How can we make homes affordable?

[Crofter]

Prompted in part by the discussion in this thread, and in part by an article in this month's Homebuilding & Renovating mag about '£50k starter homes', I thought it might be interesting to see what our members here think can be done to minimise the cost of new builds, whilst maintaining basic features including mortgageability and market desirability.

 

The target buyer would be first timers, as couples or with young families. (Although it would be great to imagine that lower cost housing and/or easier access to finance might allow people to buy earlier in their lives- to counteract 'generation boomerang'). So realistically a minimum of two bedrooms. Land cost is a whole can of worms in itself so if we want to tackle that one, best done in its own thread, IMHO.

 

Just curious to see what factors people might suggest towards lowering build cost?

[SteamyTea]

Build the house in a factory, transport to site and erect.

 

The best way to ease finances on housing would be to have two parts to the mortgage rate.  One based on the variable bank rate (very low at moment) and a second part based on property prices to earnings ratio.  This second part would need to be very high at the moment.

By raising the overall cost of borrowing, the price of housing will fall.

 

Another financial area to be looked at could be the professional fees and the charges that local authorities charge for building.

My local council has asked for comments on the CIL, a very short sighted charge in my opinion.  I am tempted to reply saying something along the lines of "no upfront charges, build the houses and get the council tax instead".  There will be a sweet spot to the rate that new housing is built and the rate that local infrastructure needs to be increased, but charging up front is not the way to get development done.

Edited January 5, 2017 by SteamyTea

[ProDave]

"Build in a factory transport to site and erect"

 

There is a local firm here who builds modular, portable homes to good standards of insulation. I have seen how they are built. Basically they are built exactly the same way as a stick built timber framed house. The only "benefit" of building in a factory is the weather does not bother you.  I don't see a great saving there being possible. Then you have to add the transport and craneage cost to get them onto site.

 

I will add at this point, what they build is mostly bespoke houses, so each one is of course individual.

 

Now I could see big savings being made, if we were talking about hundreds, perhaps thousands of identical houses. Then I see scope for automation of at least part of the process

 

Speaking as a self builder doing most of the work myself (now that the heavy work is done) materials cost is still a big issue. Even with zero labour cost, you can't get the price of a house down that much So to build a house for £50K including paying labour I see as nigh on impossible. Perhaps Crofter will confirm, but I think his materials cost will be in that region? so now it only becomes possible if you can build for free (hence large scale production of the same design automated)

 

 

[Crofter]

It's worth having a look at the H&R article- it features a number of designs looking at 66m2 for £50k. I am presuming there are land and service costs on top of that. Some are also 'self finish', so final price will depend on how much DIY the buyer/owner can do, and what spec they aim for.

 

My own project is both smaller and cheaper, at 43m2 gross internal, for a total project cost of about £38k, which includes a lot of site prep work and services. The actual fabric cost of the house is in the region of £20-£22k. I am doing everything myself so materials cost is all there is. This is for a house with TG alu-clad doors/windows, u values around 50% better than building regs minimum, MVHR system, woodburner (not a cheap one btw), and a kitchen costing around twice the cheapest option. So I could have pared the budget down here and there by going for cheaper options on the above.

 

The pre-fab issue is interesting, I think all the H&R projects had this. If time is money then it might make sense to do as much construction off site as possible, especially with smaller houses where the sections or panels will be relatively easy to transport. How much can a joiner do in a day working in a factory, as opposed to on a site, constrained by weather?

 

@SteamyTea Finance is undoubtedly the key, but probably a topic for another thread. Likewise the issue of LA charges- some of which IME do seem to take the mick slightly, and that's without having CIL. I have paid nearly £2k in fees to the council, for a house that has no building warrant, so apart from a drive past the site before they gave me PP they haven't had to lift a finger.

 

 

If we were to try and focus on the actual build route and design, what would we find?

Are different build methods going to be cost effective in different areas, due to predominance of certain types and thus availability of workers familiar with that system? For example, it's easy enough to get a TF builder up here, as it is the most accepted build method, but perhaps down south it's easier to get a brickie?

Are there any features that we unthinkingly 'need' that could be done away with? E.g. Fireplaces/stoves, too many en suites. Perhaps we are too insistent on putting everything within the heated envelope, and should instead build cheap lean-to utility rooms to house our washing machines and freezers, thus freeing up the more expensive floor area of the house proper.

