The Lucent Investment Partnership

The pressing need for housing has only increased since the 2008 financial crisis. People are working and need homes, and private investors can build them.

Local Authorities in the UK are currently facing huge challenges. The global economic downturn has reduced central funding whilst the country’s population increased by 7% in the decade to 2011. Government figures suggest that 232,000 new homes will need to be built every year to meet projected household growth in England alone over the 25-year period from 2008 to 2033. So how do local authorities build more homes with less money whilst central government is putting them under increasing pressure to do so?

Traditionally the answer would be found in selling off land to a developer and hoping that the developer would build what was needed, where it was needed, when it was needed. In today’s environment, that is not much of an answer!

The Lucent Local Investment Partnership (LIP) is a sophisticated solution to this problem. Lucent provides the commercial know how, market relationships and investment funding (via strategic land partnerships) required to give local authorities a holistic plan across their development portfolio, to assist them in gaining the best returns for their land assets and to ensure that the developments are entirely appropriate and in keeping with the local community.

The key partners in this arrangement are the Local Authority and the Lucent Strategic Land Fund (LSLF). Other private or public sector partners in the land investment opportunity can be included from the outset or later on. Adding them into the partnership is both simple and cheap to do.

The partnership is structured as a 50:50 Limited Liability Partnership. Both partners share the enhanced value on an equal footing, (a “paripassu relationship” with each partner receiving the same rate of return per pound of investment). The Council provides land and strong strategic and political links throughout its region. It can also provide or source grant funding to assist with land infrastructure requirements which, in turn, will support/maintain the IRR and also support project viability. Lucent Advisors, on behalf of the LSLF, provides requisite investment and resources to secure planning consent on each site, in accordance with the use set out in each Project Plan and agreed to by the Partnership.

So what will the Partnership do? Lucent Advisors will arrange and manage appropriate exits to operators to deliver housing, food or other retail, commercial or employment opportunities. The partnership will have the capability to acquire identified sites within towns (or even across a wider region), enhance sites and meet specific strategic community objectives. It will also support the Council Plan delivery (and other Council priorities) through the delivery of land investment plans. In addition, over the life of the Partnership, further sites and opportunities will be identified and benefits realised.

• The LIP model addresses many of the shortcomings of the Local Asset Backed model (LABV), currently popular with some local authorities and which has several disadvantages including that of the “asymmetric partnership” in which each partner is focused on different commercial and delivery objectives. This can lead to a lower or nil cash return to the authority partner.

• The LIP model provides the Council with a cash return, capital or revenue plus the economic, employment and regeneration benefits.

• It also has the ability to acquire sites anywhere. As a private entity, the LIP does not have geographical boundaries.

• LSLF is a capital growth fund. Its model is predicated on investing and growing capital investment. It is not interested in delivering construction/developer returns, ensuring both Partners have the same lined-up and equal interest in outcomes – a true joint (and equal) venture partnership.

• Moreover LSLF’s return can be invested back into other projects as determined by the Council and Partnership.

• Additional land, for example HCA land, can be “directly injected” into the LIP.

• Lastly, the model allows the LIP to work with other local authorities to meet the needs of the wider region.

Following the success of both the Allerdale Investment Partnership, formed in Spring 2014, and the Peterborough Investment Partnership, formed in December 2014, several other councils have approached Lucent to discuss the possibility of entering similar arrangements.

New Houses on Green Belt Land: A Trend for 2016?

Distinctions between green spaces that have aesthetic and environmental benefits from those that don’t should be part of the discussion.

Giving a new twist to an old controversy, Chancellor George Osborne is striving to build 400,000 homes in the UK by 2020. And it appears likely that some green belts may well be the land on which those homes - including the so-called starter homes, priced at £250,000 or less (outside London) and sold to people under age 40 – will be built.

The need is great and the homebuilding industry has said for quite some time it’s green belt land that needs to be freed up for development. As Britain strives to catch up on a million homes’ deficit to serve its growing population, UK land investment groups search for places where disused hectares might be developed into housing. But resistance to developing on the official green belts that encircle dozens of cities and towns has been fierce for decades.

The Campaign to Protect Rural England is perhaps the loudest voice in the resistance. Paul Minder, the CPRE’s planning campaign manager spoke with a reporter from the Daily Telegraph about these opposing needs, more houses versus environmental considerations: “The current policy isn’t working,” he acknowledges. “But these proposals will make things worse. It could see a lot more planning battles in the countryside over coming years.”

Indeed, the argument for rethinking the sanctity of green belts is about more than what the homebuilders want. Shelter.org, the housing charity, argues for a reasonable swap of greenbelt lands, particularly those near transport stations, for parkland swaps inside cities. This would enable lower-cost home building that would ultimately trickle-down to greater affordability for all social classes. At the same time, those swaps can bring vegetated spaces inside cities where perhaps more citizens would have visual and physical exposure to green spaces and the quality of life benefits they provide.

There are 14 green belts in England, covering approximately 13% of the country’s total land. Since the Localism Act 2011 was implemented, more local planning authorities have opted to use green belt areas for development. The National Planning Policy Framework requires each council to have formal five-year plans for development.

Other voices include the Adam Smith Institute’s Tom Papworth. His paper, “The Green Noose,” takes a more critical view (as the name implies) of the green belts, explaining there is a “welfare cost” in terms of smaller houses, house price volatility and a higher cost of living due to this “noose.” This argument roughly parallels what Shelter says. Papworth says that intensive agricultural use of green belts fail to meet their claimed purpose and environmental value, a point on which many environmentalists would agree (an organisation, the Campaign for the Farmed Environment, argues for more species-friendly methods that would also allow fewer chemical runoffs to streams and rivers, sharing this critical view that industrialised farming is undesirable).

A professor from the London School of Economics, Paul Cheshire, urges broader thinking on the green vs. growth equation. He told the BBC “You only need a tiny amount of the least environmentally-attractive green belt to solve the housing land shortage for generations to come.” Instead of treating green belts as untouchable, he favours the preservation of lands that are designated as Areas of Outstanding Natural Beauty and National Parks.

When alternative investment funds search for ways to turn land into homes, farmland and other green space– not necessarily green belts – are routinely considered. Building on green belts is already happening: the BBC reported in 2015 that planning permissions were granted in 2014-2015 for the construction of almost 12,000 homes, up from just 2,258 homes in 2009-2010.

Choosing to put any kind of money into housing development is on the minds of individual and institutional investors alike. But clearly there are variables and controversies that need to be negotiated. For individuals in particular, the advice of an independent financial advisor is highly recommended.

Build Houses Faster: Innovations in the UK that Speed Construction

From bricklaying robots to factory-built houses, the country is looking for ways to build more homes quickly. This matters to homebuyers and investors.

Will the recent invention of a bricklaying robot - which reportedly can build the exterior walls of an average-size UK home in two days - transform the house building industry? And if so, might it help alleviate the shortage of homes in the country?

Perth, Australia-based engineers recently demonstrated a fully built prototype of this house-building machine, which has the working name Hadrian (Get it? After our wall.). It lays 1,000 bricks per hour, using information fed from a three-dimensional CAD (computer assisted design) programme. A single boom head of the crane-like apparatus applies bricks and mortar to the building foundation.

Typically, traditional building methods require about four months to construct a home from the ground up, and that’s after land is acquired and planning authority approvals are put in place. That can take years, however skilled specialists in joint ventures related to property funds strive to keep those bureaucratic measures to a minimum. The faster the turnaround, the quicker the return on assets.

It remains to be seen if the company succeeds with Hadrian. Building in England is stymied by a shortage of skilled house-building labour, but building materials (including bricks) are harder to source as well. The approximately 150,000 homes built in 2015 fell short by about 100,000 of the number required to help the country catch up with the need created by a fast-growing population. Other ideas are welcome.

Volumetric building is one of those ideas. These are the offsite factory-built homes and building components (such as fully-assembled walls) that have made a dent into the housing shortage over the past decade.

Building research firm BRE unveiled two such modular homes in 2015 - the designs of which originate from Tigh Grain Ltd., a Scottish prefabricator, and Userhaus AG, a Swiss technology non-profit - that promise low costs, an eight-week build time and sustainability features such as tight insulation and rooftop photovoltaic systems. A 50-unit housing development in Scotland will be the first application of the system in the UK, which will be built in a Welsh factory. The homes will cost less than £1,000 per square metre to build.

Volumetric building is not new, however interest seems to be increasing because of the favourable economics. A publication dated 2005 from the National Audit Office, “Using modern methods of construction to build homes more quickly and efficiently,” strongly recommended offsite building. As compared to brick-and-block, open panel and hybrid methods of home construction, the volumetric method wins over the others in terms of on-site construction duration (much shorter) and the time it takes to provide weather tight conditions (reducing damage from rain and snow to the interior). It also significantly requires less on-site labour, which has an important cost savings and mitigates the UK’s current skilled construction worker shortage.

