<p><font face="inherit" size="-1">Much has been made of residential housebuilding targets and their futility, given the dynamics of the market.</font></p><br />The issues are simple in economic terms: there is a skilled labour shortage and material prices are fluctuating, which are serving to exacerbate the much-needed demand for increased housing supply. Notwithstanding this, sustainability requirements will place further pressures on the UK market. Something has to give.<br /><br />The UK has a diminishing resource of skilled labour. Residential housebuilding needs a step-change in terms of efficiency if it has a chance of boosting supply. Indeed, developers logically only build what they can sell and therefore are not necessarily incentivised to deliver more quickly than that. Unless future construction methods are part of local planning policy or incentivised through market pressures, it seems unlikely that private developers will drive the change.<br /><br />Increased efficiency<br />While the focus often falls on the private sales market, it is the burgeoning pipeline of build-to-rent units that stands to benefit most from any increase in efficiency. The demographics make sense for private rental sector investment and now, at last, the market is driving the supply chain.<br /><br />PRS developer and operator Essential Living recently announcing its intention to &lsquo;go modular&rsquo; &ndash; manufacturing building sections off site and then assembling them on site. This approach is often speedier, more flexible and able to deliver a faster return on investment.<br /><br />In fact, Legal &amp; General has built an offsite factory for mass timber modular units in Yorkshire that could supply thousands of apartments a year, including its own pipeline of build-to-rent projects. There are also other developers, both affordable and premium, that have shown interest in their own factories.<br /><br />It is vitally important for developers to consider material usage while focusing on modern methods of construction to increase housing supply.<br /><br />Mass timber is an alternative structural material where the thickness of panels range up to around 200 mm. It&rsquo;s a sturdy, precise material that&rsquo;s viable for towers up to 18 storeys. The vast majority of towers proposed in London are below 20 storeys and therefore could conceivably be built from this alternative material.<br /><br />Timber towers<br />A key example of mass timber construction designed to deliver both efficiency and long-term revenue generation is Regal Homes&rsquo; Dalston Lane project designed by Waugh Thistleton.<br /><br />The site, which will have High Speed 1 and Crossrail pass under it, chose cross-laminated timber as its material because it is lightweight and will also allow for a further two storeys of rental accommodation to be built on top. This is a great example of an innovative building approach with a tangible financial benefit &ndash; the ideal win-win.<br /><br />Mass timber provides a tangible solution to the housing crisis alongside both modular and volumetric construction. There is no panacea &ndash; that much is clear &ndash; but it is worth exploring on the majority of projects and in particular on build-to-rent schemes. Rents could be achieved more quickly due to the reduced construction programme, while financing costs would also be lowered, boosting development yields.<br /><br />We only have a limited pool of resources both in terms of human capital and finance, so we need to do more with less. This year has already brought an exciting shift to the UK&rsquo;s housing approach, particularly with new housing minister Gavin Barwell&rsquo;s welcome encouragement for offsite construction, but this is only just the beginning.

The Timber Solution For Private Rented Communities

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Much has been made of residential housebuilding targets and their futility, given the dynamics of the market. The issues are simple in economic terms: there is a skilled labour shortage and material prices are fluctuating, which are serving to exacerbate the much-needed demand for increased housing supply. Notwithstanding this, sustainability requirements will place further pressures on the UK market. Something has to give.

