), with £1.31 made available for this purpose.”