by David Khan | Dec 8, 2022 | Latest News
It is widely reported that the construction and development sector has one of the largest business footprints. Construction building is accountable for around 40% of all global energy consumption. In addition to 23% of air pollution, 40% of drinking water pollution, and 50% of landfill waste. Cement alone is a high contributor, accounting for around 8% of global carbon emissions. Every construction step has an impact on the environment. From the materials and technology used as well as the construction sites built. As a result, many experts are calling for the construction sector to act and move towards an ESG framework.
What Is ESG?
ESG is a collective term made up of three components: environmental, social, and governance. All of which measure a business’ impact on society, and the environment, and how transparent and accountable they are. In addition to how robust and transparent its governance is – this is in terms of company leadership, executive pay, audits, internal controls, and shareholder rights.
What Does This Mean For The Construction & Development Industry?
Within the construction industry and for SME developers there are key considerations that need to be looked at under an ESG framework:
Many current ESG requirements are outlined within Building Control requirements.
Why Implement ESG Principles?
According to CBI the UK’s premier business organisation, two-thirds of investors consider ESG factors when investing in a company. Thus, they are looking at not only the growth of the business but also the impact on the environment and community. Additionally, PwC reported that over two-thirds of customers would buy from companies that support ESG initiatives with customers more willing to pay more for greener products. Lastly, research conducted by LinkedIn found that 71% of professionals would be willing to take a pay cut in order to work with a company that shares their values. In addition, 39% would leave their current role if their employer were to ask them to do something that was against their morals. Therefore, even for SME developers, companies who adopt an ESG framework can benefit greatly. Including reducing risks, securing investments, lowering costs, and increasing reputation leading to more new customers.
How To Implement ESG For SME Developers
Implementing ESG as an SME builder comprises a three part process:
- Firstly, a business has to measure and understand its current impacts such as carbon emissions. British Business Bank has summarised some steps on how to measure ESG. These include deciding what to measure, gathering the information, and including stakeholders.
- Based on this analysis, a business then has to outline goals and ways in which to improve these. Such as reducing energy use or improving employee well-being.
- The next step is to roll out the ESG program to your company to improve the overall baseline and impacts.
Although every business is unique in the way it operates and is set up, there are some core principles that can be followed. British Business Bank has outlined them here. These include creating a team, investment, measuring, and communication.
One important factor to consider is that ESG is here to stay and many lenders will start having ESG criteria and metrics for their borrowers.
by David Khan | Dec 5, 2022 | Advice
Following our previous blog “Help To Buy Scheme To End” there have been further developments. Housing minister Lucy Frazer has confirmed that the practical completion deadline has been extended by one month.
This has come from the construction industry explaining the various delays outside the home builder’s control. This includes supply chain and labour issues and thus a number of reservations would be at risk of missing the government’s Help to Buy deadline.
Therefore, if a property is going to miss the original Practical Completion date of the 31st of December 2022, this has now been extended to the 31st of January 2023. This forbearance is only available to customers who already have an Authority to Proceed (ATP) or Authority to Exchange (ATE) in progress. No cancelled applications will be reinstated, and no new or additional reservations can be submitted. Additionally, the clause of this is developers have to notify Homes England (in writing) by 20th of December 2022.
Home Builders Federation has commented “Homes England will shortly contact all developers with an active reservation, notifying them of the amended first longstop date. As part of the correspondence, developers will receive access to an online form requiring details of each individual reservation that will make use of the additional forbearance period. There will be no extension to the deadline for this correspondence of December 20, 2022.”
However, the final legal completion deadline of 31st of March 31, 2023, still stands, as confirmed by Lucy Frazer.
by David Khan | Nov 30, 2022 | Advice
The Government’s application deadline for Help to Buy: Equity Loan Schemes has now closed (31st October 2022). This now means that by the 31st of March 2023, any first-time buyers must have legally completed their property. Homebuyers are expected to have the keys to their home by 6 pm. Homebuilders must tell homebuyers in advance if they cannot meet these dates. If these are not met, they will not be eligible to use the equity loan.
Originally launched in 2013 for first-time buyers of new-build homes to help them onto the property ladder. First-time buyers based in England who put down a deposit of at least 5% of the cost of the property, could use the scheme to borrow up to 20% of a property’s price. This was from the UK Government and interest-free for the first five years. Helping the buyer stretch their budget as well as access mortgages with cheaper interest rates.