Where do we see money being wasted, or spent inefficiently, in new builds?

[ProDave]

A lot of the new builds I see, I see money being "wasted" by inefficient layouts and a lot of wasted corridor space or over larger entrance halls etc. That was a "failing" in our current house. I always said the large entrance hall and galleried staircase was a waste of space. I was told it gives the house a "wow factor" Shame none of the few people that have viewed the house have been wowed by it.

 

The new one is a lot more eficcient on floor space with the hall and landing being much more modest, and my rather quirky combining of the utility room with the downstairs toilet.

 

Having just built a house with a vaulted warm roof and now see how something as simple as moving the insulation from the upstairs ceiling, to the roof line can so dramatically improve a building, I would not advocate deliberately making "cold" parts of the house.  I am actually staggered how little I have spent on insulation for my whole house, so the savings would be quite small to make one bit a less well insulated space.
 

[AliG]

We were discussing this at work this morning.

 

The problem is mainly the cost of land. 80-100 square metres of house could be built to a modest spec for £80-100,000. This would be affordable for a single person earning £25,000 or a couple earning £20,000 each. As Dave says you can get plenty of living space for a young family out of this kind of area used intelligently.

 

If the supply of land wasn't so tightly controlled and restricted its value would collapse and the number of houses built would increase to serve the market.

 

We were discussing this today at work as a report was out saying that inequality would increase as better off people are more likely to inherit more money from previous house price appreciation. I have been talking about this for years. As increasing numbers of people inherit money then for them house prices don't have to be linked to earnings, but it seems very unfair to me that they can then price others out of the housing market.

 

Again though much of the inherited wealth comes from house price inflation. If I had bought a 1 bed flat when I started working in London 14 years ago I would have made over £20,000 a year tax free. A lot more than many people earn after tax.

 

A few solutions I have considered. Tax capital gains on your main property. This would stop it being seen as an investment and also stop people receiving massive windfall profits depending on where they live. Basically people who have owned a house in London for over 10 years are now massively wealthy than almost everyone else in the country through shear luck.

 

I would also tax planning gain and use it to reduce council tax. The council tax payers have the power via the council to grant planning permission. If I had the power to increase the value of land ten fold by granting planning I would expect a massive cut. If a council owns a ransom strip they value it in this way, why isn't planning valued this way. This would have another benefit. NIMBYism would be a lot less likely as the more houses you allowed to be built the lower your council tax would be. Again this would encourage the release of more land to be built on and the value of land would soon fall when its supply was less restricted.

 

I for one wouldn't mind at all if the value of my house fell by 30% if the value of the land collapsed as I would rather the next generation have a chance to own a house and have a better standard of living. We could create rules that ignored negative equity as long as people could continue to make the payments as no ones' income would have changed. Further I don't think people realise how much of a tax on everything in the UK absurd property (land) values are. Every time you go to the pub or the cinema or the supermarket part of the cost goes towards paying for the inflated value of the space you are occupying. This spending power could be freed up for genuine value added economic activity. Sitting on appreciating land is not generating any actual value.

Edited January 6, 2017 by AliG

[jamiehamy]

6 hours ago, AliG said:

If the supply of land wasn't so tightly controlled and restricted its value would collapse and the number of houses built would increase to serve the market.

 

 

 

I for one wouldn't mind at all if the value of my house fell by 30% if the value of the land collapsed as I would rather the next generation have a chance to own a house and have a better standard of living. We could create rules that ignored negative equity as long as people could continue to make the payments as no ones' income would have changed.

 

 

I agree with you on both counts here. On the first point - the 'Land Reform Act' in Scotland is a waste of time because there is no planning reform - without planning reform, it's a waste of time. So in Scotland despite the rhetoric, nothing will change here. 

 

Re:housing prices - isn't it odd how month on month, house prices rise and yet never a word uttered against it by even the lefty parties? Why? Because they all have such vested interests they will never, ever look to tackle house price inflation - which is one of the key root causes of the issues we have in this country. 

 

I too have always said i'd take a hit on my house price when the market rebalanced - heck, I already did in 2009 - I'll never get back what I paid for my small flat, no-where near it, so I've already felt that pain once but prepared to do it again for a rebalance that is so desperately needed.  