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<div>By Adam Challis, Head of Residential Research, JLL<br /><br />In my first proper job, I had the opportunity to help organise a sales conference for a carpet manufacturer. We called it the 'Wall to Wall Conference'. Thankfully my stint as a marketeer was short lived.<br /><br />I came across the same company many years later when analysing the purpose-built private rented sector in the United States. One investor/ landlord talked to me about the bedroom sizes, which were a specific width to fit a standard roll of carpet. Fewer cuts meant less wastage, faster turnaround between tenancies, and bluntly, contributed to more profitable buildings. The investor had thousands more homes planned, chock full of tiny tweaks to standard building practices that drove better returns.<br /><br />I like this little anecdote in the context of Space Standards, because it reminds me of how far away they are from serving any commercial purpose. On a good day they represent a planning simplification of what would otherwise be quite complex issues of design quality. On a bad day, they represent a lazy proxy for design standards.</div><blockquote>"Prospective purchasers knew where they wanted to be and would make concessions on other attributes of their wish list to get there. Turns out, unit size is less important than we think."</blockquote><cite>Adam Challis Head of Residential Research, JLL</cite><div><div>In conjunction with Pocket Living, JLL ran a research survey in 2015 to better understand what first-time buyers want. It turns out that space matters, but not that much.<br /><br />Out in front, by some margin, was location. Prospective purchasers knew where they wanted to be and would make concessions on other attributes of their wish list to get there. Turns out, unit size is less important than we think.<br /><br />It should be said here that Pocket Living delivers to minimum space standards, but by designing very clever and ergonomic homes, they are able to squeeze more value out of the space for future occupiers. That's good economy for the developer, but smaller units cost less, meaning they are affordable to a higher proportion of the population. By our calculations, in London that meant an extra 200,000 households.<br /><br />The point is worth repeating; smaller units are more affordable to more people. And in the right location, that's what they want.<br /><br />Said a different way, bigger most certainly isn't always better. I am also not convinced that a simplistic approach to space standards is relevant to the modern city dweller. Demographic changes are creating smaller household sizes. Later family formation, family breakup, and living longer (often alone) together mean that space requirements are changing. Let alone the housing affordability challenge, which is set only to worsen.<br /><br />We are also seeing a shift towards shared spaces. Who needs a private dining room if one can be made available for all residents in a building on request. Business centres over a study, rooftop garden over a balcony; all provided at higher quality under a collective principle. Increasingly, shared spaces can replicate the same needs but do it better - and cheaper for occupiers.<br /><br />Returning to purpose-built rental blocks (what JLL in the UK calls Private Rented Communities, or PRCs), cumbersome design standards can get in the way of greater building densities that improve the economics of this new asset class. There is all kinds of innovation in this space - pun intended - but space standards are undermining the economics of delivery in higher value locations. Quite simply, we will see fewer PRC buildings delivered in exactly the places where people want them to be.<br /><br />To be clear, many investors in this new asset class will not engage with the space standards debate, fearing that a potential stigma of 'sub-standard' units would cast a long shadow over the sector as a whole. I get that, but at the same time this stance will undermine the huge opportunity that the sector offers to build more homes that people can afford to occupy in places and where our cities need them to be.<br /><br />The space standards review should be looking holistically at the benefits as well as the shortcomings they bring, with due consideration for the economics of delivery and what the market really wants. A 'Wall to Wall' review - if you like.</div></div>

The problem with Space Standards

In conjunction with Pocket Living, JLL ran a research survey in 2015 to better understand what first-time buyers want. It turns out that space matters, but not that much.<br /><br />Out in front, by some margin, was location. Prospective purchasers knew where they wanted to be and would make concessions on other attributes of their wish list to get there. Turns out, unit size is less important than we think.

