Delivering Sustainable Affordable Homes

Vivian Rosser

Sustainable Construction Oxford18 November 2009

Overview…

• “sustainability” in its widest sense

• impacts on delivery of housing

• what’s actually being delivered

• new development economics

• the impact of sustainability targets

Impacts on housing delivery….

• credit / tighter lending criteria• mortgage lending• falling values and land values• fewer sellers / purchasers• Unemployment / repossessions• anticipated public spending cuts• affordability / demand • political turbulence

Which means…

• loss of house building capacity and skills

• some RSLs & Developers out of the game • falls in new starts & completions

• some large schemes stalled • fewer buyers, less confidence

…this is fundamental, not a correction

and the result of this is…

• government target of 240,000 homes a year by 2016

• 75,570 housing starts 12 months to June 2009

• affordable completions projected 61,500 in 2010

• affordable starts 2010 29,900 of which only 14,500 social rent

….for the three years to 2011, the affordable housebuilding target was 156,000, but looks like only 116,000 will be achieved

…only c 80,000 starts 2009 (DCLG)

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000Starts

Completions

The picture in Oxfordshire...2008/2009

Oxfordshire County Council: 997 273 1,270 1,569 359 1,928

Cherwell District Council 160 63 223 167 50 217

Oxford City Council 218 113 331 398 217 615

South Oxfordshire District Council 107 25 132 128 39 167

Vale of White Horse District Council 318 31 349 515 5 520

West Oxfordshire 194 41 235 361 48 409

LA Area Private RSL ALL

Private

RSL All

STARTS COMPLETIONS

So what makes projects “sustainable” now?

…risk management and due diligence were focused on legals, and project quality and delivery – but now must be acutely about:

• marketability - is there a demonstrated local market?• saleability - are mortgages going to be available?• quality of customer base - are the right customers for the

products you are offering available in the local market?

… its not a financial model exercise about what “works” for the economics of the site and then who the client needs to be to fit – to be sustainable, its what is the client range, what can they afford, and work it back from there into your model…

Development economics have changed…• lower end sales values (market sale and shared ownership)• fewer purchasers• standing stock still to sell • tighter funding criteria for developers• lack of confidence

….means land values have fallen and landowners are not bringing land forward for development, which has impacted affordable housing delivery (S106)

and on top of all that…

…will the new sustainability requirements impact further on development economics and further restrict supply?

The Code for Sustainable Homes…

…is an environmental assessment method for rating and certifying the performance of new homes. The mandatory items are targets around:

• dwelling emission rates• water use• env impact of materials used• surface water run-off• waste storage and recycling• construction waste management

The CSH targets…

YearMandatory Social Housing Target

Mandatory Private Housing Target

2007 Level 3 Voluntary

2010 Level 4 Level 3

2013 Level 6 Level 4

2016 Level 6 (zero carbon) Level 6 (zero carbon)

…and the costs of delivering this sustainability?

Cyril Sweet cost analysis for DCLG 2008:

Example: a new build terrace house in a market town:

CODE LEVEL Total additional cost % inc over 2006 Building Regulations

Code 3 £5,027 7%

Code 4 £9,490 13%

Code 5 £18,738 25%

Code 6 £31,747 42%

Cyril Sweet cost analysis for DCLG 2008:

Example: a new build flat in a market town:

CODE LEVEL Total additional cost % inc over 2006 Building Regulations

Code 3 £2,922 4%

Code 4 £6,059 8%

Code 5 £12,267 15%

Code 6 £21,251 27%

so on the face of it…

…just when development economics for delivery of housing, and affordable housing, are being squeezed, Sustainability targets will add additional cost and impact viability further…

…or is there another way of looking at this?

Vivian Rosser

0870 777 7071