Originally published September 2020.
Dear development financier,
Are you really, truly, aware of the risks you will be taking over the next few years with your residential loan book? You are supposed to say yes. I am supposed to say no – and demand you wise up, with the immediate purchase and aid of my new book, Broken Homes – Britain’s Housing Crisis: Faults, Factoids and Fixes. However, I suspect that anyone wise enough to be reading Property Chronicle will need no lessons from me on residual land values and how to spot the errors and omissions in development appraisals.
Even so, there are two appraisals in Broken Homes, supplied by Montagu Evans. They relate to a single imaginary site of 100ha, on which 70ha can be built. Model A produces a residual land value of £16m for erecting 1,500 units, of which 800 are private, 450 affordable and 250 build-to-rent. The private units are built 25% larger than the norm. Model B holds 2,000 normal-sized units: 700 private, 800 private rent, and 500 affordable. The residual land value pops out at £43m.
Why produce this appraisal, beyond providing an entry-level guide? Well, my co-author, Jackie Sadek, is a regeneration expert with decades of experience. She is a woman of fierce conviction, who feels “everyone deserves better” – meaning bigger homes at lower densities than are generally being built today. Jackie has bought a site in Bedfordshire on which 1,500 homes are planned. Bought after spending three years in the Cabinet Office as a senior advisor to a Cabinet minister. Her subsequent planning ‘journey’ is a mordant read.
Model A and B underpin the opening chapters. These examine not only the financial variances, but also the differing social impacts on occupants. Why? As Jackie puts it, “occupants are regarded, not as human beings, living 21st century lives, rather as ghosts in the machine, forced to fit, rather than form the mould. The less well-off squeezed into homes the size of 19th century back-to backs. Everyone deserves better.” Will bigger homes at lower densities result in negative land values, I hear you ask?