Catch me speaking about Building For Life at Construction Expo 2009 in Chatham next Wednesday 30th September.

The article below from the FT has spawned blog posts in the Planning press with some astonishingly ill-informed comments . The main thrust of the objectors seems to be a misplaced belief that the planning system cannot refuse applications on the grounds of poor design and even if it could there is no way of measuring design quality. Nowhere in either post or comments is there a reference to Building For Life, the national standard for well-designed homes and neighbourhoods nor to the fact that the Planning Act 2008 puts good design at the heart of primary planning legislation.

What none of the posts or comments looks at is the rather dubious financial arguments. For example why can we expect the rental market to grow by nearly 2% over six years? Since new build is at best replacing about 1% of the existing stock this means that more than a third of all new homes built will be in the private rented sector. Why would long term yields theoretically equivalent to gilt yields be attractive without the security implied by gilts? Or maybe the proposal does actually rely on capital growth in which case the institutional investor will at some stage look to realise profits and dispose of the asset. Not much of a long term solution then? Who knows? I can’t see why “the time is right now”. Granted the market is at a low point in terms of capital value but I don’t see how this makes residential rental yields so much more attractive in the long term. It certainly makes capital growth more attractive in the short and medium term but that is not the same thing!

 

Identical flats to stimulate sector

By Daniel Thomas in London

Published: July 26 2009 23:37 | Last updated: July 26 2009 23:37

Big investors will move in on territory dominated by amateur and buy-to-let landlords

A tenant could soon be able to walk into a block of flats in almost any town in the UK and find identical features and quality, under plans to introduce US-style mass-produced rental accommodation.

Backers of standardised rental want to provide an alternative to navigating the hazardous UK market, which is dominated by individuals and small businesses. The option will move the country closer to the US, northern Europe and parts of Asia, where this sort of rental experience is widespread.

Aviva Investors is one of a number of institutions looking to raise funds to create an asset class out of rental homes in the UK. In doing so Aviva – and others likely to follow its lead – will be answering the government’s call for greater involvement in the private rental sector to bridge the funding gap left by the banks’ retrenchment and for a sales route to stimulate house building.

Many institutions have explored the idea of investing in the UK rental market in the past, particularly during the buy-to-let boom when private investors made large profits.

But most institutions have been discouraged by barriers such as management costs, difficulties in piecing together a large portfolio and the uncertainty of income.

Aviva, with adviser CB Richard Ellis , is expected to raise about £500m in equity, matched by a similar amount in debt. That will give it the firepower to buy thousands of flats and houses built for rent.

The group is focusing on rental income, rather than capital value increase, to generate returns. In theory, rental income should provide a long-term yield similar to a gilt.

“It is the UK taking on the US model for the first time,” said Nick Jopling, head of residential at CBRE. “This is not a short-term, opportunistic model for distressed property.”

The business model is predicated on growth of the rental market, and partners expect that first-time buyers will continue to struggle to find deposits and families will increasingly turn to quality renting.

About 13 per cent of UK homes are rented, according to Mr Jopling, compared with 68 per cent under private ownership and the remainder in social housing. A small increase to about 15 per cent, he said, would mean more than 450,000 additional rental homes.

“We anticipate a significant increase in renters. For the first time in my lifetime, this market has a chance to take off. The buy-to-let model is largely broken and this has a real chance of replacing it,” Mr Jopling said.

Other institutions, however, say the government would have to do more to mitigate risk for the model to succeed.

In May, the Homes and Communities Agency called for investment proposals for the UK private rented sector. So far, the HCA mostly provides strategic advice, but it is thought to be considering providing public-sector land and potentially some form of rental guarantee.

Sir Bob Kerslake, HCA chief executive, said: “There has been a long-held view that institutions should go into residential but it hasn’t happened for a whole host of reasons. This will kickstart site development.”

There were social benefits too, he added. “There are people not eligible for social housing but that cannot afford to buy. They might have to put up with lower-quality rental through buy-to-let.”

Nigel Hugill, who chairs the HCA’s housing finance group, said attracting institutions into the sector was crucial. “We need to leverage new money into the sector … The long-term aspiration is to create a separate institutional residential sector,” he said.

BD have published the two forewords here.

Once again Prince Charles seems determined to display his ignorance of the subject he says is too important for him to leave to others.

But this time it’s not modern architecture that is causing him a problem but rather the Society for the Protection of Ancient Buildings whose foundation lies in the Pre-Raphaelite Brotherhood with a manifesto written by William Morris. Charles it seems doesn’t agree with the fundamental premise set out in the manifesto that ancient buildings should be protected not slavishly restored and so has resigned as patron of the Society.

As the manifesto puts it,

“… those who make the changes wrought in our day under the name of Restoration, while professing to bring back a building to the best time of its history, have no guide but each his own individual whim to point out to them what is admirable and what contemptible; while the very nature of their task compels them to destroy something and to supply the gap by imagining what the earlier builders should or might have done. Moreover, in the course of this double process of destruction and addition, the whole surface of the building is necessarily tampered with; so that the appearance of antiquity is taken away from such old parts of the fabric as are left, and there is no laying to rest in the spectator the suspicion of what may have been lost; and in short, a feeble and lifeless forgery is the final result of all the wasted labour. It is sad to say, that in this manner most of the bigger Minsters, and a vast number of more humble buildings, both in England and on the Continent, have been dealt with by men of talent often, and worthy of better employment, but deaf to the claims of poetry and history in the highest sense of the words.