To investors in housing these are critical concerns. Time is money, after all. When real assets such as land funds can achieve a sale more quickly those funds can be reinvested in additional building elsewhere a lot faster.

Building.co.uk, an important industry trade publication, cites several factors that could and likely will encourage off-site building manufacturing. Those include a steady flow of orders to achieve economies of scale; lowest-cost manufacturing (perhaps locating manufacturing in cheaper labour markets outside the UK); and CAD/CAM advances that enable more customised construction (vs. building within a limited number of designs, the proverbial “cookie cutter” approach).

Land is one of the most expensive inputs into the home building enterprise. To make a wise move in any phase of the process – land acquisition, land use approvals, building and estate agent work - the counsel of an independent financial adviser is recommended.

Modern Mansions: How and Where the UK's Largest Homes Are Being Built

In contrast to a shortage of homes in the UK, the modern moneyed-classes are building big again. But perhaps investors find middle class homes more interesting.

England has always been a huge international tourist draw with its country estates and castles. And while the television show “Downton Abbey” has educated millions at home and abroad as to the process by which those 19th century edifices very often became unaffordable to the families who built them - turning into hotels and museums, if not abandoned and demolished - there is a new class of the well-off who are building 21st century mansions to rival their architectural forebears.

Currently in development is one classically styled stone-and-stucco country house in Warwickshire, complete with newly planted woodland and hedgerows, ponds, ditches, an orchard and native wildflower meadows. It contrasts architecturally with the futuristic “Serenity” manse being built near Nottingham, variously described by critics as “an amoeba-like monstrosity” and “curvaceous” and “exuberant.”

Any discussion of these new estates naturally begs the embarrassment of riches matter relative to the homes shortage in the UK. An estimated one million new residences are needed to house the country’s growing population, while only about 150,000 houses and flats were built in 2015. Working to catch up are UK land investment funds targeting areas that need people, workers in particular, who help growing companies compete in a global marketplace. When average-sized houses are near workplaces, the company and its employers are more likely to succeed.

But just as there will always be a need for affordable housing, so too will there be demand for 14+ bedroom estates with every imaginable feature and convenience. Following are some features of size and price that are affecting the UK homebuilding landscape, particularly around London and the surrounding commuter-distance areas:

The biggest homes are in the Home Counties - Savills, the property group, analysed data from the Department of Communities and Local Government to fined that the largest new homes in England and Wales are outside of London in the commuter belt. Leading this group are Surrey Heath (with 200+ square metres of interior space), Elmbridge (190 m2), South Bucks (190 m2), Maldon (165 m2) and Guildford (145 m2).

The smallest homes are in urban areas - Savills’ data analysis also shows the smaller-builds are in areas with the greatest demand outweighing supply, and where most new building is that of flats and few detached homes. From smaller to larger this includes Oxford (58 m2 of interior space), Bournemouth (61m2), Reading (62 m2), Newham (63 m2), and Islington (63 m2).

Rents in Home Counties are rising quickly - As of July 2015 the rental prices in places such as Berkshire, Buckinghamshire, Hertfordshire, Kent, Surrey and Sussex jumped 27% over the same period a year earlier, according to data compiled by Knight Frank. This is attributed to corporate renters (relocated employees and their families who wish to be in the London commuter belt) who make up 47% of tenancies in these areas. The industries fuelling these rises with well-compensated employees include gas, technology and pharmaceuticals.

Some Home County residents are London émigrés - Homesandproperty.co.uk reported in mid-2014 that the rising London real estate prices are providing owners there a chance to move up the property ladder by moving out. Over a year’s period (mid-2013 through mid-2014), 44,000 Londoners traded in their flats to buy larger homes with gardens within commuting distance. For their money (they spent an average of £330,000) the best values were in West Sussex and Medway (in Kent, including the towns Strood, Rochester, Chatham, Gillingham and Rainham).

Strategic land investments by homebuilders and investors are made in the South East as well as elsewhere in the UK. If an area is already at peak valuation the wise investor will try to get an advance on where values will rise next and where homes will be in the greatest demand. That could be in a down-market London neighbourhood, or further out to Home Counties, or even further to places such as Peterborough, or the North West in Cumbria, to Wales and to Scotland. The point is to achieve planning approval where houses are needed.

The strong demand for housing attracts individuals and institutions to invest in building the homes that are sorely needed (the larger estates are presumably funded by their eventual occupants). For an objective understanding of all market opportunities, speak with an independent financial advisor.

Bryson's Fundamentalism: Famed Author Battles Home Building on Green Belts - and the Backlash

Everyone loves the English countryside. But does green belt preservation trump the pressing need for homes in the UK? Two writers spar over the question.

In discussing problems as significant as housing and green belt preservation, it stands to reason that passions would run deep. Writers Bill Bryson (Notes From a Small Island, In a Sunburned Country) and Colin Wiles (housing writer for The Guardian) have disappointed no one in taking a strong stand in opposite corners of the verbal boxing ring.

The much beloved American writer who adopted the UK as a home decades ago, Bryson surprised many with his new swipes against portions of British pop culture such as reality TV stars and retail commerce. In the just-released The Road to Little Dribbling, Bryson reveals a not-so-surprising opinion, given his position as president of the Campaign to Protect Rural England, that the green belts be saved from the creeping development overtaking much of the rest of the country. He argues that American city sprawl is evidence of an unrelenting human drive for those with money to overtake the verdant areas; he says the UK’s green belts make that available to all.

Developers in the UK, those who identify land investment opportunities for capital growth where homes can and need to be built, run up against this debate frequently. And it’s not just green belt land that many want to preserve - it’s the proverbial backyards of NIMBYism found everywhere, where new development is perceived as a threat to the status quo. Every community is right to question the effects of development – but when they do, they owe those land investors and homebuilders the opportunity to demonstrate what new residences can create. Very often that includes new infrastructure that not only includes roads, utilities and schools, but oftentimes they build public green space where none exists currently.

Wiles’ position is less “fundamentalist,” as he describes Bryson’s writings on the topic. “Suggest that just a small fraction of green belt land could meet our long-term housing needs and they accuse you of want to concrete over the whole of it,” he says. “In London, building on just 19,000 hectares of unattractive green belt land that is within a 10-minute walk of a station would provide almost a million high-density homes. Yet there are 100,000 hectares of green belt within the M25 alone.”

Given the high rents and unaffordable prices of homes to average workers in London - and the building of “iceberg homes” (expanding basements below grade to maximize use of land) in recent years - it seems the time has come to question the use of some of the green belt hectares.

Wiles has been writing in The Guardian regarding the rationale for rethinking green belts for some time. He makes a six-point argument as follows: (1) It’s not all green nor pleasant (much of it is poor quality scrubland); (2) It doesn’t actually stop cities [from] growing (commuter belts outside the rings develop eventually); (3) The countryside isn’t being concreted over (only 6.8% of the UK is built-upon); (4) It encourages inequality (he cites a London School of Economics professor who claims only the rich and absent investors can live in London’s home counties, while others must live further out); (5) It worsens the housing crisis (constrictions on land while the population grows is unsustainable); and (6) It’s partly why house prices are out of reach for so many (a simple constriction of supply in London, Oxford and Cambridge “denies decent homes to people on low-and middle-incomes and forces people into long commutes).

Those willing to make alternative investments into UK land for development are at the ready. They want to put their capital where homes will serve a need and can yield a good return on assets. Wiles’ argument for a middle ground position seems to agree with both the builders and the buyers.

It’s a gentlemen’s disagreement, and perhaps one that will never be fully settled. As the British economy continues to grow, and along with it the country’s population, it’s hard to see if Bryson’s absolutist argument (‘build exclusively on brownfields’) can endure.

One thing investors should not argue about is where to rationally put their money. It should be a reasoned decision made under the guidance of an independent financial advisor.

England’s Second-Tier Cities: Building Homes Will Help

The entire UK economy can benefit from stronger cities north and west of London. Part of that strength draws from improving home building and infrastructure.

Strong arguments are made by many interests for strengthening the economies of Britain’s so-called second tier cities, the next-largest metro areas to London. This would not only ensure a certain regional fairness, but also could improve the overall economic health of the UK when industries, jobs, population and infrastructure are more evenly distributed to places that include Liverpool, Bristol, Birmingham, Manchester, Sheffield, West Yorkshire and the North East.

Housing factors into this as well. Not simply that greater affluence in each of these areas would drive more home building. But also that more housing and the infrastructure that comes with it can be part of what makes the second-tier cities successful.

It should be noted that some discussions and recommendations include social housing as part of the equation. But private investment too - such as that generated and overseen by real asset managers - plays a big role. This discussion primarily considers the role and effects of market-rate homes.

