The positive difference we can make in housing
In our newest guest blog, Neil Toner, partner and head of real estate from Devonshires, talks about why, during the continuing coronavirus outbreak, housing professionals should focus on some of the positive differences we can make in housing.
BC (Before COVID-19)
When I started to write this blog, I decided to look on the bright side of life. To be fair, the first draft of my blog in February was quite a bit longer. But now is a time, more than ever, to focus on the positive. Here are my top three reasons to be cheerful in the housing sector.
1. We’re a big part of the solution
What the problem will be when we get to the ‘other side’ will depend on how long it takes to get there. If the lockdown is being lifted in a month or two, our economy will have suffered a severe shock – but, the landscape will be recognisable. If we’re still confined to our homes come September, the challenges will be greater. But, in either case, there’ll be a need to re-stimulate the economy. Both academic studies, and real life examples, show that building homes is one of the best socioeconomic investments a country can make. It employs people, putting earned cash into pockets. It gets people spending on furniture and services.
2. We have the resources
The last pre-COVID-19 quarterly survey published by the regulator reflected a strong and stable sector with £22.5bn of undrawn facilities and cash balances of £5.1bn. While private developers, with models based on outright sale, will be reticent, RPs will be well placed to develop. That will be both an opportunity and an ‘obligation’ – to play our part.
And ‘new money’ will be available. As the world economy gets back on its feet, pension funds and capital markets will be looking for safe and steady investments – just as they did after World War II. UK affordable housing will be an attractive proposition. Pre-2018, the mainstay for the sector when accessing private money, was a small band of loyal banks. But, recent years have seen a growing number of new entrants including National Australia Bank, Wells Fargo and the Sumitomo Mitsui Banking Corporation.
That trend will continue. And it’s not just the volume of cash that will be interesting. The scale of investment from Blackstone into Sage Housing and L&G Capital into L&G Affordable Homes has meant that the theory of For Profits has become a reality, at scale. My prediction is that that will continue also.
3. We are innovating more than ever
British consumers have viewed modular build through the ‘prefabricated’ prism of post war construction. Mortgage lenders have been wary and structural warranty providers have been reluctant.
What has been needed in Britain is modular reaching a critical mass. So that consumers perceive it as a high quality end product in their built environment, so that lenders can see that it’s not a specialised high risk product and so that warranty providers can gain the experience they need in assessing safety and durability. That critical mass is now:
• Pocket, one of the early adopters, has had great success with its modular developments in and around London.
• At the end of last year the government announced a £30m investment into ilke Homes, to help build 5,000 modular homes a year
• A number of RPs, such as Swan and Accord, have developed their own in-house modular and off-site capabilities.
The lockdowns across the world will pose a challenge in re-engaging with supply chains. But those supply chains are currently in hibernation so will be waking up on the ‘other side’.
Keep positive - play our part
So while no-one can deny we’re living through trying times, we’ll get through them, and it will be up to us to be positive and to play our part in the recovery.