By Nick Whitten, Asssociate Director, JLL Residential Research<br /><br />The Government has this week unveiled three key measures to boost housebuilding, all of which place a welcome focus on increasing supply, rather than propping up demand.<br /><br />The first of the Government&rsquo;s measures is the &pound;3bn Home Building Fund designed to once again allow small builders to play their part in boosting housing supply. The Government is targeting 25,000 homes by 2020 and up to 225,000 homes in the longer term from this fund by providing financial support to small and medium sized companies &ndash; defined as those building fewer than 500 homes per annum.<br /><br />Prior to the global financial crisis, small builders were an important contributor to supply, delivering circa 50,000 homes per annum. However, this dropped to around 20,000 per annum after the recession as banking finance became more difficult to source.<br /><br />Innovation needed<br />Secondly, the Government has announced a &pound;2bn loan fund to accelerate development on public owned land. The key to the success of this initiative will be innovation. The Government wants to partner with private developers to deliver 15,000 homes by 2020 on surplus public sector land. It has said it will encourage developers to consider efficient techniques such as off-site building. The Government may want to consider whether it invests directly itself in off-site manufacturing. Just over 100 years ago Henry Ford pioneered the use of the production line which revolutionised the car industry. It is well documented the efficiencies that can be found from building off-site - manufacturing workers are estimated to be between 1.5 to 2 times more productive than construction workers.<br /><br />Brownfield housing<br />Finally, the Government has announced it will encourage urban regeneration through a planning presumption in favour of housing on brownfield land. There is a lack of available development land in the UK in locations where new housing is needed most. Over the past two decades there has been a trend towards urbanisation which has seen rapid population growth in many of the UK&rsquo;s towns and city centres. This has been driven by people choosing to live close to employment hubs and cultural and entertainment quarters. However, a lack of available housing has stifled those ambitions for some and driven up the cost of housing for others. A new presumption in favour of housing on urban brownfield land has the potential to be the most significant contributor to housing supply of all the new measures unveiled today &ndash; enabling housing development where people need and want it most.<br /><br />Must deliver pledges<br />The UK is in the midst of a housing crisis fuelled by an acute imbalance between supply and demand. Successive Governments have set national housebuilding targets &ndash; the current target stands at 1 million new homes in England by 2020, equivalent to 200,000 homes per annum. However, we have consistently failed to deliver that amount. The last time we built in excess of 200,000 homes in England was in the late 1970s when local authorities were a significant contributor to supply.<br /><br />It is absolutely right for Government to focus its policies on tackling the housing shortage ahead of supporting demand as has been the case in recent years and it must now ensure it can deliver on its big pledges.

Can Government deliver new trio of supply solutions?

The Government has this week unveiled three key measures to boost housebuilding, all of which place a welcome focus on increasing supply, rather than propping up demand.