One of the strongest interest groups arguing for devolution of authority is the Centre for Cities, which produces research that helps British cities to improve their performance. A central argument they’ve proposed (in a document titled, “Economic growth through devolution,” November 2014) is for the creation of combined authorities that would empower regions to act with greater autonomy on strategic planning, particularly on economic issues.

For example, a combined authority centred on Bristol would encompass Bath and Northeast Somerset, Bristol, North Somerset and Gloucestershire. Together, they could set binding statutory city-region plans incorporating housing along with transport and other land use within the region. This would also incorporate the powers to conduct green belt reviews and to rezone land as they collectively see fit.

Ideally, that would mean the economic interests of the region could be viewed in terms of where houses go, where transport goes, and where other infrastructure can be developed to lift up the region. At the same time, distant Whitehall bureaucrats would be involved.

A revamped housing authority could be an economic boost to each of these regional groups, and perhaps even make housing more affordable. The cost of housing in the UK over the past several decades, a function of the chronic and critical shortage of homes, is unlike that of other western European nations.

Another research organisation, the Centre for Economic Performance (CEP) from the London School of Economics, offered additional thinking on this topic in 2013. Henry Overman, who directs the Spatial Economics Research Centre within the CEP, wrote, “Britain’s story is fundamentally different because most of the increase in [housing] prices was a result of building too few houses in areas where people want to live. This, in turn, is down to the fact that our planning system strongly constrains the supply of UK land.” Overman goes on to state that the existing planning regime that affects housing also affects the cost of office space (he cites the 2008 study by Cheshire and Hilber, “Office Space Supply Restrictions in Britain: The Political Economy of Market Revenge,” Economic Journal).

These restrictions are what strategic land developers representing private investors encounter on a daily basis. They may be skilled at achieving land use changes from local planning authorities. But the challenge everywhere is what slows the process of homebuilding. Perhaps the Centre for Cities argument to devolve power to community authorities that approach development on a broad - but not national - basis can expedite and expand development.

The 2015 election and the election of the Conservative Government has brought about much discussion and promise to liberalise planning policies and to provide resources for home building. It remains to be seen if devolution of authority of any kind will harness regional interests.

Investors have a great deal of variables to examine when considering housing development, even in the face of almost unlimited demand and rapidly rising home prices. An independent financial advisor can help those investors to sort through the myriad factors to identify a smart property investment strategy.

England's Hot Tech Towns: Where Growth Means More Houses are Needed

If salaries are an indication, cities with the highest tech salaries are also the growth areas. Is this a shift in the winds for London and the South East?

The global growth of information and communications technologies - ICTs - is breath taking and disruptive. From a dark perspective it can mean jobs and industries go to markets outside the UK. But without question ICTs benefit all industries here in the British Isles and create new jobs along with new companies.

The reason this may matter to those investing in UK land, and in strategic land in particular, is simple: the highest demand for new housing, and the likelihood of selling those new homes, is where job growth is most robust. You can’t ignore tech industries, and established businesses being transformed by tech (the “internet of things”), if you are interested in maximising your return on assets.

Drill down to where ICTs are job generators in England, Wales, Scotland and Northern Ireland and a surprising picture emerges. As might be expected, the bulk of “tech jobs” are in London: the recruitment firm Experis found in 2015 that seven in ten such positions are there. But in a report titled “Tech Cities Job Watch Report” it appears as if the rate of growth in tech is a bit higher elsewhere. Cities that offer relatively high average salaries for technology work are Cambridge, Glasgow, Edinburgh, Manchester, Bristol, Birmingham, Sheffield, Brighton and Newcastle upon Tyne.

Looking at non-salaried independent contractors and their compensation averages, London actually ranks below or at a near par with other cities in absolute compensation (pound for pound) for certain specialised skills. For example, cloud technologies reward the Bristol and Brighton workers with £520 and £500 per day, respectively; in London it’s £436. Security specialists in Edinburgh, Glasgow and Brighton also do better than their London counterparts. Factor in the cost of living for these freelancers and it’s easy to see how better money is often made outside the Capital.

This might be due to the high cost of doing business and living in London. An industry where many of the jobs need not have a physical address seems perfect for placing workers where the commutes are shorter and where they can spend their money on something other than stratospheric house prices or rent.

Those engaged in joint ventures that seek land to buy and convert to housing already are investing outside of London. The devolution is on - a younger generation of educated workers are finding the economics in places such as Manchester, Birmingham, Southampton, Peterborough and elsewhere to provide a better quality of life because their money stretches farther.

And for enterprises in the property and estate agent fields, City A.M. reports that property sector-specific ICTs are rising in the UK. The newspaper cites the 2015 £1 billion listing of Zoopla, a property portal, among several companies that wed digital technology with real estate transactions and industries. Others are GetAgent, Splitable, Trussle, Purplebricks, eMoov, Homeshift, Buzzmove, Fixflo, Property Partner, Uniplaces and Rentify.

As technology and the economy grow overall, so too does interest in land assets. But to make a rational investment relative to your individual portfolio, speak first with an independent financial advisor.

Challenges of Land reclamation at Royal Pier Waterfront (RPW), Southampton

Forming new property from the sea has gotten sophisticated, even as the relentless tides are a force to be reckoned with. But it’s worth the investment.

The new scheme at Royal Pier in Southampton will be constructed partly on existing land at Mayflower Park and Town Quay, and partly on land reclaimed from the sea. It is this reclaimed land that presents the major challenge for Lucent Group ("Lucent") on this project.

As participants in a joint venture land opportunity know, any work undertaken on the coastline is always going to be difficult, but the scale of the reclamation at Royal Pier Waterfront ("RPW") presents its own trials. In essence Lucent will build a dam out into the Test Estuary using sheet piling that stretches from the existing Red Funnel ferry terminal right out to the tip of the old pier structure, then returning back in a straight line to the western end of Mayflower Park. This will create a 13 acre lagoon, and the next step will be to pump out most of the sea water which will leave a large ‘hole’ – ideal to be made into a large basement and exactly what Lucent plans to do.

There are a number of issues in doing this, not least of which is installing the sheet piling in the first place. This requires long ‘W’ section steel sheets to be driven into the sea bed from a floating barge, and these sections must interlock through a system of clutches to create a reasonably water tight seal with its neighbour. Once the sheet piling is complete the water can be pumped out.

The next challenge is keeping the water out so that work can commence on the basement structures. This is done by using ‘dewatering’ plant, which consists of sinking a number of tubes into the seabed around the perimeter to create a system of wells from which the remaining water can be pumped away. This lowers the water table and creates a dry working area. Because there is a lot of porous gravel under the seabed, water pressure from the tide causes the ground water level to fluctuate throughout the day, placing a varying demand on the dewatering plant during the course of 24 hours.

Once the ground water is under control, a level platform needs to be created on the seabed. This level platform is called a piling mat. This consists usually of a thick layer of crushed rubble and provides a stable working area so that plant and machines can begin constructing the basement.

The sheet piling installed earlier now needs to be stabilised to prevent it from being damaged by the action of the waves. One of the traditional ways to do this would be to sink ‘sacrificial’ piles into the seabed and connect these to the sheet piles using steel tie rods. However because we are creating a basement, we can use the concrete floor slab to stabilise the piles instead, while a reinforced waterproof concrete wall is constructed behind the sheet piles. Investors in joint venture partnerships want to know they are building on a solid foundation, literally and figuratively. By this point we should have 13 acres of reclaimed land on which to commence construction.

Of course the alternative for our land fund managers would be to build a traditional revetment sea wall and back fill the whole space with dredged material, but that wouldn’t be much fun would it?

Beyond London: Investment Excitement Elsewhere in England

The cost of living and doing business in London has reached a tipping point, driving young workers, employers and investors to consider other growing UK cities.

An important signal to many global investors - and even some domestically - that an England exists outside and beyond London came in early 2015. This is when the Urban Land Institute (ULI) ranked Birmingham as a top European city (#6) for property investment, ahead of London (#10), Amsterdam (#8) and Copenhagen (#7).

This isn’t news to everyone, including investors who are already banking on developing property in all points east, west, south and north. Lucent strategic land partnership projects now underway in Allerdale, Southampton and Peterborough bear this out.

The survey (conducted jointly by the ULI and PwC), “Emerging Trends in Real Estate Europe 2015,” bumped London down because stratospheric property prices there simply make it a hard investment for anyone new to the game. Because of their affordability, cities including Birmingham are able to attract the entrepreneurial class, which then create jobs that are near more-affordable housing for productive, younger workers.

We see similar advantages in other markets where we work. In Southampton, spinout firms from the various local universities are drawing similar entrepreneurs, giving recent graduates (from, inter alia, University of Southampton and Southampton Solent University) jobs and reason to stay on the south coast of England. Our Royal Pier Waterfront development, an excellent application of land investment funds, will provide the living (730 contemporary waterfront apartments), high quality office space and leisure amenities (premium food and retail, a 250-room hotel, cultural space and an expanded and enhanced Mayflower Park) that may also attract government departments for relocation away from London.

