Worth the risk?
Posted by: Westcor International


Published at the beginning of February, the long- awaited Housing white paper had the admirable purpose of ‘fixing our broken housing market’. Whilst its aims are commendable, it carries a number of transactional risks which should be considered by all operating in the property sector.


Whilst some were quick to point out its failings, with Property Week claiming it “lacked teeth in key areas”, others applauded one of the government’s main proposals; most notably a shift away from the ideal of home ownership and towards promoting rental schemes and affordable housing. Particular emphasis was placed on the build-to-rent market, with a focus on apartment blocks managed by professional companies and funded by institutional investors.


Despite initial concerns that the government would require all new developments of a certain size to contain at least 20% starter homes, the government proposed amendments to the National Planning Policy Framework (NPPF) to require housing sites to deliver a minimum of 10% of affordable home ownership, made up of a mix of tenures.


Jennet Siebrits, head of residential research at CBRE noted that: “It is particularly positive to see a shift in policy that emphasises the importance of mixed tenure and the private rented sector as a way of alleviating the chronic housing shortage.”


Also included in the white paper were measures to deal with land banking; a practice whereby landowners and developers hold on to land for an extended period of time to maximise their profits. As a result, the white paper proposed encouraging “more active use” of local authorities’ compulsory purchase powers in order to “support” the development of sites where projects have stalled.


Another proposal put forward by the government recommends that authorities consider the likelihood of a site being developed when considering a planning application. In addition, the government is consulting on whether an applicant’s track record of delivering similar schemes should be taken into account when considering a planning application.


Other proposed measures include shortening the timescales for implementing planning permission from three to two years, which critics believe may be too short a timeframe to prepare a site and meet any attached planning conditions. Critics of this proposal argue that fewer planning applications could be submitted as a result, with the head of residential research at JLL, Adam Challis, commenting to The Telegraph: “Policies that increase the risk of holding land will undermine the objective of increasing the number of homes that are built.”


If these measures were to be introduced, developers feeling the pinch on their profit margins are likely to become more risk averse. In order to ensure that a plot is marketable, title insurance is likely to become a very relevant consideration.


Finally, it is also worth considering the impact of the government’s initiative in providing a “better choice of accommodation” for the elderly; helping them to live independently for longer whilst reducing costs to the health and social care systems. The government recognises that the process of moving out of a family home can be difficult, not least due to the costs involved, and is “committed to exploring these issues and finding sustainable solutions to any problems that come to light”. Through doing so, as the white paper notes, it will also free up homes for other buyers.


From a risk perspective, it is worth noting that a property that has not changed hands for many years is more likely to hold latent title defects. Buying a home, of whatever tenure, can be an emotive subject and title risk can increase when dealing with leasehold properties. Having the right title insurance in place can ease any title concerns that can arise.

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