The Intermediary – May 2025 - Flipbook - Page 43
RESIDENTIAL
Opinion
new-build to work
Site viability assessment
consultancy s106 Management rightly
calls the plans “a high bar, particularly
in areas which were not previously
subject to affordable housing
requirements.” Most important,
they note, is that the requirements
now apply to all major development
proposals for housing in the green-belt
in any form. Thus, any scheme over
10 units.
The viability density requirements
also favour the development of larger
sites which, given the stretched
resources, will likely detrimentally
impact the ambitions of those
developing smaller sites. While
larger more dense housing can offer
benefits like preventing sprawl,
improving infrastructure, and
promoting sustainable travel, they
also raise concerns about community
satisfaction and access to services.
For the country’s largest lenders,
being on top of the proportion of
affordable housing on their balance
sheets will be key. Smaller lenders,
too, will need access to broader
market data to ensure their own
risk exposures are proportionate,
both on a tenure and geographical
concentration basis.
But volume is only part of the
challenge. Quality control is
paramount. The combination of
high pressure to deliver new homes
at volume, the limited availability of
skilled workers, and the higher cost
of raw materials, is shaving profit
margins which has raised concern that
standards may be slipping in some
quarters.
This makes warranties absolutely
critical for lenders’ risk management.
Not all warranties are created equal,
however, making whole of market
data analytics a very useful tool for
benchmarking potential structural
risks associated with new-build.
Climate risks
The risk that climate change presents
to the UK’s housing stock are well
known, but many lenders have
still not fully quantified their own
exposure. Understanding what data
gaps exist in their own loan books is
one area that many are now focused
on remedying. The prospect of how
lending against new-build affects
this type of risk exposure is front
of mind, particularly in light of the
Government’s relaxation of planning
policy and desire to encourage the
development of green-belt, brownfield
and so-called ‘grey-belt’ land. Access
and previous use are all issues that
arise when land is repurposed.
Lenders are already cognisant of
climate risk, with particular focus on
its effect on access, geological impacts
and propensity to flooding. These risks
are present in all tenures, but there
is a high awareness for homeowners
living in newer properties.
Research published in Autumn last
year by the insurer Aviva found that
56% of new-build homeowners believe
their home is at risk from flooding.
This found that owners of newer
homes are more likely to be worried
about the impacts of climate change,
with 45% of new-build homeowners
Understanding the
evolving nature of newbuild risk will be more
important than ever”
concerned about damage in the next
year, compared with a third of all UK
residents.
Furthermore, 58% of owners of
newly built properties told Aviva
their home had been affected by a
weather-related event during the
previous five years, compared to 40%
of all residents. One in three said their
new-build home has suffered from
wind or storm damage, while 22% said
their home has flooded – versus 12% of
homeowners in all types of homes.
Between April 2020 and April
2022, around 7% of new homes were
built in Zone 3 floodplain areas,
where they are at the highest risk of
flooding, according to the Climate
Change Commiee’s most recent
progress report. At this rate, that is the
equivalent of 105,000 of the planned
1.5 million homes due for completion
by the end of this decade.
Of course, knowing about the
issues is one thing, addressing them
cost effectively is quite another. My
observations here are not exhaustive,
but should give you an insight into the
issues lenders are facing.
Our New Build proposition
addresses exposure risk and
concentration risk across 16,000 UK
sites, and it has been instrumental
in assisting more than 45,000
transactions. This is growing daily.
The appropriate solution will
vary by lender, and will need to be
nuanced. What all lenders need,
though, is a solution that includes
more data than sits on their own
balance sheet, and a team of experts
who can flex as issues arise. ●
May 2025 | The Intermediary
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