The geographical circumstances of Peterborough, a city just 70 miles north of London, mean it’s a transportation hub with increasing warehousing and distribution functions- indicators that attract real asset management ventures. Its economic mix meant it fared better in the 2008-2010 recession than most of the rest of England. Fletton Quays, the first project being developed by Peterborough Investment Partnership is a 20-acre site that can accommodate about 265 new homes, a hotel, office space and parking as well as additional commercial and leisure facilities. Importantly, the city ranks second highest in the country for private sector employment growth, meaning that central government funding cuts have a lesser effect on the local economy.

The various sites identified by our Allerdale Investment Partnership will include schemes that will create 500 to 600 new homes and which also provide food and retail facilities, a family entertainment centre and a hotel. West Cumbria’s economy is growing at 4.2% (vs. London’s 3.7% growth rate), in part because the nearby Port of Workington has received a multimillion-pound government investment to expand its shipping capabilities, which will also provide many new jobs.

Lucent squarely agrees that while London offers excitement, there’s money to be made elsewhere.

Adding the Wow Factor to Development

The design of new property is a collaboration of architects, investors and the existing community. Ideally, cumulative creativity spawns exciting new places.

Placemaking is a hot topic for local planners. Often there is a big divide between the business community who look at the viability and a local authority who are undertaking visioning workshops for a large development. As such, it is important that we bridge this divide. Development does not need to be boring; good design is essential in creating a development, which captures the imagination and is welcomed by the local community, residents and investors (e.g.real asset fund managers). So how can this be achieved?

Firstly, engage a good design team; a team that has the flair, imagination and organisation to translate the clients’, local authorities’ and local communities’ aspirations into a workable scheme, adding their own quality and style to the plans.

Secondly, put together a highly experienced technical team, a team which cannot only identify key constraints, but which can also produce workable solutions with the design team. Seeing the constraints as a potential opportunity allows the design team to integrate this into the overall masterplan. For instance, in the Lucent Lincolnshire Lakes planning applications, the drainage system was designed not only to provide a functional network but also to offer a visual amenity and ecological benefits, adding to the individual character of the development.Financial backers who are familiar with investing in real assets understand how sustainable and aesthetic features add value to the final product.

Thirdly, effective and meaningful public consultation is essential. Developers often see this as a negative but effective public consultation cannot only be good PR, it can also produce good ideas. In a recent Lucent residential development, local residents were objecting to the proximity of the development to their properties. Supported by key members of its design team, Lucent met with the objectors. Following a short discussion we were able to agree a design solution that met the visual amenity aspirations of the local residents but also added to the quality of the design - as well as the objectives of the property fund managers who were backing the project. The residents subsequently withdrew their objection to the planning application.

Fourthly, establish an overall concept. All developments require a vision or a concept: indeed, a Design and Access Statement requires this. In major developments, the initial work is often undertaken by a local authority through public consultation. However, the developer then has to translate this into a developable scheme. A defined vision guides the development and the design and also helps market the end product. Originality is good as long as it is based in commercial reality. We have all heard of concepts that we know will never be built. As such it is essential that both the public and private sectors sign up to an agreed concept. The devil is always in the detail; however, this can be worked through stage by stage. Lucent also likes to work with local authorities to produce design guides to maintain the quality of the development through the life cycle of the scheme.

Finally, keep within budget. Viability is essential to any scheme. Without an appropriate return to investors, a scheme will never leave the design stage. Providing financial discipline is maintained and a local authority is realistic regarding developer contributions, clients/developers are more than happy to produce schemes with imagination and character and which contain the wow factor.

Smaller Home Builders in the UK: How Can They Help Fix the Housing Shortage?

Several factors have diminished the role of smaller builders and developers in building British homes. To find solutions, it helps to understand the problem.

Shadow housing minister Emma Reynolds has long been an advocate for increasing the housing supply, particularly because it will make housing more affordable for those at the lower end of the economic spectrum. She is also well versed in housing and house building history, having recently emphasised the greatly diminished role of small- and medium-sized house builders (SME builders).

Reynolds rightly notes that in the 1980s SME builders were responsible for 80 per cent of home construction, a time when more houses were being built than are today in the face of England’s burgeoning population growth. Even as late as 1995, firms that built between 1 and 100 homes were credited with 25 per cent of homes; today, that portion is closer to 12 per cent.

What happened to smaller and medium-sized home builders? Several things:

Access to finance is limited - Larger developers who work at greater scale (100+ homes per development) have access to capital through such entities as real asset fund as well as bonds. Developments in smaller towns and in urban infill sites aren’t of a scale to attract such investors at a time, post-financial crisis of 2008, when lenders are nervous about lending to small businesses of all kinds. Consequently, SMEs have to pay higher interest rates or sacrifice equity to private investors.

Planning processes expensive - Even as larger-scale developments are dependent on planning permission specialists who work to exploit capital growth land land opportunities, so too must smaller builder-developers achieve approvals for small sites – sans the expertise and options that larger developers have. Larger developers also have economies of scale that amortise costs over many more homes and plots, while a smaller builder might spend as much as £50,000 for a single small-site application.

Public land procurement is unwieldy - About 40 per cent of developable sites, as well as 27 per cent of brownfield land that is suitable for housing, is publicly owned. To satisfy transparency requirements of the sale to private interests, the administrative tasks required to be a buyer are a disproportionately larger burden on smaller builders.

The Government has acted to help smaller builders, most notably with the £500 million Get Britain Building scheme and the £325 million Builders Finance Fund. The former provides equity investments to smaller residential schemes (under £12 million) while the BFF is focused on stalled housing schemes of 15 to 250 units. The Confederation of British Industry (CBI), the voice of business, looks at the challenges to SMEs and recommends increasing affordable housing capital investment (currently at £6.5 billion) at the expense of housing benefit welfare payments (currently at £24 billion). The business organisation also recommends that alternative sources of financing such as retail bonds or government-guaranteed lending be made available to SMEs.

Another solution provided by the Government - but concerning to environmentalists - is how the Government has relaxed the zero-carbon homes requirement, set to take effect in 2016 for all new construction. Recognising that this goal is unachievable in some buildings, it offered two allowances. One is that where not achievable on-site, a developer could employ “allowable solutions,” which often means implementing a commensurate carbon reduction in another project such as a building retrofit. For smaller developers, any project of 10 residences or less is exempt from the requirement. But as some have noted, that means those homes will be more expensive to operate for decades to come because more fuel will be required to heat them.

For the time being, larger-scale developments will continue to draw the lion’s share of investment money and build the developments with the most homes. But few will argue against using many initiatives from multiple sectors to make up the national shortfall of homes.

Individuals and institutions are increasingly drawn to the housing sector in the UK as a smart investment strategy. But choosing the right vehicles for every situation requires an independent financial advisor, particularly for individuals.

Might Modular Housing be England’s Next New Home Building Method?

Offsite-built homes are more energy efficient and less costly to build than traditionally constructed houses. They could help solve the housing crisis faster.

“Modular housing” created a bad name for offsite-manufactured homes and building components in the post-war period, probably because most were intended to be temporary in nature. But in the 21st century, this type of residential building, sometimes called “flat-pack” homes, is in some ways superior in quality and might be the answer to Britain’s housing shortage.

The advantage largely lies in how modular homes can be built to higher energy-efficiency standards than those houses built onsite. Additionally, offsite-built homes will cost up to 25 per cent less than on-site construction. In the UK, such homes have gotten more attention recently because of these environmental and cost benefits, and also as a means of expediting building that might alleviate the housing crisis.

Typically, modular homes are detached houses accommodating one family, very often in the “self-build” category where the owner first acquires land in a rural or suburban area and then purchases the building components. In 2005, however, the industry was given a boost by the successful multi-storey, multi-unit Raines Court modular building located in Stoke Newington, London.

This suggests that larger-scale developments might be ripe for flat-pack housing. The accelerated means by which the country can build the 240,000 or more homes per year - versus the 140,000 being built today - is when investors in joint venture land funds buy several hectares of land. They will seek planning permission, develop infrastructure (roads and utilities) and then sell parcels to homebuilders who in turn build homes. The second part of this equation, the construction of homes, would be shorter when most of the building occurs offsite.

The Institution of Mechanical Engineers (IME) addressed this by publishing a report in 2015, “UK House Building, manufacturing affordable quality homes.” The IME makes just this case: “there is therefore an urgent and pressing need to substantially increase the number of new homes being built on an annual basis,” the report authors write, adding “not only does the number of new dwellings need to increase, so does the quality of their construction.”