 

In Scotland I think the planning situation is even more bonkers given just how much empty land we have - no point allowing the break up of big estates if they only think you're allowed to build on them are wind turbines - serious point. Build a wind turbine on the top of a hill? - Sure, why not make it 10. Build a small house nestled in the foot of the hill - bugger off. Oh, but if you managed, that piece of land worth 4k is now worth 80k - guess who wins?! Not anyone on a low income, that's for sure. 

 

So back to the original question - I don't think you can separate out land costs - that's the problem here more than the cost of building. In my humble opinion only! Address the land cost and planning policy and you could look at a housing that could last decades - not only more people building their own, but more people building small, second homes - love em or hate em, they are nothing unusual on the continent. 

[ProDave]

This still brings me back to my pet gripe. houses are NOT overpriced HERE.  If you build a new bespoke house now, I think you would be really lucky to sell it for enough just to get your money back.  That's if you CAN sell it.  Yet again though they tell me house prices here has risen 4% in the last year . I DO NOT SEE THAT AT ALL. So please don't talk to me about house prices need to . Not here they don't.
 

[Crofter]

Average UK wage is, what, £26k? Historically you'd want to only have to borrow about 4x that to fund a house, so anything over £100k is no longer 'starter home' territory.

[Tennentslager]

Don't have the answer but do like this thread.

I'd be interested in more debate about LVT but not sure if this could be implemented without massive other taxation/ local government reorganisation.

http://www.landvaluetax.org/what-is-lvt/

[ProDave]

14 hours ago, AliG said:

I for one wouldn't mind at all if the value of my house fell by 30% if the value of the land collapsed as I would rather the next generation have a chance to own a house and have a better standard of living.

 

You might not mind if you were just living in a completed house, and if you ever sold it you know the replacement house would also be 30% lower.

 

BUT if you were living in a house and trying to sell it, while at the same time part way through building the replacement, and a 30% drop in value of the old (5 bedroom) house would mean the sale value of that would no longer cover the costs of building the replacement 3 bedroom house, then you WOULD mind VERY MUCH.
 

[Crofter]

Just to return to my original premise/question.

@ProDave What do you think you would have had to do differently, or sacrifice, in order to build within my suggested budget of £100k for a starter home (I realise that you're not trying to build a starter home obviously). Changes to spec, size, design, materials? What if the land cost was zero?

 

Is it in fact the case that in the current climate it is not possible to build a house cheaply enough for an average person to afford to buy it, without historically high mortgage multipliers. Putting to one side land costs, because these obviously vary hugely according to location and demand, are material and labour costs currently too high to allow starter home to be built?

[AliG]

Sorry Dave, I know your situation is tough.

 

In fairness though, when I said the value of my house might fall by 30%, I was really thinking the value of the land would collapse, the cost of building a house would then underpin the value, not the inflated value of land.

 

In your case the land should have very little value so I doubt you would suffer a big drop in value. Also I wouldn't expect house prices to fall overnight which would cripple people with bridging loans etc, I would assume that increased supply would have effects slowly over many years.

[ProDave]

My actual build cost for a bare shell is currently under £100K I am confident however it will go over £100K, there are a lot of big ticket items still do be bought and having to wait until we can afford them.

 

To build it for absolute minimum, then it would have needed cheaper much less good windows and doors, no luxuries like mvhr just basic trickle vents on windows, no en-suite, just one bathroom with a very basic bathroom suite. A very basic cheap kitchen, no nice wooden floors just chipboard and cheap carpets everywhere, no UFH just ugly radiators, no attempt at being green and using an ASHP, just a cheap basic oil boiler.  It would not end up as the house we want.

 

There are a lot of costs associated with building a house these days, like detailed drawings, SAP reports, structural engineers reports, drainage reports. A mass builder will win here because one set of design costs gets spread over perhaps hundreds of identical houses.  I still don't know why more people are not using the "portable house" model to avoid building control and a lot of these costs. you can build a single storey "portable" building up to 100 square metres without a building warrant, that is plenty big enough for a 2 bedroom bungalow.
 

[Ferdinand]

Back in December I was nurdling a post looking at the issue of the extra cost/benefit by building thinner walls.

 

The point is that LAs specify maximum external directions, but Estate Agents value by internal floor area.

 

So eg a 10m x 6m internal size detached house which used 150mm celotex rather than 300mm PUR in the walls potentially gains 10 x 6 x 2 (sides of house) x 2 (floors) x 0.15 sqm of internal area which is 18sqm or 15%, or a master bedroom suite , representing perhaps £36k of extra market value at £2000 per sqm.