Numbers released by the UK Government revealed over 55,000 households bought their home with the support of the Help to Buy: equity loan in the financial year 2020-21. Since its inception in 2013, more than 355,000 new-build properties have been bought with the help of an equity loan. The Home Builders Federation (HBF) states the scheme has generated about £60 billion in economic activity. The number of homes built in England went up from 110,530 in the year to June 2013 to 183,450. In total, the value of these equity loans has reached over £22 billion, with the value of the properties sold under the scheme going past the £90 billion mark.
However, the UK Government has stated that there are no plans to extend or replace the scheme when it ends.
The Impact Upon Home Builders
Under the terms of the Help to Buy: Equity Loan Funding Administration Agreement, homebuilders are required to reach Practical Completion by 31st of December 2022. This might mean considering the number of working days during December to ensure the deadline is met.
If this date cannot be met, the homebuilder must tell the buyer in advance and return their reservation fee in full. You must also tell your Help to Buy agent and contact the Help to Buy Claims team by email at [email protected].
Furthermore, if the homebuilder has exchanged, they must also unconditionally release the homebuyer from the contract and return their deposit. There is no deadline for exchange, but homebuyers must legally complete it on or before the 31st of March 2023.
Lastly, the removal of advertising is the responsibility of the home builder. Any marketing activities or advertising boards, for instance, need to be stopped and removed. Any costs that are incurred due to this are the responsibility of the home builder.
Is Now The Right Time?
Neil Jefferson, managing director of the HBF, believes that Help to Buy has been one of “the most successful government home ownership interventions in history and handsomely delivered on all its pre-set objectives. For the first time in decades, there is now no government scheme in place to support first-time buyers to purchase new homes at a time when political and economic instability has seen mortgage availability challenged”.
The National Federation of Builders (NFB) also does not believe this is a good time to end the scheme. Rico Wojtulewicz, head of housing and planning policy, says: “We have lobbied the government to keep Help to Buy and reform it in a way to ensure it supports certain criteria, such as higher energy-efficient housing, on smaller plot sizes of houses only, or to help specific people who struggle the most to borrow, such as families needing bigger homes or single people.”
Experts within the industry believe that no scheme will lead to a drop in the number of homes built. In addition to the impact on social housing in terms of wannabe buyers having to spend longer in rented housing to consider. A survey conducted by the Royal Institution of Chartered Surveyors has already started to see this trend of the letting market growing. Struggles with money will increase and many people will be left with the choice of staying at home, “bank of Mum and Dad”, shared housing, or renting if possible. Leading to another struggle for first-time guys getting on the housing ladder. Wojtulewicz explains: “With fewer people being able to access mortgages, the housing crisis will no doubt worsen as people continue to pay more in rent, live with parents longer or in overcrowded homes”. Housing Today believes “the government should not back away from its manifesto pledge of building 300,000 new homes a year by the middle of the decade. We badly need more homes, and a lack of supply is a major factor in creating problems of affordability for both buyers and renters”.
by David Khan | Oct 21, 2022 | Case Studies
There is a lot of noise at the moment around the UK government, the cost of living, and house prices. It is clear to say that every day seems to be different. As a result of this sadly, 1 in 4 young renters have reported that they are thinking of moving away from London due to the cost of living. With rent and house prices being higher than ever before.
Research shows that the average weekly rent price in London has increased to £553. With the average advertised rent prices increasing by 16.1% over the past year. Charitable foundation Trust for London found that between April 2021 and March 2022 the average rent for a one-bedroom property cost the equivalent of 46.3% of the gross-median pay in London, compared to 26.4% for the rest of England.
London, estate agent Foxtons stated that the increase was due to a combination of demand and a shortage of rental properties. Estimating that of the 23,000 rental properties that came on the market, in September 2022, there would be 29 people competing for one singular property. Furthermore, SpareRoom, a site that helps people looking for flatmates, found that more than seven people are competing for each available space in London. This is almost double the rate compared to the rest of the country. Lastly, Rightmove found there were 9% fewer available properties on the market, with demand for rentals increasing by 20% overall. Therefore, the demand is high however, the number of rental houses and flats in London is down.
Pocket Living build flats for first-time buyers and surveyed 1,000 renters aged 25-45. They found that within the first 12 months, 27% of renters were considering leaving London. Marc Vlessing, Pocket Living’s chief executive, said the situation was “one of the clearest indicators that London faces being gradually leveled down”. However, whilst London has the highest rent in the UK in other places such as Bolton, Walsall, and Salford, they have seen affordability drop the most since the pandemic.
The average price of a property in the UK has nearly tripled in the last 22 years and has increased by more than 60% over the past 10 years. It is difficult to see what the future holds for the housing market in the UK, especially over the long term. However, many housing experts believe there is a critical requirement for more affordable housing and for developers to build more buy-to-let houses.