Perhaps he should have read the manifesto (it’s not very long and well worth reading) before he accepted the post; all of the ordinary members have to sign to say they agree with it before they can join!

Perhaps he will read it now and realise what an ass he is making of himself as a self-appointed protector of “the old and trusted ways”, who is “…deaf to the claims of poetry and history in the highest sense of the words“.

I wasn’t going to blog about our future king’s speech at the RIBA because Piers Gough et al said it should be boycotted.

Anyway I read the transcript and I was just appalled – who wrote that stuff and is he (or do I mean He?) really so ill informed about architectural history that he doesn’t know that Organic Architecture was coined by Frank Lloyd Wright, one of the heroes of the Modern Movement – it never had an “…older meaning“; has he never heard of the ‘Modulor‘, a Modern Movement inspired ordering system based directly on the human body and linked inextricably with the same geometric ideas underlying Classicism; and did he not see the photographs of the Parthenon in Corb’s “Vers une Architecture“, did he not understand the praise for the Classical within that seminal Modernist text (or maybe he’s never read it)?

I think the most idiotic parts of the speech are those where he decries “current practice” – almost everything he describes in this way is simply not current. On highways design, he seems to have missed the publication of “Manual for Streets” now over two years old; Christian Norberg-Shulz’s seminal work “Genius Loci, Towards a Phenomenology of Architecture” was required reading when I was at architecture school in the 1970s, so I’m not sure which “… Schools of Architecture and Planning have persisted in teaching an approach which is deliberately counter-intuitive to the human spirit and to the underlying patterns of Nature herself“; and it is as if all of the fantastic work to improve public realm design done over the years by CABE, an organisation run for the most part by architects, planners and urban designers, has simply not occurred.

But hey, Modernism apparently is a “great experiment” that has led us away from the true path and brought us to the Edge of Destruction; and architects, other than those who follow the great Saint Quinlan of Terry, are the false prophets of this abomination. I can’t help feeling there’s just a tinge of a persecution complex here. Is that from Prinny or his entourage?

The HCA are getting serious about the private rental sector with this new initiative and looking through the invitation for expressions of interest, the proposal seems laudable. But I am still at loss (see below) to see how, when capital growth in the residential property market comes back, the institutional landlords will not simply cash in thereby destroying the dream of a strong institutionally based rental sector.

Or has the credit crunch not just put the brakes on rising house prices in the short term but also somehow put an end to the long term trend increases. After the 1990 property crash, prices were about 15% below the trend line and made that up in about three years with double digit average annual inflation. Of course how you draw the trend line makes a difference and demographic trends over the next few will also have an impact. But if we really do need three million new homes by 2016 to meet demand, which seems increasingly unlikely to happen, then we will have an even worse supply/demand equation and presumably the right market conditions for high house price inflation. Add into this the capital gains tax benefits in home ownership, plus the relatively sophisticated and probably quite cheap mortgage market (when banks etc finally decide they need to make a profit) and the customer base looks tenuous as well.

There will need to be some clever financial engineering to make the modest rental return seem more attractive than cashing in the capital growth which will happen in the medium term.

As I skimmed through my copy of last week’s Building Design I came across this article about Smart Geometry. Basically ’smart geometry’ means parametric design which allows designers to produce blobby buildings like the Beijing Stadium.

Okay, in some circumstances a blobby building works; like in a parkland setting as an iconic piece of work. But for most of the time a blob is singularly inappropriate. 

 And then I got to this bit:
Martha Tsigkari of Foster’s demonstrated with boundless enthusiasm how the use of Generative Components has been integrated into the work of design and production information. The Valery Gergiev Cultural Centre project illustrated the use of a single Generative Components model to generate four related but individual buildings (see illustration).

Foster’s used Generative Components to propose four related but individual buildings for its Valery Gergiev Cultural Centre design. Clockwise from top left: philharmonic concert hall, multi-purpose concert hall, school and youth centre.

 

If these four images are supposed to be four individual buildings, why do they all look the same (I accept the two on the left are red and the two on the right are yellow but is that really sufficient?) Should a concert hall really look like a school or a youth centre? Are these blobs so important that the rest of the city only merits inclusion as a silhouette? And what exactly is supposed to happen between the apparent skin of the buildings and the clever exoskeleton that encases it?

It seems that they must be well designed buildings because it takes a vast amount of computing power to draw them. Hurrah! Or rather yawn. I’m bored of these egotistic self-referencing apologies – they are uncouth, anti-urban and difficult to tell apart. Once you’ve seen one blob, you’ve seen them all!

I like Wayne Hemingway mouthing off because he’s usually got a point and he’s passionate about good design. But I was disappointed with this offering in the Independent. I agree we shouldn’t rush to “save the house-builders” but it looks like most of them are going to survive anyway and soon enough they’ll start building again in much the same way as they always have – with focus on driving down costs and little if any regard for design quality. What’s the solution Wayne?