 

Lots of angles on the calculation, and ways to interpret it, but is it something we think about?  

Ferdinand

 

Edited January 6, 2017 by Ferdinand

[SteamyTea]

Fittings i.e. bathrooms, kitchens and build in wardrobes could save a bit.  I am not sure of the quality of today's starter homes, but my house has a cheap bathroom and kitchen (probably 200 quid each in today's money) fitted in 1987.  They are still both working as intended.

 

I should be possible for major housebuilder to do the construction for between £600 and £800 per square meter.

That is really quite a lot of money for a wall, bit of roof and some window.

 

The house factory near me was gearing up to make almost 30 houses a day.  They would leave the place with the windows in place and the walls plastered.  They did not employ any trades at the factory as such (though some of them may be skilled people from other industries).

A properly designed and build 'factory' house does not need much labour and the machinery is pretty basic, saws, nailers and plastering machines.  Even a wire loom could be machine made and just pulled though on sight.

Reduce the plumbing to a minimum would save a bit.  Simple UFH rather than radiators, plastic pipe to hot taps (no more than 3 needed really).

If a small house is designed 'open plan' (which I loathe), then there is a saving on doors and internal walls.

 

[Ferdinand]

My understanding is that on medium size upwards sites of say 100+ houses in a normal uncomplicated setting, the cost structure for a big developer for an average 200k house might be roughly:

 

Site Purchase, groundworks, infrastructure: 50k

Building it: 50k

Planning Gain taxes and cost of affordable provision: 50k

Planning, Paperwork, Promotion: 25k

Profit: 25k.

 

Sanity checks welcome.

[Crofter]

1 hour ago, ProDave said:

To build it for absolute minimum, then it would have needed cheaper much less good windows and doors, no luxuries like mvhr just basic trickle vents on windows, no en-suite, just one bathroom with a very basic bathroom suite. A very basic cheap kitchen, no nice wooden floors just chipboard and cheap carpets everywhere, no UFH just ugly radiators, no attempt at being green and using an ASHP, just a cheap basic oil boiler.  It would not end up as the house we want.

That is the disconnect between desirable and necessary.

I have lived my entire life in houses with radiators, at best, or storage heaters at worst. Likewise, I have never lived in a house with anything better than UPVC DG- and my current house is 50% single glazed.

I grew up in a house with an open fire and back boiler- not really 'central heating' in the modern sense.

I have never lived in a house with anything other than a bottom of the range B&Q type kitchen.

None of these things killed me. I suppose you don't miss them until you have had them.

 

If you were to offer somebody from 'generation rent' the chance of paying off their own mortgage, not someone else's, I think they wouldn't really give a hoot about the standard and spec of the building.

 

One area where there may be a case for government intervention is to put a thumb on the scales and promote the installation of technologies that make long term financial sense- so a subsisdy for the ASHP vs a penalty for the oil boiler. I guess we have things like RHI and FiT already but they seem pretty complex and benefit those with the capital to spend, which is of little help to the first time buyers/buillders.

 

1 hour ago, ProDave said:

There are a lot of costs associated with building a house these days, like detailed drawings, SAP reports, structural engineers reports, drainage reports. A mass builder will win here because one set of design costs gets spread over perhaps hundreds of identical houses.

Absolutely!! And another place where there could be an argument for the government/LA helping rather than hindering. Perhaps things could be simplified by the provision of 'deemed to satisfy' standards that people could design to. Or automated online tools where you submit your design details (wall buildup for example) and it spits out pass/fail/info.

I came across a very detailed and useful technical document produced by the Scottish Government, basically telling you 'if you build a house like this it will pass building regs' but it was only applicable to standard masonry skin builds, not timber clad, so I couldn't use it.

 

1 hour ago, ProDave said:

 I still don't know why more people are not using the "portable house" model to avoid building control and a lot of these costs. you can build a single storey "portable" building up to 100 square metres without a building warrant, that is plenty big enough for a 2 bedroom bungalow.

One word: mortgageability.

[ADLIan]

Interesting discussion guys

 

Can someone (ProDave?) point me to the reference exempting portable buildings upto 100m² from building regs/building warrant?

 

Thanks in advance.