Development Finance With BLG
According to recent research, about 145,000 affordable homes will need to be built annually for the next five years to address the UK’s housing crisis. BLG is a leading principal lending specialist in property development finance, we are positioned to help you. Providing residential and commercial finance ranging from £1 million to £15 million we have the ideal skill set to lend and advise. Priding ourselves on fast decisions and flexible terms we can aid you through these turbulent times. Contact our financial experts today who will take the time to get to know you and your aims.
by David Khan | Sep 14, 2022 | Latest News
Suraj Lakhanpal, Business Development Director
Navigating Headwinds and Tailwinds facing the Housing Market and Future Living Trends …
One may wonder when we will truly appreciate the magnitude of the pandemic’s global impact on the everyday way of living in the UK. Hybrid working has transformed lifestyles, making optimising space in our homes more important than ever. Add to that, the energy price squeeze and cost of living headwinds, making the journey to a new norm longer and more turbulent. But what about those knock-on tailwinds that help our flight accelerate towards our desired destination? Here we observe how headwind events, impacting the housing market, often lead to positive tailwind innovation effects, and to stay relevant, the need to stay on top of future changes affecting the housing market.
It comes as no surprise that Rightmove recently observed that garden offices are now amongst the most sought-after house feature; suggesting the meteoric rise of video conferencing software is here to stay. Indeed, these software tech firms are investing huge sums in the future digitalisation of meetings taking place in the Metaverse. Will VR headsets soon become essential work equipment, to engage with colleagues in your firm’s Metaverse office? Will your avatar, or digital twin, be dressed in formal or casual attire?
Awareness of making UK homes greener, as a critical step in the roadmap towards Net Zero by 2050, is well-known. It is very much seen as the ‘Plan A’ in ticking off the ‘E’ in ESG agendas for most firms operating in the residential sector. For developers and builders, however, new building standards mean more headwinds to navigate; notably a ban on fossil fuel heating systems in new homes from 2025. For larger schemes, that means adoption is needed now to ensure later phased homes are compliant with new rules. Now exacerbated by prevailing energy cost crises, carbon-efficient homes not only mean cheaper bills, but also premium values due to demand from buyers and renters alike.
Whilst new homes and those older stock requiring mortgages will allow the government to lever policy incentives, what about the 10M+ homes owned outright? Whilst energy price spikes will enhance payback periods on green improvements, it remains uncompelling. Rightmove also observed that buyers are starting to negotiate offers factoring in the cost of green improvements. Could the energy crisis be the headwind that pushes older households to finally change flight, to smaller, more-efficient homes so they maintain living standards? In turn, this could become a catalyst that enables younger generations, in their prime home-buying years, to improve older, low-EPC homes stock via greener retrofitting works; ultimately, a tailwind towards destination Net Zero?
The UK’s housing supply-demand imbalance and affordability factors are likely to take several years to fix. Fingers remain firmly crossed that planning departments can be fuelled by government policies towards quicker decisions abilities, to help keep the UK’s housing pipeline engines switched on at least. The coming months may well define currents and effects on house prices – will those doom and gloom headwinds or the supply squeeze in new stock prevail? Future government and monetary policies need to consider proportions and types of home sales sensitive to rising rates in a supply-constrained environment. At what level could interest rates overcome affordability and weigh down on home sales pricing and/or volumes?
A tough set of questions to answer. With a significant pipeline stuck in what feels like a nationwide planning bottleneck, no quick fixes seem possible to cure the shortage of new homes built in recent years. So, in a fast-changing environment, arguably yet to fully embed the global pandemic’s disruption to how we live and work, one could argue that the case for innovation has never been more critical in recent times. Microsoft’s CEO, Satya Nadella, is unequivocal in his belief that “The next 10 years will be a historical inflection point for digital technology, acting as a deflationary force in an inflationary world”. Seeing it as “…the only way to navigate the headwinds we are confronting today.”
How our work and home lives evolve over the next few years remains uncertain in these turbulent times, but looking out for the longer terms of goals and how they apply to construction and the latest living trends are more important than ever to be able to negotiate the headwinds.
Development Finance With BLG
BLG are a leading principal lending specialist in property development finance, we are positioned to help you. Providing residential and commercial finance ranging from £1 million to £15 million we have the ideal skill set to lend and advise. Priding ourselves on fast decisions and flexible terms we can aid you through these turbulent times. Contact our financial experts today who will take the time to get to know you and your aims.