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<div id="main"><div><div id="residentialcontent_0_LeftColumn"><div><p>The use of online platforms has allowed hybrid estate agencies to grow steadily in recent years - they now boast a 5% share of the UK&rsquo;s residential transactions.<br /><br />Hybrid agents, who combine online services alongside teams of local property directors, look set to play an increasing role in how the residential market operates. But will it be a leading role, or more supporting player?<br /><br />Russell Quirk, the founder of the UK&rsquo;s second largest hybrid agency&nbsp;<a href="https://www.emoov.co.uk/" target="_blank">eMoov.co.uk</a>, predicts that 20% of the overall market will be split by the top five hybrid operators by 2020. To put this into context, the UK&rsquo;s current largest estate agency is Countrywide Group with a 10% market share.&nbsp;</p><p>&nbsp;</p><h2><b>Disintermediation</b></h2><p>But can a start-up company compete with an industry giant, let alone surpass it? The answer lies in disruptive innovation - by creating a new market and value network to displace the existing market.Technological innovation has led to some phenomenal success stories across a number of other industries in recent years. Uber is now the largest taxi firm in the world with a market cap in excess of traditional car giants such as Ford or General Motors; Airbnb now has more than 1.5m listings in 34,000 cities around the world; and Netflix effectively killed off the video rental market by offering on-demand TV streaming.<br /><br />Purplebricks is the UK&rsquo;s largest player in the hybrid estate agency space, with a 60% share of the market. Purplebricks, which was founded in 2014, describes itself as the fourth largest estate agency in the UK.<br /><br />Its business model sees it sell properties for a flat fee ranging from circa &pound;800-&pound;1,150 dependent on a property&rsquo;s postcode. It says that on a typical &pound;190,000 sale this would equate to a &pound;5,000 saving in agency fees.<br /><br /></p><h2><b>Online-only valuation difficulties</b></h2><p>But could the market grow in a purely online-only capacity?</p><p>There are a number of difficulties facing online-only operators in providing accurate local market valuations to customers. For instance, gaining a sufficient appreciation of a property&rsquo;s location and standard without ever setting foot through the front door could see valuations that are wholly inaccurate.<br /><br />The solution to this from hybrid agencies is to employ local experts who will take photographs, create a floorplan and write the description of a property before it is listed on the likes of Rightmove or Zoopla.<br /><br />Crucially, it is this kind of model that experts believe will prove successful in the &nbsp;immediate future, with a market perhaps dominated by a handful of major hybrid operators combining online and local agency services.&nbsp;<br /><br />And while the local human touch will underpin an agency&rsquo;s success in today&rsquo;s world, going forward, it is the online element which could become increasingly significant, particularly once the tech-savvy Generation Z &ndash; the cohort born from the late 90s onwards - begin to dominate the private rental and first time buyer markets</p></div><div><div><article data-sf-ec-immutable=""></article></div></div></div><div><div><header><h5></h5></header></div><div></div></div></div></div><footer><div><div><a href="http://residential.jll.co.uk/"><svg xmlns="http://www.w3.org/2000/svg" viewBox="0 0 575.4 255.1" width="66px"><g><path d="M344.6 51.5h-64.1v5.9c3.1.3 5.6.6 7.6 1.1 2.4.6 4.2 1.3 5.5 2.4 3.8 3.3 3.7 9.4 3.7 20.4v74.2c0 15.1 1.4 36.5-20.1 36.2-9.2-.1-18.6-6.7-21.5-18.6h-7.4c3.1 20 13.8 33.6 39.6 33.6h.2c21.9 0 41.5-10.1 41.5-44.4v-81c0-11.1-.1-16.9 3.7-20.2 2.4-2.1 4.5-3.1 11.2-3.8v-5.8zM418.2 51.5h-64.1V57.4c6.7.7 8.7 1.7 11.2 3.8 3.1 2.6 3.6 6.9 3.7 14.2V179c-.1 7.3-.7 11.6-3.7 14.2-2.4 2.1-4.5 3.1-11.2 3.8V202.9H451l10.2-29.6h-7.5c-7.4 16.3-19 18.2-29.5 18.2-8.6 0-14.3-.5-18.4-3.1-3.3-2.1-4.5-7.6-4.5-17V81.3c0-11.1-.1-17.2 3.7-20.4 2.4-2.1 6.5-2.9 13.2-3.5v-5.9z"></path><path d="M525 51.5h-64.1V57.4c6.7.7 8.7 1.7 11.2 3.8 3.1 2.6 3.6 6.9 3.7 14.2V179c-.1 7.3-.7 11.6-3.7 14.2-2.4 2.1-4.5 3.1-11.2 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Hybrid Estate Agents: How Big Can They Grow?

