Humane Housing with a mix of Social and Market Yield
Let’s Share the Vision
Here we explain why Douglas and King, as architects, believe that housing serves a fundamental human and social need. We believe that incisive knowledge and insightful management of the dynamics of integrating Affordable Housing and For Profit housing can maximize investment value.
We advocate responsible real estate strategies that create positive social impact alongside strongly performing investment models. We understand the importance of the sustainability of an asset and yet within this model create aspirational communities.
We are experts in managing the financial model of a project at all stages and are 100% happy with a profit driven motive. However ‘maximising profits’ at the expense of delivering good quality buildings and community focused environments is at worst anti-social and at best discriminatory. A good investment strategy must incorporate environmental and social issues alongside traditional economic considerations.
We as architects strive to create the best possible solution for the people that will live in the developments we design yet are equally committed to ensure that the funding partners receive resilient profits on their investments. Responsible investment requires anticipating and managing all risks to maximize returns, not only the absolute but also the anticipatory.
The Role of Housing Initiatives
In order to alleviate lack of provision and high values in the housing market national planning legislation is undergoing re-evaluation to encourage an increase in homebuilding. The new legislation is intended to ensure that private sector new housing delivery provides for all members of our society from the affluent to the impoverished and from the old to the young.
There are also initiatives to increase the supply of social and affordable housing including that of consent to Local Authorities to again develop their own estates. Here we explain why, as architects and project managers, we are placed centrally between the ambition of a development investment model and the ambition to create a successful and well-balanced community.
We welcome legislation that encourages the creation of mixed communities and that is why we encourage developments with place making at their core. This aim yields a twofold outcome: mixed tenure helps integrate people and cultures, stimulates opportunities and creates a neighbourhood that has potential. It also encourages an entrepreneurial vision that can be shared by institutions, not for profit partners, and the financial sector.
Since the 1980s the cost and types of housing development have been driven by prevailing market forces. Developments needing to prove that a profit can be made in order to attract private sector investment. The issue here is that there has been little control over the balance between market yield and investment in successful communities.
The Role of Developers – The Good, The Bad and the Ugly.
There are many development players and partners in the housing sector. Some are massive profit-driven entities, e.g. Persimmon (the Ugly), some are ideas shapers, e.g. Igloo (the Good), and some are just plain Bad (unameable). The Good strive to deliver an effective social balance of quality homes and inclusive communities within a robust and strongly performing investment model.
To maximize profit solely for shareholders dividend returns in the housing sector results in the squeezing of cost/ambition/responsibility at all levels and neglects the vital component – added value. The profit net gain/loss might be determined by many factors that may include the following:
The availability and purchase price of the land for development
The cost of the infrastructure necessary to support a new development, e.g. onsite roads, sustainable drainage, utility connections, public transport and amenities, etc
The cost of construction including buildings and landscaping
Fees for specialist advice and design team costs (Architect, Engineers, Agents, Solicitors) etc.
The cost of taxes and other contributions that may be part of the planning obligation as outlined in the local planning agreement (otherwise known as Section 106)
Borrowing requirements, warranties, etc
Historically the profit yield from a housing development would have been mutually agreed between a Local Authority and a developer on the basis of a Viability Appraisal. This was a simple model balancing all delivery costs against returns and provided an indicator of the ratio of AH within a development. The profit yield threshold of 20% was applied to determine how many AH homes would be included, along with other factors such as design quality, infrastructure provision, etc
However, a loophole by which AH could be squeezed out or knocked down was open to manipulation. If a developer had overpaid for land it could be argued that in order to make their money back the community element would have to be reduced or eliminated altogether.
Conversely, a developer who had paid the right price for land was able to deliver AH within the development and satisfy the baseline profit margin. As a result land prices ballooned and thousands of AH housing provision was lost.
Currently, legislation is being introduced to limit the use of Viability Appraisals to exceptional circumstances and these will be fully available for public scrutiny.
The Role of Housing Associations and Other Not for Profit Partners
Housing Associations have long waiting lists of people from all walks of life who need a secure home that is affordable whether rented or within a shared ownership scheme.
Housing Associations often like to see properties within their responsibility located together for ease of management. Sustainability is a particular issue for Housing Associations: the physical management and upkeep of their estates.
At Douglas and King we like to discuss the Affordable Housing component of a development with an appropriate housing association at the outset in order to eliminate or design out concerns focused on market value impact, the positive value of mixed tenure occupancies, customer-led demand contributing to supply, etc as well as longer term issues such as maintenance costs, management, and community engagement.
Other organisations such as National Pride and Forviva can also provide partnership identification and advice.
The Role of Estate Agents
Estate agents can be resistant to the concept of mixed tenure developments designed on the principles of place-making and inclusion due to the potential impact of less affluent households on the resale values of the market housing element of a development. That is why ‘tenure blind’ features are crucial in order that an integrated appearance is achieved throughout the development and that rented and privately owned dwellings are indistinguishable from the outside.
Estate agents are part and parcel of the private residential market whether rented or owned and their knowledge of the market is invaluable however, the bigger issue is achieving the best possible local and environmentally sound impact through a quality development. Achieving the best possible market value for owner occupied homes increases the investment yield.
The Role of the Tenure Mix
It is almost impossible to establish an ideal tenure mix however, developing a good mix of typologies and unit sizes to accommodate a range of household sizes would potentially contribute to the long-term investment and stability of the development. An emphasis on good design is the best strategy – attractive neighbourhoods that people want to stay in encourage the development of ‘organic’ social relationships across income groups and tenures and foster neighbourhood stability and sustained market value.
The Role of the Architect
As architects the success of the social and built form of a project is a core value. At Douglas and King our track record evidences our ambition to uphold a credible and profitable financial model coupled with a high level of social responsibility.