At the time of writing, Homes England has just announced a new £1 Billion brownfield land fund explicitly aimed at unlocking land fit to produce 40,000 new homes, prioritising local projects that can boost economic growth and increase supply in areas of low affordability. This action is overwhelmingly positive, and something we have openly called for in the past is finally coming to fruition. This week's blog will examine how opportunities in brownfield development may benefit smaller developers, why smaller businesses were historically discouraged from Brownfield development, and how it could still be an excellent opportunity for both the broader market and the SME market.
Looking at the macro story for the UK, The Times recently published an article stating that Michael Gove is due to start "seizing sites" in a big city shakeup of industrial land, which sounds incredibly dynamic and exciting, but rather than the Rt Hon. member for Surrey Heath kicking down doors like a G-man seizing a Still, it was actually a reference to development zones, something that we have referenced in the past, and a potential way through the planning maze. These development zones will target the few urban brownfield sites in the north that have yet to be turned into alfresco dining experiences to encourage developers to focus on urban affordable housing stock in line with countries' requirements.
This interventionist policy needs to happen now, as even though house prices haven't seen the once-feared cliff-edge retraction, the market has slowed enough for the sizeable UK housebuilders to reduce their land-buying activity as profits decline, and we need houses built to solve the broader issues. Opening opportunities to stimulate the market must be the policy, and that's what we are seeing the beginnings of here.
There are a record number of brownfield sites in England identified as having redevelopment potential, theoretically, enough land and empty factories to build 1.2 million homes. The last count was back in 2022; the countryside charity CPRE identified around 27,342 hectares, with circa 45% having planning permission of some sort granted. Vast swathes of this sit within former industrial heartlands that desperately require community regeneration, which is one of the key selling points of the whole concept, limited to zero local resistance. Unless you're a budding art house movie auteur looking for site locations for your next haunting feature or some 1990s rave promotor, the site of a decaying and cavernous industrial sprawl isn't going to corral a vast number of planning objectors, people want these sites gone, people want homes, common interests are aligned which is rare, a great starting point.
So why are so many of these sites mothballed? Special licences and permits are traditionally required for previously developed areas due to the risk of surface-level contamination, below-ground structures, buried hazards, and deeper land contamination from sub-structures. With all the above, it's taken the reduction in available greenfield sites and the mounting pressures on homebuilders for these options to be considered, but in a market where land is at a premium, and planning can be time-consuming and difficult to obtain, is there a market for this with smaller developers?
Acquiring a brownfield site would come with a unique set of challenges to consider. The main vulnerability comes from delays due to the volume of external parties involved in completing the necessary environmental and structural risk assessments in addition to a traditional build. There is also a holding period you must account for should there be a significant period of land remediation to remove contaminants from soil. Seeking specialist advice before acquiring a site like this would be deemed practical, but this process still has a mystery box element; delays would have to be baked into the proposed timeline.
Suppose these opportunities are managed correctly, with the correct advice; we believe brownfield sites offer fantastic development opportunities for both large and small developers alike, tackling conservation, community building and housing requirements and maybe unlocking the problem of our diminished housing supply.
At Invest & Fund, we continue to support the kinds of residential property developers at the epicentre of any of these potential changes, offering enhanced development facilities from 5.30% plus the cost of borrowing. So, if you currently represent clients with these requirements, let's talk soon.
Our Development Finance clients can benefit from facilities up to 70% LTGDV (Up to 85% LTC) from 5.30% plus the cost of borrowing.
For a full criteria breakdown, please email us at borrowing@investandfund.com or call us on 01424 717564.