22 Jun 2016

Chris Brown of Igloo Regeneration discusses custom build lessons from Berlin

Chris Brown of Igloo Regeneration discusses custom build lessons from Berlin

The Igloo team spent a few immensely productive days in Berlin recently studying custom build projects and talking to baugruppenführers (custom build building group leaders – we need a snappier English title for this!).

These baugruppenführers and the processes they use are fascinating. The leaders include architects and project managers, as well as professionals whose only role is to work with the group during the design process.

Most building professionals do not have the skills to design with a group and so would work alongside one of these ‘mediators’ (not a direct translation but the best I could do). Some of the building professionals clearly had a talent and took great pleasure in working with groups and these people were hugely impressive – humble, intelligent, self-aware and really good at listening.

Custom build quality

One of the main lessons is that custom build produces places that are, excuse the pun, streets ahead of anything produced by a volume housebuilder.

The reasons for this are easy to understand. The volume housebuilder is providing for the lowest common denominator customer and is driven purely by short-term arithmetic that estimates cost with a lot more accuracy than value.

Custom builders, in contrast, make decisions based on what is valuable to them and to their community. So you find them delivering elements like communal roof terraces, shared ground floor rooms that get used for a huge range of activities, allotments, waste water recycling and small commercial premises.

This last aspect was particularly interesting. We saw buildings where many of the residents worked in a variety of studios and maker spaces dotted around the building and another with a run of small, single-story buildings at the end of the gardens backing on to the street that were used as cafes, shops, hairdressers, bike stores and garden sheds (and gave the street real life). Finally, there were also large, terraced homes where the bottom floor or two were used as professional offices or, in one case, a café.

Local government support

Berlin is a relatively mature custom build market which has local government that understands the electoral advantage in supporting custom build homes. One of the ways these more interesting schemes get built is when public land is sold at a fixed (usually market price based on a valuation) and then the best scheme proposal is selected. Sometimes the sale requires custom build, and sometimes not.

In our system we could combine this approach with Build Now, Pay Later. This would help councils both achieve their financial targets and, possibly more importantly, create places that not only deliver fantastic quality of life but also become substantially more economically competitive as people choose to live and work there.

Berlin generally makes the top 10 in the most liveable city rankings, in no small measure because of custom build, while most UK cities struggle to get into the top 50.

Berlin’s custom build finance route

We were particularly interested in how Group Custom Build projects are financed in Berlin. In a symbiotic relationship, group custom build has grown in Germany together with a number of banks that have specialised in the market. These are the equivalent of our building societies, for example Ecology, and banks, such as Triodos, though they are often state owned. This is a profitable business stream for them and risks are clearly extremely low.

The contrast here with the current debate about risk weighting for custom build mortgages is stark. The combined blunt instrument of the Basel Committee on Banking Supervision, the European Commission and the Bank of England’s Prudential Regulation Authority looks completely capable of ignoring the reality that custom build is an extremely low-risk lending proposition (for a variety of very good reasons) and lumping it in with the much riskier speculative house building. This would substantially blunt lenders’ appetites for the sector.

This is a massive issue for custom build lenders in the UK currently and we could do worse than reach out to our continental colleagues to seek mutual lobbying support.

All of these lessons are currently feeding in to our second, larger, group custom build pilot project Fruit Market, which our Blueprint business is doing in Nottingham. Working with Letts Wheeler Architects we will be experimenting with the leadership role in the design process and working with lenders to design financing structures that meet their needs and the needs of the custom builders.

It’s an exciting time to be in the emerging custom build sector in the UK. Next month we are back out to Amsterdam with some of our local authority colleagues to learn some more. In retrospect these trips are best when all parts of the industry, local authorities, enablers, lenders are together seeing what works and gaining mutual confidence in what is possible. So if anyone wants to join us….

Editor’s comment

We now have the legislation in place in England to bring on custom build, but while this gives us a solid starting point we need to do more. The industry needs to maintain the momentum, but just as importantly we must have a banking system that supports the sector. Without this custom build can never grow as it should in the UK. This is a tried-and-tested model across the world, and we know that, once people understand what it can offer, they are enthusiastic about designing and building their own custom build homes.

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