As election fever grows, we are increasingly hearing promises regarding housing, most recently with Labour unveiling its plan to build on ‘grey belt’ land as part of its aim to construct up to one-and-a-half million homes in the first five years, if elected.
While initiatives from political parties to boost housing supply through large-scale development should generally be welcomed, it’s equally important not to overlook the role self-built properties can play in helping tackle the UK’s housing crisis.
Self-build projects tick many of the same boxes, if not more, than their new-build counterparts when it comes to the benefits they offer. Self-build homes are not only generally equally or more energy efficient, but also come with the advantage that they are what the borrower has chosen, designed, and, in some instances, built themselves.
Designing and building a self-build property also generally doesn’t face the same local opposition as larger housing developments. In some cases, self-builds are more welcomed by communities as they are smaller in scale and less intrusive.
Alongside this, self-build mortgages present a great opportunity for mortgage brokers. With the funds released in stages as the build progresses, one of these mortgages offers a break from the norm; with brokers and lenders often along for the exciting journey of self-build projects as well.
Just like the build itself, self-build borrowers are often not vanilla cases and can include complex incomes and scenarios. The same goes for the property itself, with over half of self-build projects using modern methods of construction (MMCs).
We are firm believers in the potential the market can offer and are hopeful for a continued push from political parties to support the sector’s growth.
Support in previous years
So as an election draws closer, what – if anything – might we expect from the political parties regarding self-build?
In previous elections, one of the most significant boosts for the self-build market came in the Conservative Party’s 2019 election manifesto, which promised to “support community housing by helping people who want to build their own homes find plots of land”.
In the years following, there was a concentrated effort to promote the self-build market, with the manifesto setting the wheels in motion for one of the largest reviews into this market to date.
In 2021, Boris Johnson’s government commissioned Richard Bacon, MP for South Norfolk, to look into how to increase self- and custom-build properties to 30,000-40,000 per year, up from their then-current 13,000.
The ‘Bacon Review’, as it became known, put forward six recommendations, including a greater role for Homes England in creating a new Custom and Self-Build Housing Delivery Unit, supporting the creation of serviced plots on small and large sites, and delivery at scale. It also recommended maximising access to permissioned land for self-commissioned homes through the government’s proposed planning reform.
Bacon himself noted that: “We need to build more and better new homes. Custom and self-build can help achieve this, by putting customers and their choices back at the heart of the process. When customers come first, we will see more homes built that are better designed, better built, greener and [that] cost less to run, and [that] are warmly welcomed by their communities.”
The summer of 2022 also saw the launch of the Help to Build scheme, backed by £150m of government funding.
However, as we often see with government initiatives, the results don’t always match the intention. Figures released just after the scheme launched showed that between 31 October 2021 and 30 October 2022, registrations for self-build properties were down by around a third compared to the same period a year earlier.
Furthermore, only 6,374 planning permissions were granted for serviced plots suitable for self- and custom build, a decrease of 23% from the same period a year earlier.
Lenders open for self-build
Like the new-build sector, it can at times be the case that it’s not finding the funding that is the main barrier, but finding the plot of land.
Some of the constraints around where a potential borrower can build and who gets assigned the land can be complex, with the risk a smaller plot could get swallowed up into a large development.
Awareness can also play a large part in ensuring the growth of the self-build sector and getting the message out there that the mortgage market and building societies such as ourselves are ready and waiting when it comes to funding these projects.
We are advocates for self-build and have funded some great projects — one of which was for a broker whose client needed a £1.4m remortgage, initially on an interest-only basis, for a £2.5m self-build project that incorporated MMCs.
Such projects often require a flexible and in-depth look at the build and borrowers’ finances in order to achieve the best possible outcome.
As the general election approaches, it’s crucial for the government to maintain and even strengthen its support for this sector.
We must ensure that the self-build market is given the same priority as the broader housing industry.
