It’s all a little topsy turvy but the housing sector suggests that the traditional domains of single specialism expertise are increasingly of the past
We are not quite sure whether it’s now spring or still winter, and it isn’t clear if we are heading towards recession again, or just a softening of the housing market. Everything’s a little mixed up and the same can be said of housing provision and major repair contracting.
Margins for contractors are not in great shape, with reports of 2% to 3% considered good. While profits for housebuilders, particularly those involved in Help to Buy, such as Persimmon, reap bumper returns, housing associations are retrenching back to rent/grant homes and a less open market sale model of provision, driven by Brexit uncertainty and a clear slowdown in sales for open market and shared ownership homes. It seems that providers are adopting traditional roles again and there is consolidation in each sector.
However, this masks a more complex picture of increased cross-housing activity. The housebuilder/contractor model seems to be morphing to include registered provider subsidiaries.
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Housing associations such as L&Q, A2Dominion, and Peabody – which recently announced it will work with Lendlease on the £8bn regeneration of Thamesmead Waterfront in south-east London – have moved into the domain of the housebuilders and strategic land. They are acquiring large-scale, standardised house-type developments that would traditionally be associated with the likes of Taylor Wimpey or Barratt.
Large institutional funders and investment funds such as L&G, Blackstone and hedge fund Man Group have entered the affordable housing market, providing a new perspective on issues of delivery, affordability and tenure.
Joint vehicles are also increasingly featuring as a delivery model: housing associations including Notting Hill, Genesis Housing, Optivo and L&Q have teams setting up JVs, predominantly with major housebuilders and contractors.
Developer Hub is bringing sites such as Taberner House in Croydon and Abbey Place in Greenwich forward on a package basis in London for registered providers or institutions to invest in. They are acting as development managers in the main but also bring funding to secure sites.
Apex Airspace development have recently secured GLA funding to progress their development model of building on London roof tops (hence the airspace reference in their name). They aren’t delivering at a great scale and have relatively modest ambitions for the next 5 years but are one to watch.
In addition to Lendlease/Thamesmead, the likes of Argent Related are doing Brent Cross South and Tottenham Hale. Both Argent Related and Lendlease include sizeable Build to Rent elements to their portfolios.
We also have local authorities entering the market. Homes for Lambeth, 3,000 mix tenure homes built on existing council estates in the next 5 years, increasing the net supply of affordable housing. Interest that after initially keeping the company very close – another council department – they are now ‘setting it free’ to act more independently and commercially.
And then we have mid-tier housebuilders such as Hopkins Homes, Park Properties, Larkfleet Homes, following the likes of British Land in setting up their own registered provider.
But heading the other way, we are seeing an increasing number of housing associations moving back to inhouse major repairs contracting, setting up or re- energising direct labour organisations. Clarion, L&Q and Sovereign housing association in the south, for example, have all increased their inhouse capacity.
It’s all a little topsy turvy but suggests that the traditional domains of single specialism expertise are increasingly of the past. The future prospects are mix and simple diversification. Hedging against uncertainty is increasingly the norm.