“a simple process that can be brought in overnight – competition.”

He seems to be saying that if only the Homes and Communities Agency would sell government owned land in small lots it will all be alright because there would be competition – as if there hasn’t been competition ever before.

Is there no competition to the Bridge for example, Wayne’s flagship scheme with George Wimpey? Surely prospective purchasers will also look at any of the other myriad new build schemes in the area?

And what about Building for Life? I know it’s another “tick box” but it’s a little bit broader than the Code for Sustainable Homes. It aims to cover housing design in its broadest sense, it is now central government’s principal design standard and in theory all planning applications should be assessed against its 20 criteria. Oh and who is its chairman – Wayne of course.

Come on Wayne if you believe in Building for Life, why don’t you shout about it and shout at government to make it a mandatory part of the planning system? Perhaps then we might get high quality design in all new housing.

Dermot Finch makes a good argument for how now is the Time to Rent and you have to agree with the basic proposition that we need a housing market that’s more flexible therefore less dependent on home ownership and with a proper institutional private rented sector – a market more akin to continental Europe.  I agree with him but, speaking as a developer, there is little incentive to build housing for private rent – it’s just not as profitable as housing for sale. Of course it’s better than affordable housing and you might think that in the current climate, where house sales have dropped off a cliff, building rental property might offer a sustainable alternative. However the reality remains that gross rental returns hover at best around 4 or 5% and when you net off costs you are down to 2 or 3%. On top of that Savills are now predicting rental falls in prime London property of 10% across this year so little prospect of an improvement in yields and anecdotal eviodence suggests there is a glut of rental property on the market because noboby can sell. When you look at rentals outside prime London, generally the yields dip even lower. This simply reflects that renting is cheaper than owning but it gives institutions who want to rent a fundamental problem – to achieve a realistic yield, they can’t afford to pay as much as an owner occupier can for any given property. The money made by private buy-to-rent investors came from capital increases in the value of stock but that’s not likely to happen for the next few years and may not happen again.

So what should we do if we agree there should be a more institutionalised rental market? The current tax system favours home ownership, because successive governments (the current one included) have liked the concept of Britain as a “home-owning democracy” with all that that implies. It would be possible to change that but such a change will have a direct negative effect on 68% of the electorate, so I cannot see that happening. Or you could incentivise buy-to rent, which seems to be what Sir Bob and the HCA are aiming for as Dermot reports and what Liz Pearce of the British Property Federation argues for in Housing Horizons supported by a variety of housing luminaries.  But I just don’t see it generating a strong and sustainable institution-backed private rental market; particularly not if you can sell the rented housing on the open market after ten years, as Liz suggests!

Quite simply housing for sale is more valuable than housing for private rent, never mind social rent. Anyone looking to buy land to develop will not voluntarily forego competitive advantage by working up schemes with less valuable land uses – he simply won’t get to buy the land if he does. And once he has bought the land why on earth would he develop it with a land use which makes a lower return. Even if incentives can be offered which make rented housing close to as valuable as housing for sale, this is only a short term fix. Once the incentives stop, which they surely will, then the rental market becomes untenable again and which institution will consider investing for the long term in a market which has that inherent value impairment.

I don’t see how the rental market will really take off unless a quota system is adopted akin to the now ubiquitous affordable housing requirement so that a percentage of new housing must be for private rent in perpetuity. Everyone knows where they stand and the whole issue becomes a simple matter of economic viability where the reduced revenue from affordable housing and private rented housing get reflected in a lower land value. If that means there needs to be a subsidy to make the project work, well that is what the HCA do best isn’t it? Sir Bob suggested at the Regeneration and Renewal Annual Conference (one of the events he appeared at last week with Dermot) that he wanted to see whether the market would come up with a solution before imposing a quota system akin to affordable housing – if what Liz Pearce is proposing is the best the market can do then I think we can expect legislation to impose quotas.

It is a problem; it does need fixing so I say legislate!

Le Corbusier at the Barbican is thought provoking. It provides a fine overview of the great man’s work the contrast between his “machine for living in” pre-war work and the more rounded post-war work is clear for all.

Holding the show in the Barbican is of course particularly telling. I won’t say we got lost getting there (I’m a man and therefore incapable of being lost) but we were temporarily unsure of the precise direction of true north. The high level walkways are alien and disorientating – it’s just really hard to know which way you’re supposed to go. And the disastrous result of leaving only vehicles on the streets – a particularly important issue for Corb – is that they are terrifying places to be. Once you’re inside the development, in the gardens surrounded by the buildings, it all seems almost worthwhile except there’s too little activity for comfort and you haven’t a clue where you are or how to get to where you want to be. Maybe modern man just cannot cope with the modernist world Corb and co. prescribed in the twenties and thirties – maybe we haven’t worked hard enough to embed within our psyche the necessary new cues and clues to our environment. Or maybe he made a terrible mistake in deciding that public spaces, like streets, should be reserved for machines to drive in.

Still the architectural brilliance that shines through from the buildings is breath-taking.