Dispatches from Leeds: All eyes on L&Q, Gateway 2 and Pennycook’s warning

Gateway 2 grumbles

The overwhelming message from developers this week was that the fledgling Building Safety Regulator (BSR), set up three years ago by the previous Conservative government, is not working.

Grumbles about delays in Gateway 2 and Gateway 3 – the checkpoints tall building plans must pass for construction to begin – reached fever pitch in Leeds, with one chief executive warning that they were making investing in high-rise homes “a massive risk” and causing housebuilding in cities to come to a “grinding halt”.

Even Homes England boss Eamonn Boylan acknowledged the concerns, calling the regulator’s decision-making “unacceptably slow”.

Meanwhile, in an interview with Inside Housing and in response to criticisms about gateway delays, the deputy director of the BSR said its processes are preventing unsafe homes from being built, with applications rejected for “fundamental” failures to show compliance.

Building safety minister Alex Norris has promised “significant measures” to reduce delays and added this week that officials will publish performance data for the regulator.

Will it be enough? “It’s such a mess, I’m confident the government will do something to sort it out,” said one developer. The BSR is unlikely to be abolished – it’s still bedding in, after all – but expect tweaks and additional resourcing to accelerate the process.

What this year’s UKREiiF made clear is this is a deeply uncomfortable inheritance for a government desperate to scale up housebuilding as quickly as possible.

All eyes on L&Q

L&Q is currently belle of the ball in the residential investment market. The giant London housing association is selling off its private rent business to plough cash back into its social homes. Its 3,100-home Metra Living portfolio has a net asset value of £1.2bn, although a sale price has not yet been set. 

Five buyers are circling: Blackstone, Kennedy Wilson, Morgan Stanley with Ridgeback, Pelham Partners and LRC. A winner is expected to emerge by early July.

Metra Living is a highly anticipated sale that is seen as a starting gun for more build-to-rent deals, since it will set a price benchmark against which other firms can measure their portfolios.

Housing associations are watching closely, too: Notting Hill Genesis is currently reviewing the future of its private rent arm Folio, which Inside Housing understands could be next on the market.

For-profits on the hunt

Last month Inside Housing predicted “the next wave of stock transfers” as housing associations sold their homes to for-profit providers. Well, it looks like the wave is swelling. Housing associations have put 107,000 homes on the market this year, according to Catherine Raynsford, a director at Legal & General’s for-profit provider.

Ms Raynsford, who joined L&G last year from Hyde to lead on acquiring occupied affordable homes from social landlords, openly compared today’s climate to the first stock transfers in the 1980s and 90s.

“When a load of council housing was completely knackered and we knew we needed to do something about it, you had a programme of stock transfer into newly created housing associations, who then had the capacity to borrow and to improve existing estates. We’re just in the same situation again,” she said.

Her fellow panellist Will Gardner, executive director of asset and development at Home Group, was more cautious. Selling homes to for-profit providers is “definitely taboo” for some social landlords, he said, adding that “partnership, collaboration, retaining an element of control” are better approaches than outright sell-offs to for-profits.

Also, for-profits may turn out to be picky buyers. At a different panel on Wednesday, Peabody’s chief executive revealed that a for-profit pulled out of a deal with the landlord over homes with low Energy Performance Certificate ratings.

“My experience of engaging with third-party capital is the organisations that we work with don’t move at lightning speed, and they are not risk-takers,” Ian McDermott said.

We might imagine big capital as all-powerful and world-striding, but in fact it can be fickle and timid. A source at a major European broker said an investor is like a mouse approaching a piece of cheese. With each favourable development – political stability, a proven business model – it creeps forward a little, but all it takes is a whiff of uncertainty and it scurries back into its hole.

Pennycook’s warning

On Wednesday, housing minister Matthew Pennycook took to the main stage with Andrew Taylor of Vistry for what began as an incredibly nerdy chat about planning.

Upon picking up the ministerial red box, Mr Pennycook said, he was surprised by how much low-hanging fruit the previous government had left behind to speed up housebuilding.

As the pair nattered about the development management process and regional spatial strategies, it was evident that Mr Pennycook, a former councillor, is the most knowledgeable housing minister in at least a decade. If anyone can machete through the jungle of the UK planning system, it’s him.

But he also came with a warning on quality. “If we fail on the 1.5 million [new homes], or if we succeed on the 1.5 million but on the basis of units at any cost that people think are badly designed places, we will have undermined support for this agenda,” he said.

“It will be put back in the too-difficult box, and no government will touch it again.”

The government is reducing development costs and risk for the industry, he said, and “the quid pro quo will be we expect better from you. You will still make – developers in the room – a very healthy profit, I’m sure.”

As delegates left the conference the next day, passing under all those flats covered in green plastic, his words resurfaced in my mind.