The report goes on to express that home building companies are not sufficiently incentivised by regulations and economics to build larger and more energy efficient homes (the square-metres-per-person statistics for England are the lowest in Western Europe). Alternatively, off-site construction is urged by the IME for its several benefits:

• Shorter build times - Said to be less than half of conventional masonry construction.

• Superior quality - Because of factory-based design standardisation, precision engineering and quality control are exemplary.

• Energy efficiency - Due to superior thermal insulation, resulting in 20 per cent lower energy consumption for occupants.

• Less construction waste - Factory efficiencies result in 90 per cent less refuse.

• Lower cost of ownership - Due to reduced construction and operating costs.

• Reduced transport in construction - Lower fuel consumption in transporting raw materials to a centralised factory instead of the home site.

For investors in property fund management schemes - the financing behind buying land that achieves planning permission - these efficiencies do not directly affect the value increase in their funds and the developments they are engaged in. By and large their involvement ends with basic infrastructure on sites that are then sold to homebuilders. But if there is faster delivery on higher-quality, energy-efficient homes, that might enable more developments overall to be built. As of 2015, a construction labour shortage has stymied some building (many skilled construction workers left the industry as a result of the financial crisis that began in 2008).

IME calls for policy changes by the Government to support the still-relatively-small modular housing industry. First, the organisation supports investment in off-site construction technologies as a means of creating jobs (it bears noting that jobs would be diminished for construction firms that do on-site construction). Second, IME is critical of Whitehall’s wind-down of the 2016 Zero Carbon standard, exempting developments of 10 units or less from the energy-performance regulation. Third, it recommends a programme (and funding) to encourage diversification of the housing supply to favour self-builders, local authorities and housing associations in building different types of homes.

UK investors should always be keen to support new land investment schemes, new technologies and new methods for meeting market demand. The housing shortage certainly attracts investment to the sector, but an independent financial advisor should be consulted to ensure the investment provides the appropriate risk for the investor.

How Does Chancellor Osborne Plan to Fix the Economy with Housing?

Housing is in the matrix of economic activities that make for a stable and prosperous Britain. The homes shortage can be fixed with policy and investment.

Chancellor of the Exchequer George Osborne published a presentation to Parliament in July 2015 that outlines his ideas for stimulating the British economy. Titled “Fixing the foundations: Creating a more prosperous nation,” in it Osborne speaks of the drivers of productivity: “A dynamic, open, enterprising economy supported by long-term public and private investment in infrastructure, skills and science.”

No small part of this plan is what the UK does to ensure adequate and good quality housing. Fixing the foundations states as a premise that the country has fallen behind in building residences to accommodate a growing population. Osborne reads this as bad for people, but also bad for business: it “harms productivity and restricts labour market flexibility, and it frustrates the ambitions of thousands of people who would like to own their own home,” reads the report.

This is a critical consideration to investors who want to build new homes. Strategic land developers must work with local planning authorities to get permission to build; what comes out of Whitehall can influence councils at the local level. As anyone who has been through this development process will attest, it is not a cakewalk.

Osborne’s plan to increase housing as an economic stimulus comes in five pieces, fundamentally serving the need to provide homes that people can afford close to where they want to work:

Develop a zonal system for brownfield sites - In effect, it would grant automatic permission to build on suitable land that has fallen into redundancy.

Enforce requirements that local authorities develop their own local plans - Surprisingly, about half of the local councils lack a plan called for in the National Planning Policy Framework, which since 2013 has required each council to outline where new homes can be built. Osborne says “the Government will publish league tables, setting out local authorities’ progress on providing a plan for the jobs and homes needed locally.” Where local authorities fall short, the Secretary of State for Communities and Local Government will consult with local people in an intervention to arrange for writing local plans.

Encourage strong and fair compulsory purchase powers - This is a devolution of power to planners in London and Manchester. According to the document, the intention is “to bring forward more brownfield land for development by making the compulsory purchase regime clearer, faster and fairer for all parties.”

Support first time buyers - Provide 200,000 Starter Homes built by 2020, and extend Right to Buy to housing association tenants. Starter Homes will first be built on underused brownfield land; residential-unviable land can be used for retail, leisure and institutional uses.

Alter the tax structure for landlords - Under the current system landlords have the advantage of being able to deduct costs when calculating the tax they pay on their rental income - they still enjoy Mortgage Interest Relief that homeowners lost 15 years ago. Osborne proposes that this relief should be restricted and will be phased in over three years beginning April 2017, shifting the balance between landlords and homeowners.

The fact that Osborne stresses the work-home proximity factor is worth noting to those involved in alternative land investments. The proposal notes that labour market inflexibility is frustrating to employers as much as to workers. He remains critical of the strict planning system, even after the reforms begun in 2011, because it increases the costs and uncertainties in investments. Only better-managed strategic land investors understand how to navigate the system in such ways that a profit can be extracted from the enterprise.

Osborne does acknowledge the planning system has improved, that housing starts are at a seven-year high, and that government programmes such as Help to Buy have put 100,000 households onto the housing ladder. For those who invest in land for the purpose of development, this is encouraging.

Investors should always consult with an independent financial advisor to fully understand the implications of alternative assets and their risks. Investment in UK land and property can be lucrative, but the experience of the specialists managing the development or related funds needs to be considered as well.

Has Localism Failed? Osborne Gets Tough on Local Planning Authorities

The post-election proposals from the Conservative Government seem to buck the trend of the 2011 Localism Act. Local councils need to move faster.

David Cameron announced in September 2015 that planning permission would be streamlined with preapprovals for selling off publicly owned lands to housing developers. While a marked departure from standard planning processes, it should come as little surprise to those in the business of housebuilding. It appears the Conservative government is losing its patience with local councils.

“Is it not time to cut out the middleman?,” Cameron asked in a keynote speech covered by InsideHousing.co.uk “Should government not just contract out development on this land and get building on it straight away?”

This is just one sign among many that central Government is growing impatient with local planning authorities (LPAs) and their respective councils over a collective failure to provide for sufficient house building. The country has a critical shortage of homes, building under 140,000 residential units (flats, terraced, detached, etc.) per year when something closer to 250,000 homes each year for the next decade are needed to bring supply into balance with demand.

Investors engaged with property fund managers know the challenges of getting use permission. In their quest to turn unused land into housing, the LPAs have to be assured the new development will not place undue burden on the existing community infrastructure, or that the developers will provide necessary funding (through Section 106 payments or Community Investment Levies) to cover that concern.

Local councils have been asked under the requirements of the National Planning Policy Framework to produce five-year plans, projecting where and how new homes can and should be built in their communities. About half have complied as of mid-2015. The remainder, in addition to being out of compliance, then are subject to the interests of developers with no sense of a master strategy.

Cameron’s Chancellor, George Osborne, has proposed from London several additional changes to the planning system that further undermines the idea of localism. Chief among them is how the Government should intervene to draft local plans when the local authorities fail to do so themselves. Other changes include:

• Penalties to local authorities who make 50 per cent or fewer planning decisions on time.

• No planning approval necessary within a new “zonal” system that applies to suitable (residential-worthy) brownfield sites. Additionally, mayors of London and Manchester are granted stronger compulsory purchase powers to bring forward more brownfield land for development.

• Major infrastructure projects that include elements of housing will be fast-tracked through the Nationally Significant Infrastructure regime (not required to go through full democratic consultation).

• Residential property owners in London are allowed to add up to two storeys to their structures to accommodate additional homes (one restriction is that the addition not be taller than an adjoining neighbour).

This should provide encouragement to private financiers engaged in alternative investments. The lure of the high demand for housing is increasingly attractive as an investment, however some who are new to real property find the planning approval process to be off-putting. With streamlined systems in place and becoming less bureaucratic, such worries are diminished.

Investing in housing or other forms of real estate, land, property - and market-traded equities relating to these - comes with nuance and complexity. Individuals are advised to discuss it with an independent financial advisor.

Does the UK Tax Regime Distort the Housing Market?

Part of how cities and towns accept new housing is through improvements in nearby infrastructure. But how that is assessed fairly is subject to debate.

The UK’s housing shortage problem is one with arguably many causes. Some trace it back to Thatcherism, selling off council housing without guaranteeing that affordable housing would be built to take its place. Others say the planning system, the preservation of green fields, tight financing rules, and the Great Recession of 2008-2010 (and later) all shook out buyers as well as builders.

Now with a resurgent economy, investors involved in strategic land development are betting on building and selling more houses to a country that clearly demands them. They work through and past the planning authorities, select homebuilders to construct houses, and they generally do well when a development is complete. But there still are certain stymying issues.

