Can Nick Clegg’s Garden Cities Deliver the Housing Needed in the UK?

By: Lucent Group   02/28/2015
Keywords: property fund partners

Many more homes must be built in the UK. While garden cities might deliver homes on a large scale, smaller, privately-financed developments are already being built.
Deputy Prime Minister Nick Clegg made a definitive statement of support and intent in 2014 to build garden cities in the South and South East portions of England. Modelled around “good life” and sustainability concepts, the planned communities would contain 15,000 or more homes each – a scale much larger than developments currently being built in and around towns and cities.

No one questions the need for more housing in the UK, where home prices and rents are rising ever upward and the number of households waiting for a home is estimated at one million. Public policy and support with infrastructure development (roads, schools, utilities, etc.) are required for both garden city developments and those brought about by private investment, and Clegg acknowledges that at least £1 billion will be required of the national Government through a Large Sites Fund to stimulate development of sites involving at least 1,500 homes.

Private investors may get involved in these schemes. Fortunately, those investors are already working on multiple projects of lesser scale that are delivering much needed new-built homes today. The involvement of the private sector, from both individuals and institutions, remains an essential factor in market-rate and affordable housing.

The economics of development always include some cost sharing between the private and public sectors on infrastructure, but the degree of red tape can stall projects to a maddening degree. With high-level support from Clegg, however, there is the promise these issues will be handled in an effective way. But when the Government attempts large-scale programs, it also draws higher-profile opposition. According to the report “Unlocking Garden Cities/March 2014” (from the London-based GVA organisation), “political opposition and the planning process are at least in part responsible for delaying or preventing delivery at large urban extension sites.” The Guardian reported in August 2014 that special compensation may be necessary to appease existing homeowners whose properties are affected by garden city developments in their close vicinity. Clegg cites the development of large housing districts following the Second World War (Milton Keynes, Welwyn Garden City, Corby, Aycliffe and Hatfield among them) as examples that provide a model for addressing 21st century housing needs.

Whether or not the Coalition Government, or its successor after the May 2015 General Elecion, can effectively develop garden cities in the next five years is subject to question, debate and decision-making. In the meantime, individual investors working through such entities as are building new homes on, arguably, a more organic basis. Rather than the creation of new municipalities – what garden cities essentially are – smaller scale developments achieve planning approvals to develop raw land into homes and the infrastructure required to support those homes within extant jurisdictions. In most cases, the land is purchased at a market rate (pre-development) and the properties created are largely sold at market rate prices (post-development). With greater local housing supplies the costs to buy or rent experience downward pressure.

No investor should go it alone on real estate schemes, however. People interested in participating in the UK’s land-to-housing development boom need to speak with an independent financial advisor to determine an appropriate risk level for their investment.

Keywords: property fund partners

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