The use of online platforms has allowed hybrid estate agencies to grow steadily in recent years - they now boast a 5% share of the UK&rsquo;s residential transactions.&nbsp;Hybrid agents, who combine online services alongside teams of local property directors, look set to play an increasing role in how the residential market operates. But will it be a leading role, or more supporting player?

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<div id="main"><div><div id="residentialcontent_0_LeftColumn"><div>By Adam Challis, Head of Residential Research, JLL<br /><br />The housing affordability crisis is vexing, not least because the solution seems clear.<br /><br />"Build more" says I - and most other commentators, neatly tucking in the roles of planning, land, alongside the chose-your-own hobby-horse of SME builders/ Private Rented Communities/ housebuilder expansion amongst a host of other notable solutions that ought to get the job done. Sadly while all of these private sector-led solutions have merit and all will help; none will be the silver bullet.<br /><br />Ramping up ambition further, many see the allure of a new generation of publicly-funded housebuilding as too attractive to ignore. Signals from the new Chancellor suggest we may well have seen the end of strict austerity. Could this be the harbinger of a new era of strategic housing investment?<br /><br />This big idea would of course allow us to dodge the thorny problems of trying to induce the private sector to ramp up delivery. Maybe we could even re-engage direct commissioning, as we all know that housebuilders 'just don't want to build more.' Ah, were it just that easy.<br /><br />Housebuilders deliver to a margin, not a volume. Unless sales rates ratchet up to twice the current pace, housebuilders cannot reasonably be expected to double output. How this simple truth continues to be overlooked is baffling. There is no reason to expect a serious step change from this group.<br /><br />Direct commissioning sounds like it may have more promise, as it could carve out some of the profit margin to deliver higher volumes at lower cost. Great stuff, except that it requires a new legion of quasi-public sector workers to manage and direct procurement into a supply chain that is, to be candid, about half the size that it needs to be. Oh - and relying on the same supply chain means we're no further forward, just creating greater risks for existing private sector players in the market, further dis-incentivising private sector expansion, particularly from those SMEs.</div><blockquote>"Housebuilders deliver to a margin, not a volume. Unless sales rates ratchet up to twice the current pace, housebuilders cannot reasonably be expected to double output. How this simple truth continues to be overlooked is baffling."</blockquote><cite>Adam Challis Head of Residential Research, JLL</cite><div><div>OK - let's assume that over a short few years that the public sector is able to ramp up investment to sufficient levels. At the same time, the industry develops the confidence in this new public sector programme to invest in capacity and is in the position to deliver on this policy promise. Is this even possible? If it is, would it be the answer to our collective prayers?<br /><br />Yes - those are very big assumptions but no, unfortunately they are not the biggest problem.<br /><br />Proponents of a new wave of council house building 'just like we did in the 50s and 60s' are overlooking the real elephant in the room. Back then, in the post war era, the UK was in post-war reconstruction and expansion mode. House building enjoyed widespread support and philosophically, there wasn't a NIMBYist in sight.<br /><br />Today, that's not so true.<br /><br />To double the rate of construction requires - broadly - a doubling of available development land. Until the country is united in the universal truth of the need for more homes, alongside a pro-rata responsibility to absorb some of this stock locally, it will make little difference whether the schemes backers are public or private sector; existing communities will be having none of it. In the face of localism, I say good luck with that.<br /><br />Chancellor For a Day<br />If I were Chancellor, and eventually I was able to turn my attention to housing, the first thing I would do is to stop misleading the public with ambitious, nonsensical targets. Can't happen, won't happen. Stop breeding policy short-termism and focus on getting the fundamentals in place.<br /><br />Push harder on the public estate and let those cash-strapped public bodies - especially local authorities - keep more of the upside from land sales.<br /><br />Controversially, I also happen to think the London Mayor is on the right track. Moving towards a higher rate of AH delivery, linked with permissions in principle, is a savvy way to move with the grain of the market to achieve public good objectives.<br /><br />For what it's worth, a bit more direct investment in affordable housing would also be on the cards</div></div></div><div><div><header><h5></h5></header></div><div></div><div></div></div></div></div><footer><div><div><a href="http://residential.jll.co.uk/"><svg xmlns="http://www.w3.org/2000/svg" viewBox="0 0 575.4 255.1" width="66px"><g><path d="M344.6 51.5h-64.1v5.9c3.1.3 5.6.6 7.6 1.1 2.4.6 4.2 1.3 5.5 2.4 3.8 3.3 3.7 9.4 3.7 20.4v74.2c0 15.1 1.4 36.5-20.1 36.2-9.2-.1-18.6-6.7-21.5-18.6h-7.4c3.1 20 13.8 33.6 39.6 33.6h.2c21.9 0 41.5-10.1 41.5-44.4v-81c0-11.1-.1-16.9 3.7-20.2 2.4-2.1 4.5-3.1 11.2-3.8v-5.8zM418.2 51.5h-64.1V57.4c6.7.7 8.7 1.7 11.2 3.8 3.1 2.6 3.6 6.9 3.7 14.2V179c-.1 7.3-.7 11.6-3.7 14.2-2.4 2.1-4.5 3.1-11.2 3.8V202.9H451l10.2-29.6h-7.5c-7.4 16.3-19 18.2-29.5 18.2-8.6 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Housing Solutions For A New Chancellor

The housing affordability crisis is vexing, not least because the solution seems clear. "Build more", says I - and most other commentators, neatly tucking in the roles of planning, land, SME builders/ Private Rented Communities and housebuilders amongst a host of other notable solutions that ought to get the job done. Sadly while all of these private sector-led solutions have merit and all will help; none will be the silver bullet.

https://res.cloudinary.com/jll-global-olm-np/image/upload/v1569580190/resi/gb/cms/Blogs/Photos/housing_solutions_for_a_new_chancellor.png