A good case can be made for the market distortions that some tax structures cause. One example of this is how the Stamp Duty Land Tax (SDLT) affects the price and liquidity of home ownership. On a home valued at under £125,000, there is no tax but until December 2014 there were incremental jumps to a 2% tax (£125,001 to £250,000), 5% tax (£150,000 to £925,000) on up to 12% for homes valued at £1.5 million on up. Those abrupt jumps created artificial reasons for holding down prices and therefore the types of homes that were built were often done so to stay below a SDLT threshold. Critics point out this “slab” system tax was designed in 2000, before the 139 per cent increase in average UK home prices that we have today. A new, incremental rate is progressive but gradual.

Other taxes imposed on developers can also dampen development. When joint venture partnerships form to convert land to housing - in all that entails - investors and builders have to budget for other costs as well:

Planning gain taxes - The objective of land investment funds applied to development is to be granted planning permission to build on land that was previously designated for a lesser (lower value) purpose. Planning gain taxes divert some of this gain to the public sector, which can be a fair way of funding public realm improvements. Some parties are critical of this system, saying the negotiation between developers and planning authorities can be wrought with inconsistency, unfairness, a lack of transparency and lengthy negotiations.

Community Infrastructure Levy - Councils in England and Wales can raise funds for infrastructure from private developers to support public development. It is charged on a per-square-metre of development basis. The benefit to developers of this system (versus planning gain taxes) is that the fee structure is established up front, applicable to all developers without a horse-trading process of negotiations. Planning Resource, an independent planning professionals intelligence firm, provides a current list of CIL charges for developments across the country.

But not all infrastructural improvements are compulsory. Land investors and developers who are strategic land specialists might voluntarily propose and build infrastructure around developments. To do so the developers need to have a fairly good margin on their project.

Individuals and institutions alike look to developers to create value from undervalued land. But all investors are wise to consult with an independent financial advisor for advice on where and how to invest real estate funds.

Detached Home Building is Up in the UK: What are the Implications?

Detached homes are in high demand in Britain by “second stepper” buyers upgrading from their first homes. One step up the ladder allows new people on the first.

There are many variables in how the UK increases its supply of homes to meet the demands of a growing population. Government financing-support schemes (e.g., Help to Buy, Help to Buy Isa, Build to Let, etc.) are showing signs of success, as has the overhaul of the planning process. More recently, incentives for smaller homebuilding firms and an effort to increase the number of skilled workers to build homes have been introduced.

Investors from the private sector too have stepped up their efforts to increase homebuilding, such as when managers of capital growth funds file for land use changes with local councils. They turn unproductive property into residential neighbourhoods, generally because local employers want homes in closer proximity to workplaces.

A new wrinkle in the homebuilding scenario is that in 2014 the number of detached homes rose by 9 per cent over the previous year. This is part of a trend being followed by the National House Building Council (NHBC), which reports that 38,113 new build detached homes were registered in 2014, the highest absolute number in that category since 2004. A total of 145,174 homes were built, making detached homes 26 per cent of the total. Flats and maisonettes constituted 33 per cent of the total registered; semi-detached houses 22 per cent; terraced houses were 18 per cent; and bungalows were just 1 per cent.

This information was met with dismay in some quarters, with complaints that detached homes are more expensive, therefore they do not address the shortage of homes at the lower economic end. Further, because they consume more land they meet resistance from those who wish to limit building on green field and green belt areas.

But certain other variables of the housing market should be considered in this discussion.

These include how Shelter, the housing charity, routinely argues that all types of housing need to be increased. Reinforcing this idea were findings reported in a November 2014 article published by PropertyWire.com, the widely quoted global property new service. These findings, from a report from Lloyds Banks, include:

• Detached houses are the property of choice for homeowners ready to move up the property ladder from their first homes.

• So-called “second steppers” increasingly want four bedroom homes (31 per cent, up from 24 per cent in 2010).

• Homeowners in their first property are staying 19 months longer there than planned (most who want to move up have increasing incomes and family size, or want to add to their families).

• The typical gap between the sale price of a starter home and the purchase price of a second home is £58,400; second steppers fill this gap by savings (37 per cent) and overpaying their first mortgages (41 per cent).

The financing to build the larger, detached homes largely comes from private investment groups such as joint venture partnerships. As they work with local planning authorities to get approvals to build, they have to demonstrate that the demand for housing justifies what is being built. A local employer that needs middle- or upper-management employees needs the housing stock to match, for example.

Putting capital into housing serves the investor as well as the broader economy. Speak with an independent financial advisor about what needs financing and where - and what is likely to optimise your return on assets.

CBI on the UK Housing Shortage: It’s Bad for Business

The million-plus homes deficit in Britain is treated like a social issue. It is that but so much more; leading business organisations have calculated the costs.

It’s conventional wisdom that the UK’s housing shortage is harmful to families. But when people spend too much of their income on homes, or cannot move out of parents’ homes to form new households, it creates a drag on the economy as well.

So says the CBI, “the voice of business,” in its 2014 report “Housing Britain: Building new homes for growth.” According to the CBI deputy director-general, Katja Hall, “Housing is not just a social priority, it’s a key business issue. We see the impact of too few homes being built not just on the front pages of our newspapers but in the experience of our families, friends and colleagues...it also has huge implications for our future economic competitiveness. Businesses need a flexible and mobile workforce, but the high cost of moving home, and lack of decent and affordable housing, are barriers to attracting and retaining employees.”

This is a key driver for those engaged in UK land investment, working to build homes where needed. That almost always is where a local economy is growing and one or several employers want their people to live nearby.

The CBI publication points out that restrictions on land use for new development, a function of the planning permission system has “for decades…caused cyclical house price volatility - a situation that has contributed to macroeconomic instability to the detriment of households and businesses alike.” It also cites statements from Mark Carney, Governor of the Bank of England, who has said that the housing market poses the biggest risk to future financial stability.

The CBI partnered with the Centre for Economic and Business Research (CEBR) to put numbers to these claims. Findings from this and other CEBR research include:

• £4 billion per year - How much extra spending power households would have if housing and commuting costs rose at the price of inflation (the Consumer Price Index), instead of the 56 per cent rise in UK house prices since 2004. That much incremental spending would multiply itself as goods and services are purchased.

• £770 million per year - The portion of that £4 billion that would be saved simply in reduced transportation costs if people could afford to live closer to where they work. That doesn’t account for time savings, which could be substantial. Managers of property funds wisely focus their research on sites that would serve employer needs.

• £5.5 billion - Money spent on suppliers to the homebuilding industry, part of the £12.5 billion invested in land and buildings for homes built per year (based on the 140,000 homes built in 2013, which is only about 60 per cent of what needs to be built).

• 600,000 jobs - Number of people employed in a year when 140,000 homes are built. If 250,000 homes were built, it would bring this up to about one million jobs.

The goals of the CBI are aggressive. They see a doubling of new home building (to 250,000 or more per annum). The business organisation sees it necessary for a “pipeline of land” - the work of specialists engaged in planning permissions - to deliver well-designed homes for sale or rent. Also, innovative financing programmes and an increase in the skilled workforce able to build would further this objective. A simpler and more competitive tax regime, paired with a flexible planning system, are required as well.

Investors in house development understand that both obstacles and handsome returns meet the high demand for homes. What all investors need to do is to discuss their interests in home-development investments with an independent financial advisor.

Building Upward: How the British Feel About High Rise Living

The squeeze is on as the British population continues to increase. London is in a tall building boom, but not all UK residents are willing to let go of their gardens.

The UK has a bit of an identity crisis with regard to housing development. Either we should build up into the sky or out to the green fields - or both (because we cannot afford to do neither).

There are those who take the position of protecting the greenbelts. These include supporters of the Campaign to Protect Rural England, an organisation that opposes Britain’s housing planners’ proposals to develop on a large scale - up to 15,000 homes in various parts of England. Such developments are a modest effort to address the country’s growing population and urgent housing shortage. They propose instead small developments of 6 to 12 homes scattered about the villages (note: that would require 1,250 to 2,500 villages, not all conveniently located). The thinking goes the incremental, distributed approach would impose fewer burdens on infrastructure.

Elsewhere, there are urbanites who have trouble with high rises. Which to the contrary seems only logical: if the country cannot build out, it must go up. This stripe of urbanistvalues human-scaled streets, squares and parks, and mid-height buildings. But has that battle been lost? More than 236 new high rise buildings between 20 and 75 storeys have been or are being built in London. And these are short of The Shard, which at 87 storeys became Western Europe’s tallest building in 2012.

Can we come to some kind of compromise? To anyone engaged in property funds- endeavouring to achieve planning permission to build on raw land - an all-of-the-above strategy is all that is practical. The country is short of one million homes, and the 7 per cent population growth identified in Census 2011 is likely to continue on its trajectory. The population of London itself stands today at 8.6 million people, expected to grow to 10 million in 15 years and to 11 million by 2050. People have to live somewhere.

