How do we tackle the development slowdown?

Steve Larkin, Director of Development Finance, LendInvest

One of the current frustrations of the housing market is the significant number of development deals being delayed, rather than pushing on towards completion.

Last month, Blane Perrotton of Naismiths organised a roundtable event, hosted at LendInvest offices and attended by lenders Maslow, Octopus, Shawbrook, Paragon, Close Brothers, Zorin and LendInvest to look at just what is causing developers to sit on deals rather than proceed now when they have the opportunity to deliver the homes that so many buyers are desperate to see on the market.

From that discussion, it seems clear that there are a handful of factors which are all contributing towards this hesitance in the development market.

Keeping cautious

Perhaps unsurprisingly, the number one reason is the general caution that has gripped the market as a whole. It seems like caution has been the buzzword to describe the housing market for a couple of years at this point, but that doesn’t make it any less appropriate.

And with Brexit fast approaching – and still precious little detail about just what post-Brexit Britain will actually look like – this sense of the unknown is causing many to really double down on the ‘wait and see’ approach that has become so prevalent.

This may actually present an opportunity for those developers brave enough to bite the bullet and proceed with their projects though. The fundamentals of the residential housing market remain strong – and by progressing with developments in areas where there is a ready market of buyers, it may be possible to take advantage of this relative stagnation and secure an excellent deal.

The problem with planning permission

The Government’s attitude towards the housing situation, recognising that real action is needed today, has been welcome. But while it has made plenty of positive noise on improving the planning process, to date this still feels a long way off.

It’s still often too difficult, time-consuming and expensive for small developers to get the planning permission they need in order to get on with their projects.

Therefore, it’s little wonder that developers are less inclined to push on until they are convinced that the stars have aligned and everything is set.

An inconsistent quality

The roundtable discussion revealed some concerns too with the quality of the developers who are coming forward with project plans. Whether this is down to a simple lack of the necessary skills or some would-be developers thinking they spot the chance to make a quick buck is open to debate, more often than not, this is down to the developers lack of experience in being able to deliver the scheme.

At LendInvest we are very clear that the only way we are going to tackle the housing crisis is by ensuring that small and medium-sized housebuilders once again play a key role in producing more of the nation’s homes.

And in order to do that, we need to ensure that those who are keen to try their hand at development are equipped with the skills they need in order to make their projects a success.

How do we fix this?

Identifying the issues which are clogging up the housebuilding process is only the first step though. How can we clear this blockage and get things moving again?

As an industry there is not a lot we can do about the uncertainty caused by Brexit, but we can do more to push the government to give the planning system the shake-up it so desperately needs in order to get things moving quickly.

Similarly, lenders need to continue to focus on lending only to credible developers – those who take their responsibility seriously and bring the professionalism needed – while supporting efforts to bring through the next generation of developers.

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