In our last blog in this series, we take a look at the final piece of the puzzle of London’s housing crisis – the perception of land value vs. building value, and the importance of detaching the two.
A report by the British Property Foundation in 2016 found that the market value of real estate in the UK is £1,662bn – which represents 21% of total net wealth.
Most of that value tends to be in land rather than in buildings; in fact, according to the Valuation Office in a 2015 report the average price of agricultural land in England was £21,000 per hectare. Compare that with land that has planning permission for housing and you’re looking at a staggering £6m per hectare. That’s quite a jump.
High value land results in high cost properties – far out of reach for those on low income or benefits, and is a significant contributing factor to London’s worsening housing crisis.
The properties built on that land, in comparison, hold less value. On top of that, the properties are designed and built to last perhaps 150 years, but after 30 or so years increasingly they may be knocked down – the materials wasted and sent to landfill, and the whole process begins again.
We have to break this cycle for the UK to be competitive and successful in the future.
Increase building value through sustainable design
Separating the value of land into one commodity, and a building into another, different, commodity, means we’re able to focus more on the sustainability of the building – specifically its design, construction and materials – to create properties that can flex with the needs of the UK housing market.
At QED, we’ve specialised in the development of modular homes – buildings that are made up of component parts that can be deconstructed, moved and reused as and when necessary. This approach flips the current model on its head and balances the current skewed perception of the value of land and property.
In Part 3 of this series, we discussed the importance of future-proofing housing design, and considering the sustainability of the materials used in the build. If all new homes were designed and built for deconstruction and re-use, rather than being bulldozed and sent to landfill, the result would be fewer emissions, lesser impact on finite resources such as copper and steel, and would bring about a sea change in the perception of land value vs. property value.
Passport to sustainability
The technology to design our buildings sustainably exists now. Building Information Modelling (BIM) is a highly efficient and effective method of information management in a team environment, and Materials Passports enable us to have a full inventory of every material component in a building.
This technology provides the data for which - when combined with human experience - when the time comes that the building is no longer useful we can accurately price the residual value of components, such as copper (1000kg of copper pipe, for example has a residual value of £3/kg), to enable good decision making.
At QED we believe this technology is the future for UK house building. To make it work on the scale needed to solve the housing crisis in London, then long-term access to land is essential.
What about affordability?
A far lower cost of installation and construction ultimately means that housing can be made more affordable.
One of the ways to control affordability so you don’t get such a volatile market, in terms of land prices for developers to buy, would be if local or central government or big institutions controlled the land rather than speculators.
A sustainable operating model would be implemented – in the first instance renting the properties; but, the model also lends itself to different operating vehicles, be that a community group, or perhaps a group of local councils, local business or our pension funds.
In the first part of this series we explained how Sadiq Khan had proposed that half the target of 50,000 homes a year should be genuinely affordable to rent or buy. We’ve covered the need for proactive policy change, and why we must find ways to ‘stop the bleeding’ and reduce public spending. We’ve also discussed the need to become future-savvy with materials and design right now, making use of the technology that already exists.
For an ultimately sustainable built environment, we must separate the building from the land. We must use materials intelligently – considering their environmental impact, as well as acknowledging the potential residual value they hold.
This, combined with access to land on a temporary basis, delivers a different, progressive model on which the UK’s housing market could benefit from indefinitely.
Be brave and take action
A serious conversation must be enabled between big institutions, the Government and developers around piloting this model. Their investment and support is essential in transforming our approach to housing.
QED’s vision is one of a moveable, diverse and sustainable built environment. We are delivering this by bringing brownfield land back into productive use; with our buildings routinely constructed from a kit of re-usable component parts. Our recent projects include Hope Gardens and Marston Court in Ealing.