Of course, it’s well understood that foreign nationals are buying flats in these high rises as investments, rarely if ever actually living in them. But foreign inhabitants in London are hardly new: one-third of Londoners were born somewhere else. Foreign nationals from the U.S. and Asia who are living in London are quite accustomed to high-rise views and long elevator trips to the car park - and much less inclined to tending the primroses.

The traditional English ideal is to live in a detached home with a garden, and that largely remains the case. Many property investors put their cash into real assets to develop homes closer to the ground where cities in the southeast, the west, north and midlands are growing as well. Employers find that locating outside of London enables lower costs for them and their employees. This is why proposed garden cities and other such developments, on green fields as well as brown fields, make a lot of sense.

Investors will go where the money is to be made. To build traditional detached homes, they achieve planning permission to build on unused land; this typically provides a handsome return on the investment. Alternatively, investors in high rises find the higher they build or own in one of the new high rises, the more its value increases - by about 1.5 per cent per floor. At the highest levels in the best buildings, prices begin at £1.35 million (for a one-bedroom flat) and can be worth as much as £15 million. Clearly, these are not the poorly maintained council flats of the 1960s and 1970s.

There are as many ways to invest in UK land as there are types of homes, on the ground and in the air. But would-be investors should always speak with an independent financial advisor to learn which investments and risk factors fit their individual needs and strategies.

Are Newly-Built Homes in the UK More Sustainable?

Indeed they are. But whether new builds or retrofits, increasing the energy efficiency of homes is beneficial to the UK economy in all kinds of ways.

Shockwaves hit the green house building industry in the UK in July 2015 when the Treasury announced it was dumping two planning regulations intended to ensure all new homes were “zero carbon” by 2016. The rationale was that these regulations were burdensome to homebuilders, a position that has some merit given the red tape barriers often cited as contributing to the country’s critical housing shortage.

The Treasury provided some assurances to environmentalists that it would “keep energy efficiency standards under review,” according to BusinessGreen.com, a sustainable business-focused website. The Government acknowledged the benefits of increasing energy efficiency in homes in its statements.

While this elimination of mandates might slow the advance of green home building in the UK, by no means does it suggest a return to the energy-wasteful building practices of the past. Home builders and their investors - frequently those seeking capital growth land opportunities for large-scale new building – have already been doing a pretty good job of constructing what are sometimes referred to as “high performance” homes.

The past dozen or so years of homebuilding have benefited from improved materials and methods, to significant results. The Carbon Brief, a climate science and energy policy news organisation, reported in 2014 that energy use in all UK homes, new and existing, fell by 11 per cent in the decade since 2004. Acknowledging that this was partly due to a warm winter in 2011 as well as household cost cutting due to the 2008-2010 financial crisis, several components that have become standardised in new homes contribute to energy savings as well:

• More insulation, double-glazed windows and better boilers - From the Fuel Poverty Report 2014, the portion of homes in the UK that scored in the middle- to high-efficiency ratings categories went from 45 per cent in 2008 to 70 per cent in 2012. This is attributed to better insulation, energy-efficient modern windows and condensing gas boilers that are replacing older standard boilers and combi boilers.

• Better light bulbs - EU rules that banned inefficient incandescent bulbs forced a rather rapid adoption of much more efficient compact fluorescents and now ultra-efficient LEDs. An energy expert at Oxford University, Dr Brenda Boardman, says that home lighting energy use dropped by 22 per cent from 2000 to 2012 due to better light bulbs – even while home computers and other electronics have added to the load on home electricity in this same time period.

• Energy efficient appliances - Newer, energy efficient refrigerators, ovens, dishwashers and washing machines are replacing older, less efficient models, particularly since 2008.

Because the supply chain for all of these items has learned to be greener, in order to compete effectively in an energy-educated consumer market, it means that all new construction now features greener components. Those who undertake real asset investing in new home construction need not make a tortured decision between “green” and “cost-contained,” as they are one and the same. Some of it came about by mandates, but much due to the advances in technology in response to rising energy prices and concern for the environment and climate.

Investors in home building generally do so for rational reasons - to achieve a good return on investment - however building can also affect social and environmental causes as well. Homes are needed throughout the country in all price strata. But before investing it makes sense to speak with an independent financial advisor to consider the depth and breadth of investing in UK and real estate.

200 Years of Housing Policy History in the UK: We Adapt

The changes in population, construction and infrastructure technologies have certainly improved homes in the United Kingdom. But Government policy has also played a role.

While the UK is truly in a housing crisis it is not without precedent. We need to accelerate building by about 110,000 homes per year to make up for the shortfall, thought to be in total one million homes and made more urgent by a growing population. But the UK has dealt with pressing needs for housing throughout modern history and has always managed to figure out how to do it. The relative stability of British society bears testimony to our capacity for doing so.

Two organisations have recently documented this history. They are the National Housing Federation (NHF) think tank in its report, “The Politics of Housing,” which largely concentrates on the 20th century; and the NHBC Foundation, “Homes through the decades: the making of modern housing,” a look back to about 1800. NHBC Foundation, established in 2006 by the National House Building Council, largely focuses on a sustainability agenda, risk management and consumers.

The NHF report points out that the current level of housing completions has not been this low since the 1930s, with about 115,000 new homes built in 2010 (it rose a bit to 140,000 completions in 2014). It opines that one barrier to government policy not being more successful at building is that the high degree of ownership in the country - about two-thirds of dwellings are owned by their inhabitants - necessarily dampens efforts to increase supply.

Their rationale is if you own a home in a community you like, you are less inclined to encourage development nearby that will alter your community and add burdens to its infrastructure. This is among the key challenges to capital growth partners who buy UK land and seek planning permission to convert to housing.

Note that in previous periods private ownership levels were lower: It was just 10 per cent in 1914, 25 per cent in 1939, by 1971 ownership reached 50 per cent and by 2001 it reached its peak at 69 per cent. By 2011, largely due to the financial crisis of 2008, the ownership rate declined to 64 per cent. As fewer own, more people rent - and the Buy to Let programme has played a large role in meeting some of that demand.

The NHBC Foundation report traces both the types of homes and infrastructure from the Victorian era to the present, crediting reformers, planners, architects, designers, technologists and construction teams for the advances made through the decades. While investors, such as those who prefer alternative investment funds that build physical communities, and government officials probably should be added to this list, it is clear the Foundation report looks at the broad sweep of players in ensuring comfortable and resilient homes for the British.

To coalesce the analyses of these two perspectives, consider the following points. While not in strict agreement from both analyses, several themes emerge:

• Government has always played a role - Victorian mains sewers, flushing WCs and waste collection were critical to the UK’s population growth in the 19th century. This supported the private sector investments that then could build homes in more places and in different ways.

• Population growth has been a driving factor - The UK population grew from 11 million to 32 million in the 19th century, including the urban growth from 2 million to 20 million.

• Housing is closely tied to economic stability - Since the end of the First World War, Government policy has pegged social and financial stability to housing. This led to the large-scale post-war council house building programme.

• Private ownership has risen dramatically - And as it did, privately rented housing dropped from 89 per cent in 1914 to about 10 per cent in 1999 - but has risen to about 16 per cent today. The trend is considered ahistorical and tied to the above-inflation pace of home price increases.

• The quality of housing stock has markedly improved - In the rush to replace a half-million homes destroyed in the Second World War, prefabrication was developed and enabled the construction of a stunning 354,000 new homes in 1954 alone. But that came at a price in quality. Already variable quality in new privately built homes prompted the establishment of a national registration scheme for house builders in the late 1930s. Tower blocks that introduced high-rise living often proved to be social and financial failures.

• Sprawl has always been a worry - Planning principles that apply today (to some extent) were largely established in the 1947 Town and Country Planning Act, which sought to limit suburban expansion.

Today, we wrestle with questions on the inadequate supply as well as the need for sustainable housing. The private sector has proven to inventive in achieving both objectives, however the planning process is still considered unwieldy, as the question first addressed in 1947, to block suburban expansion, is still unresolved. Developers and home builders have the capital to build, but still must convince local councils that development will benefit existing communities.

Investors in housing recognize the present-day opportunity to build for the UK’s rapidly growing population. But the complexities of investing combined with the many variables of housing require that would-be investors consult an independent financial advisor before taking a position of significance.

Zero inflation: How does it affect land investment and the housing sector?

Deflation can sound good to consumers’ ears, but it also alters economies and investment decisions. UK deflation is new and housing investors need to pay heed.

The UK is in a stage of exceptionally low inflation - even deflation in some sectors - which any student of macroeconomics knows has its pluses and minuses. Consumers love paying lower energy bills, but some businesses suffer if they have to cut prices to attract buyers. Borrowers suffer if they are paying back on debt incurred when prices were higher.

Investors in new home building might take notice as well. For example, capital growth land opportunities provide individuals and institutions a means to participate in the high demand for housing - finding UK land that can be converted to housing (with council approvals) and establishing homes where the local economy needs them.