<div>It seems hard to believe today, but town planning used to be an Olympic event &ndash; held for four consecutive Games between 1928 and 1948. At the Los Angeles Olympics in 1932 John Hughes won gold for Team GB with a design for a stadium and sports and recreation centre for the City of Liverpool. True story.<br /><br />Fast forward to Rio 2016 and following TeamGB&rsquo;s most successful overseas Games, there is concern from some about the real legacy of the 2012 London Olympics.<br /><br />Some have queried who new Legacy housing is targeted at, citing the huge disparities between sales prices and average local incomes in boroughs like Newham. Mayor of London Sadiq Khan has also questioned whether affordable housing delivery, and indeed housing delivery generally, is as high as it should be.<br /><br />The local community is also not convinced. For example, a petition has been raised to stop the London Legacy Development Corporation (LLDC) from demolishing part of Vittoria Wharf to make way for a pedestrian footbridge linking Hackney Wick with new Legacy housing. Those petitioning say that the LLDC has explained that building the bridge will benefit the community, but contend that they are the community and that they are being deleted in the process. They have a point.<br /><br />The real question should be, is there a bigger responsibility to deliver better development, which makes it befitting of an Olympic Legacy? And what makes development better?</div><blockquote>"In total, there is planning permission for circa 18,000 new homes within the LLDC&rsquo;s boundaries, with the quantum of affordable housing above the 28% London average for 2014/15. &nbsp;There are also plans for creating space for businesses, for new university campuses, for new museums; many amenities to make a place alive and successful."</blockquote><cite>Caroline Harper Associate Director, Planning and Development, JLL</cite><div><div>The dramatic transformation of Stratford and what is now the Queen Elizabeth Olympic Park is indisputable. There&rsquo;s award winning architecture. There are terrific sports venues which are hosting big events like the track cycling and athletics World Championships. There&rsquo;s a huge and busy shopping mall. The former athlete&rsquo;s village has been converted into East Village, providing just shy of 3,000 residential units of which roughly 50% are affordable and most of the remainder are for private rent. In total, there is planning permission for circa 18,000 new homes within the LLDC&rsquo;s boundaries, with the quantum of affordable housing above the 28% London average for 2014/15. There are also plans for creating space for businesses, for new university campuses, for new museums; many amenities to make a place alive and successful.<br /><br />Some of the problems lie, perhaps, in understanding what the Legacy is meant to be. Part of this is a commitment to east London&rsquo;s regeneration, but the practicalities of who benefits from this are pretty broad-brush. The Government&rsquo;s 2015 Policy Paper talks about putting plans into action to create a lasting economic, sporting and cultural legacy that will benefit the whole country. The 2014 Long Term Vision produced by the Government and GLA talks of securing social and economic benefits for the whole city (of London). This is echoed in the London Plan, which looks to secure a lasting Legacy for Londoners. Then there&rsquo;s the strategic regeneration framework developed by the Olympic host boroughs and endorsed by both the GLA and Government, which aims for the communities who hosted the 2012 Games to have the same social and economic chances as their neighbours across London. Arguably a Legacy which delivers for the country, for Londoners and for local communities is nigh on impossible.<br /><br />In this context, how will Mayor Khan fulfil his Mayoral election manifesto to rebuild London&rsquo;s Olympic Legacy? I&rsquo;m not convinced it&rsquo;s enough to up the quantum of affordable housing. The LLDC is a Mayoral Development Corporation and, following widespread compulsory purchasing in the run up to 2012, it controls a lot of the land within its boundaries. There is scope therefore for the Mayor to really involve himself in the Legacy. But in so doing it has to be more practical and more nuanced than simply shooting for undefined benefits for everyone.</div></div>

Is London’s Olympic legacy worthy of a medal?

Following Team GB&rsquo;s most successful overseas Games, there is concern from some about the real legacy of the 2012 London Olympics. Some have queried who new Legacy housing is targeted at, citing the huge disparities between sales prices and average local incomes in boroughs like Newham. Mayor of London Sadiq Khan has also questioned whether affordable housing delivery, and indeed housing delivery generally, is as high as it should be.

https://res.cloudinary.com/jll-global-olm-np/image/upload/v1569580207/resi/gb/cms/Blogs/Photos/olympic-legacy-worthy-of-medal-image.png

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