British developers scent profit in towns that last

10 September 2007 - Source: http://www.reuters.com/article/inDepthNews/idUSL16

By William Kemble-Diaz

LONDON (Reuters) - After decades putting up -- and tearing down -- hundreds of thousands of cheap identikit homes, Britain is planning a new wave of housebuilding with a major challenge: to produce communities that last.

Property developers scent potential profits in a new kind of development, which would help the government tackle its chronic housing shortage and may be kinder to the environment.

With roads now congested as people drive from residential clusters to reach facilities, the buzzword is "sustainable urbanism" -- carefully thought-out developments with meaningful open spaces, mixed-tenure housing, shops, places of work, schools, leisure facilities, and so on.

"Towns" might be an old-fashioned word for them. Besides being greener they may even bring shifts in Britain's rigid social class system, by mixing up the 'haves' and 'have-nots'.

In the past -- in anticipation of weak returns -- the emphasis was on public funding for 'affordable' or 'social' homes. Known to many as "council houses", they were clumped in concrete jungle estates where deprivation and social problems festered.

Besides these estates, private low-cost developments by traditional housebuilders have created drab dead-end roads from which people are forced to drive.

But Yolande Barnes, director of research at property services firm Savills, said the evidence suggests new "sustainable" developments are far more valuable hectare-for-hectare in the long run than typical estates.

"What sustainable urbanism is about is creating your own location," said Barnes. "It's the only way we can deliver the numbers being considered in the concentrated geographical locations without flooding the market with rubbish."

Prime Minister Gordon Brown has said he wants 3 million "affordable" new homes built by 2020, after a tripling in house prices over the past 10 years as the supply of new homes lagged demand, pricing many of Britain's 60 million people out of the market.

An emerging view in the industry is that the more money and time you put into a mixed-use project, the bigger the potential returns. But obstacles remain: the upfront costs are huge and the returns could take up to 20 years to emerge.

GOODBYE "GREEN BELT"?

The biggest housing shortages are in flood-vulnerable London and the overcrowded southeast, where the government has ambitious plans to build on much of the area east of London -- known as the Thames Gateway.

Some urban planning experts say pressure is mounting for laws restricting property development to be relaxed, threatening a 60-year-old doughnut of greenfield land that has protected London from the unfettered suburban sprawl blighting other cities such as Mexico City and Los Angeles.

Some building on this 'Green Belt' is, they say, unavoidable: the topic is highly sensitive in a country which likes to see itself as what poet and artist William Blake called a "green and pleasant land".

The UK has been here before -- after World War Two when the government built several "new towns" around London to ease housing shortages exacerbated by Hitler's 'blitz' bombings -- places such as Crawley and Basildon.

The late 1960s saw another wave of new towns further afield, while the London Docklands Development Corporation in the 1980s and 1990s led to the regeneration of large parts of east London and the development of the Canary Wharf business district.

Francis Salway, chief executive of Britain's biggest listed property firm Land Securities, said there is a similar need now for an overarching vision of what type of communities to build, as well as government investment in key infrastructure such as transport links and flood defenses.

"Will they be collections of villages, small towns, or just suburban sprawl? To get this right requires a resource input which goes far beyond conventional housebuilding," Salway said.

Citing his own company's experiences in trying to develop a 1,450-acre site within the Thames Gateway region, he said the private sector now had a motive to build Britain's next generation of sustainable communities.

"Market forces may provide a solution if people believe that if they can access a large tract of land they will be able to create something which is ultimately of greater value," he said.

PRINCE SHOWS THE WAY

Barnes said commercial property developers -- rather than traditional housebuilders -- are taking the lead with bigger mixed-use sites, because they have longer-term business models and more experience in acquiring enough land to be able build a meaningful large-scale development.

Neither the industry group the House Builders Federation or the UK's biggest housebuilder Taylor Wimpey wanted to be interviewed on the topic.

Some large private landowners have also shown the way forward, including the Prince of Wales's Duchy of Cornwall, with a new village development called Poundbury on the English south coast.

For that lead to be replicated on a grand scale, Barnes said mechanisms are needed to encourage smaller landowners to pool resources and build up "patient equity" investment in residential property, by investors who can wait those 20 years.

Another challenge is to persuade central and local governments to make more room for private rented accommodation on sites released for development, said Ian Fletcher, a director at industry group the British Property Federation.

The private rented sector is providing more new affordable housing than either social housing or home ownership.

"There seems a reticence on politicians' part to acknowledge the role of the private rented sector for fear that is seen as a lack of commitment to home ownership or social housing," he said.

 

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