Market forces or institutional factors: what hinders housing development on brownfield land?

Abstract

Purpose – The purpose of this paper is to understand the barriers to housing development on brownfield land in the UK, making clear the distinction between market and institutional factors and identify appropriate public and private sector solutions to encourage more residential development. Design/methodology/approach – In this research, the city of Nottingham in the East Midlands of England was chosen as the case study city. The research was based on secondary literature review of relevant local authority reports, Internet searches, consultancy documents and policy literature. Detailed case studies were undertaken of 30 sites in Nottingham which included a questionnaire survey of developers. Officials from Nottingham City Council assisted with the gathering of planning histories of the sites. The investigation took place in 2014. Findings – Based on the evidence from Nottingham, the most frequently occurring significant constraint was poor market conditions. At the local level, it is clear that there are options that can be promoted to help reduce the level of friction in the market, to reduce delay and cost and, thus, to encourage developers to bring forward schemes when the market allows. Securing planning permission and agreeing the terms of a S106 agreement is recognised as a major development hurdle which requires time to achieve. Practical implications – Market forces were clearly the dominant factor in hindering development on brownfield sites in Nottingham. The local authority should be more circumspect in the use of S106 agreements in market conditions where brownfield development is highly marginal. Imposing additional taxation on specific developments in weak markets discourages development and is counterproductive. Originality/value – This detailed study of 30 development sites is significant in that it provides a better understanding of the barriers to residential development on brownfield land in the UK.

Developer constraints on housing supply in urban Ghana

“…Before any housing development can take place in a market economy, real estate developers must consider a broad range of factors, both market and institutional. Among the market factors are construction costs, cost and availability of financing, current and future house prices and the level of market demand on completion, which is determined by time on the market, interest rate, GDP per capita, unemployment rate and inflation rate (Hutchison and Disberry, 2015; Owusu-Ansah, 2014). Institutional factors also include the availability and tenure of land and planning regulations (Owusu-Ansah, 2014).…”

Modelling the effects of affordable housing ‘sticks’ and ‘carrots’ for developer-delivered projects

“…In a market-led, voluntary system, one of the primary barriers to affordable housing provision is the financial implications suffered by developers, who perceive that affordable housing provides insufficient development returns. Hutchison and Disberry (2015) emphasise affordable housing developments in the inner city have higher market risks and construction costs that are not offset by the inherently low returns of affordable housing projects, relative to other development opportunities. Consequently, in a market situation, affordable housing investment and development is limited by private developers' reluctance to consider affordable housing as a voluntary contribution.…”

“…As Reed and Sims (2015) observe, development feasibility models are key project appraisal tools for developers. A case-study approach is necessary in this study because market-based development feasibility models that analyse project opportunities and risks must be location specific to reflect industry practices and provide realistic results (Hutchison and Disberry, 2015). Rowley and Phibbs (2012) created high level static feasibility models to demonstrate the potential of initiatives, but without location specificity, their results were general in nature.…”

A negotiator's tool: An Affordable Housing Calculator for voluntary agreements

“…The Australian development industry has traditionally not been attracted to projects with affordable housing contributions. There are several reasons for this including; lack of a consistent system to either mandate or incentivise such affordability contributions; reluctance on the part of developers to add additional risk factors to developments in inner city locations already typified by higher construction costs and market risks (Hutchison & Disberry, 2015;Rowley & Phibbs, 2012) and; lower returns relative to other market based opportunities . Further, the Australian market does not have a multifamily or established 'build to rent' sector in a market characterised by 'mum and dad' rental investors (Hulse, Martin, James, & Stone, 2018).…”