[Crofter]

It comes from the Caravans Act IIRC, your particular council should have a policy on it- here's Highland Council's: http://www.highland.gov.uk/downloads/file/1346/bst_018_caravans_and_mobile_homes

 

I must thank @ProDave for suggesting it as this is my build route. It allows me to do everything myself, but the major downside is that without a completion certificate it would have been difficult/impossible to finance this in the conventional manner. And I fully expect it to be considered 'non standard construction' and thus not mortgagable on the open market, which could knock maybe a third off the value, at a guess.

 

Edit to add: I presume that the point of the exemption is that there must be a cutoff somewhere between a house and a caravan. And the definition of 'caravan' is pretty simple so as long as your building fits within the dimension constraints, and is monolithic or assembled from no more than two sections, you can meet it.

[ADLIan]

Thanks Crofter

 

Ian

 

[Ferdinand]

Chatting to a couple of Timber Frame manufacturers to try and get some constructive estimates together.

 

Sadly Space4 do not supply outside Persimmon any more.

 

But, working to Building Regs only spec, a full Timber Frame kit for a detached house in the 90-135 sqm range can be 220-250 £/sqm.

 

That includes everything except Tiles, Cladding, Plumbing, Electrics, Gas and Finishes such as paint, and requires a site, slab, services and to build it.

 

(will update this post with further estimates for the other items)

 

Ferdinand

[AliG]

1 hour ago, SteamyTea said:

Fittings i.e. bathrooms, kitchens and build in wardrobes could save a bit.  I am not sure of the quality of today's starter homes, but my house has a cheap bathroom and kitchen (probably 200 quid each in today's money) fitted in 1987.  They are still both working as intended.

 

I should be possible for major housebuilder to do the construction for between £600 and £800 per square meter.

That is really quite a lot of money for a wall, bit of roof and some window.

 

 

I agree with this. The people on here are generally building houses to a much higher standard than necessary as it is what they want. Indeed I think you'll find a lot of modest houses on here are better built than £1m+ houses built by developers.

 

In Edinburgh even in new build flats at over £4000 a square metre (mainly land obviously) you don't get triple glazing, you don't get MVHR, you don't get airtightness, you may get UFH, but often it is still radiators and with a gas boiler. You do probably get nice kitchens and bathrooms and wooden floors, because as ever people will pay for the things they can see more than the basic construction.

 

If you build a timber frame house to a B-C on the EPC, with 2G windows, walls with around 0.15 U-Value, carpets, GCH, 1 or 2 bathrooms, no Silestone worktops etc, then the cost is going to come in at less than £1000 a square metre. Indeed isn't this exactly what the likes of Barratt and Wimpey build.

 

Barratt are selling 120 sq metre town houses in West Edinburgh for £280,000 (2300/sq metre). They are selling 100sq m including an integral garage semis in east Edinburgh for £236,000 (2360/sq meter). But if you go to Motherwell they are doing 125 sq m townhouses for £166,000 (1300/sq metre). That was about as cheap as I could find on their website. They still probably paid something for the land at those prices.

 

What people would like is to be able to buy these kind of houses in Edinburgh for example where well paying jobs are easier to find. But of course in those places the land is too expensive and instead they build £4000 a square metre apartments for downsizers.

 

I don't really think we need to get that creative in terms of how we build houses. You can build a perfectly acceptable no nonsense house for under £100,000. It would still seem like luxury to what was being built in the 70s. But you need to be able to get the land cheaply and people have to have perhaps more modest expectations. 

Edited January 6, 2017 by AliG

[SteamyTea]

57 minutes ago, Crofter said:

I came across a very detailed and useful technical document produced by the Scottish Government, basically telling you 'if you build a house like this it will pass building regs' but it was only applicable to standard masonry skin builds, not timber clad, so I couldn't use it.

Something like that for each area would be very useful, could stop a lot of the 'game of caught you out'.

Maybe a few standards that people could work to, and if you want something different, then you apply like you do now.

Would have thought it would help everyone.

[AliG]

I think blaming building standards is a red herring. For the people here with unusual build methods and one off designs this will definitely be a headache.

 

Why would this be a big overhead building standard 3 bedroom semis in timber frame? As long as they meet current insulation standards what big issues would there be? Mass market builders churn these houses out all day long.

 

Indeed I tried to buy a piece of land that was built by a mid sized builder who outbid me. They are selling the houses for very close to what I estimated, the only way they could have bid what they did is if their build costs are around £1000 a square metre. I think they paid around £1300 a square metre for the land based on the built houses and that is before costs to clear the land.

Edited January 6, 2017 by AliG