But with all the moving parts of the UK economy, within the context of global economic shifts (petroleum pricing among them), where to apply money and capital is a question that isn’t easily answered. These publications have offered some perspective in 2015:

FT.com - The Financial Times’ online “UK economy at a glance” provides a rundown on more than a dozen economic indicators, including both inflation (at -0.1% as of October 2015) and the housing market. The annualised house price rise that month across the country was 6.1%, but 5% when factoring out London and the South East. Relative to inflation, the paper’s economists note, “Exceptionally low inflation, driven largely by falling oil prices, supermarket price wars and the strength of sterling keeping down the costs of imports, has been a boom for household finances.” It cites the Bank of England’s prognostication that very low/zero inflation is due to “external factors” and not indicative of a looming deflationary spiral. Relative to home buying, “the value of mortgage lending also rose by the largest amount in almost seven years,” with 69,300 mortgage approvals in October 2015, perhaps due to demand that was held back earlier in the year during the lead up to the national election.

The Telegraph - The paper’s property correspondent interviewed economists on how a deflationary cycle might affect housing prices. Making distinctions between “good” and “bad” deflation, the head of JLL residential research says a bad cycle could include flat or falling house prices. The impact could be a cooling of transactions because existing homeowners won’t feel comfortable about trading up; if they do anyway, with lower proceeds from the sale of their old home their deposits will be smaller, forcing some to accept a higher loan-to-value mortgage on their new home. “Would you buy if you think prices are going to go lower?” posed the researcher. “Homeowners like buying into a rising market.” But this would require a “sustained and persistent” deflation cycle, which he says is not yet evident.

PricedOut.org.uk - This advocacy group campaigning for affordable house prices says that “nearly 3.5 million private renters are unable to afford the average house and this number will increase further if house prices continue to rise faster than wages.” Citing how the average cost of houses is seven times that of average income, it points out how rising home prices have a perverse inflationary effect: “Rising house prices hinder the ability to build enough houses because it increases the market value of land, thereby increasing costs to the developers ... attract[ing] more speculators to the housing market as ... it makes houses more expensive.” The proposed solution is to set a target of zero per cent house price inflation, levy a higher rate of capital gains tax on property (to make speculative buying less attractive), liberalising planning policies, and otherwise encourage a zero-per cent house price inflation rate.

So regardless of whether you invest in market-traded securities or alternative investments such as land, house building, antiques or commodities, there is this unusual dynamic of very low inflation and perhaps deflation to consider.

But the chief property economist at Capital Economics, the independent macroeconomic research firm, told FT.com that the shortage of homes for sale causes an “upward momentum” defined by tight competition by more buyers chasing after too-few homes. For the most part, that’s what capital growth investors look for in alternatives to securities.

No investor can be expected to understand the many interrelated factors of any economy, deflationary or inflationary. This is why third party advice from an independent financial advisor is almost always recommended.

Will Privatization of Public Housing Ease the Housing Shortage?

Several Government changes relative to housing associations suggest they will cease to deliver homes as needed. Private investors might be the only builders.

Several significant factors in the UK housing association sector have cast doubt on whether the growing need for housing would be abated. Indeed, these factors suggest this need will not be met if trends continue.

The Government’s abdication from supporting housing associations comes at a time when private investors’ interest in house building is growing. Alternatively, from the private sector, real asset funds seek land where it can be acquired and where planning authorities will allow for building. This is where standard supply-demand dynamics play well: with high demand come higher real returns to those funds.

But at the lower end of the market, lower income families are seeing diminishing opportunities to find housing. Consider what has happened in 2015 alone:

• In October, the Office for National Statistics reclassified housing associations as non-financial public corporations. This effectively places £60 billion of privately procured housing association debt on the Government’s balance sheet. Observers speculate Chancellor George Osborne will then try to get this debt off the public books by selling it to private investors, or remove regulator burdens on housing associations that in effect enable them to become commercial property companies - setting rents as they wish. Note that Germany’s experience with privatisation (selling to large investors that included Vonovia, Fortress and Cerberus) resulted in one million fewer social dwellings and an overall increase in housing prices.

• A few months ago, Chancellor Osborne surprised many with a forced rent cut of 1% on housing associations, in contrast to the 1% increase plus inflation as they expected. Subsequently, a survey of providers by the Homes and Communities Agency found that the associations curtailed investment plans by about £1 billion for 2015, believed to be a consequence of this rent cut. This decrease is spread across more than 200 landlords, not due to a single large drop in individual plans.

• One of London’s largest housing associations - Genesis, which owns and manages 33,000 homes in the city and the South East - announced in August it would discontinue building social housing. Contributing to this, according to an article in The Guardian, were the Government’s decision in 2010 to cut funding for social homes by 60%, and welfare reforms that reduced tenants’ ability to pay rent.

To the dismay of social housing advocates, Genesis will build homes for sale and rent at full market rates. Real asset investing of this nature is considered mission creep in that the profits from market-rate building are ostensibly targeted at subsidising social-rent dwellings. But the extent to which organisations such as Genesis go into for-profit building is an unanswered question.

Without question, new homes are needed in the UK. Private investors are keen to enter real estate as an asset-growing opportunity, which it indeed is. But as the housing charity Shelter points out, the housing shortage at all price levels is affecting both the middle and lower classes equally. Buyers are favoured by such programmes as Right to Buy, Help to Buy and Starter Homes initiatives. But the experience in some European countries has been many owners lack the wherewithal to maintain the homes they own. Instead of appreciating value, large percentages of dwellings fall into disrepair and become an asset that is hard to sell.

Those keen on investing in UK land and building should consider it as any other asset class: a balance of risk and reward is uncertain. An independent financial advisor should be able to counsel the investor in how to identify manageable risk. 

WikiHouses: What Might They Do to Alleviate the UK's Housing Shortage?

At a remarkably low cost and buildable in mere days, these energy-efficient structures might help England to build more homes faster.

There is a big idea out there called WikiHouses, and it might just be one of the key solutions to the UK housing shortage. Notably, the design-build movement is rooted in England but it’s already being tested around the globe.

A WikiHouse is essentially a flat-pack-like kit that combines 3-D printing with a very democratised, open-source approach to architecture and construction. Its progenitor, Alastair Parvin of Zero Zero Architects (Hackney, London), speaks of it as the solution for the masses, a self-build method that might make housing affordable. Which, given the high cost of housing and the inadequate supply of homes, makes the method worthy of examination.

It also might make the short list of creative concepts worth investigating for individuals engaged in UK land investing. If housing delivery in a short period of time is critical, this method offers something rather extraordinary: Single-day construction of a two-bedroom, 68-square-metre wooden frame house, at a cost of about £50,000. The construction “crew” need not even be professionals, as amateurs or volunteers can do it if, in the words of Parvin, they are “IKEA-savvy.”

The Wiki design concept is open-source, meaning designs are essentially free online and open to variation provided by anyone generous enough to do so - essentially doing for simple home designs what Wikipedia did for encyclopaedic knowledge. The design program cuts building parts - much of it orientated strand board (OSB) - with a computer numerical control (CNC) machine. As this can be done locally, where a CNC exists, the materials are less expensive because there is less transport required. And this is part of the building’s sustainability story. WikiHouses can be built to high performance standards, even to qualify as “net zero energy use” Passive House requirements.

The South Yorkshire Housing Association announced in late 2015 it would build a pilot home with the method in 2016. Should the pilot project prove successful, the association said it may enable them to affordably replace homes sold under the Right to Buy programme where low-value land areas make it otherwise an economic challenge.

Investing in UK strategic land typically involves buying the land from non-builders, for example farmers or public owners. Investors then will seek a zoning change from the local planning authorities to build, although increasingly that means selling the lots to homebuilders. The WikiHouse concept would radically change the homebuilding process, but it’s not inconceivable that the speed and lower-level of investment could compel investors to test the concept. Alternatively, an individual could purchase the land to do self-build – assuming they are “IKEA-savvy.”

The Guardian considered the WikiHouse option in an article in 2014, suggesting that land availability and cost would be the biggest barriers - particularly in densely-built London. But it went on to suggest constructing these buildings on top of existing buildings, which by law may be possible. A spokesperson for Sustainable Homes, a not-for-profit consultancy, noted that post-war pre-fab buildings were similar in concept and suffered from poor energy performance. But much has changed in the 60+ years that have passed such that those concerns may be unnecessary. WikiHouse proponents emphasise how the open-source nature will provide for innovation and adaptation to different situations, climates and design interests.

Investors in housing are by nature innovative. Every site is different and every market needs different kinds of homes to meet local demand. Meanwhile, homebuyers want quality homes that can enhance their lives and build value over time. But every investor should consider all variables relative to the house-building opportunities in the UK - an independent financial advisor is the first place to go to consider the options.