The inheritors

One-hundred-and-twenty-thousand more homes – that’s what economist Kate Barker says England needs to make the housing market more affordable and to bring inflation into line with the European Union average. The government is soon to publish its response to Barker’s in-depth study of housing supply, produced for the Treasury and the ODPM in March last year, but it has acknowledged that output need to be increased to meet demand, and it wants the homes to be located in urban centres, built as far as possible with off-site technology, have high environmental standards and cater for a range of income levels.

Traditional housebuilders may be ticking some of these boxes on some of their schemes, but as their bread-and-butter business has long been a brick-and-block house constructed on a greenfield site and sold on the open market, changing to meet the government’s aspirations is a slow process. But non-traditional housebuilders have no such handicaps, and a new species of firm is evolving to fill the evolutionary niche created by the government.

As the companies featured here show, these operations are doing things differently from the traditional housebuilder. One specialises solely in environment-friendly homes, another uses advanced building technology and several are meeting the needs of the lower-income market. Most are building private homes for sale, but their key marketing tool is affordability.

What they all have in common is a fresh approach to what they are doing, exemplified by slick websites and trendy brands such as R.gen and Inspired Developments. Behind that are solid business models, a passion for product and a desire to grow. They may be making a small contribution to housebuilding totals at the moment, but some of them might be heading for bigger things.

First Base: learning lessons from commercial developers

First Base is a newcomer on the block, but it has an impressive pedigree. Its managing director is Elliot Lipton, pictured right, the son of the Stanhope founder Sir Stuart Lipton. Elliot Lipton has a stake in the company and his partners are his dad’s company, the developer Lend Lease and consultant Abros.

It has not built any homes yet, but First Base produces a regular magazine that shows where it is heading. Beautifully designed and containing heart-warming stories, such as an interview with a home-hunting paramedic, the magazine sets out the company’s stall as a provider of design quality for first-time buyers and low-income earners in the capital.

The company will soon get the opportunity to show whether its homes can live up to the glossy image, notably on sites in English Partnerships’ London-Wide Initiative, a programme dedicated to providing low-cost homes for key workers. The company is also among the first batch of private developers shortlisted to receive Housing Corporation grant and is working as development manager on the conversion of a pair of King’s Cross office towers to student accommodation. Add to that its shortlisting on Canning Town and Elephant & Castle regeneration schemes and First Base’s development pipeline could soon be bulging.

To handle that workload, the small business based in London’s West End will be calling on the expertise of its “extended family of business partners”. The four parties set up First Base three years ago as the government began calling for more homes for first-time buyers and key workers.

Lipton says: “The question was whether the expertise of the commercial construction industry could be brought to bear to deliver homes better.” The business has put a lot of upfront research into its venture, working with consultants such as Richard Rogers Partnership, Allford Hall Monaghan Morris and Arup. “We knew from the commercial sector who the experts were and we brought them in to help us make sure that we could deliver. We also recognised that there was a need to crack the issue of bringing more land forward for more affordable homes, so we did research there too,” Lipton says.

Back in 2002, the company’s commercial building processes sounded a world away from mainstream housebuilding. Now Lipton claims that he can use them to cut construction costs by 20% and produce a high-density urban apartment with a selling price of £100,000. With the company now on the threshold of starting on site, its ability to deliver on that promise is about to be reality-tested.

What’s so different about First Base?

When First Base launched, Lipton talked of building mock-ups of key building elements – a common procedure in commercial construction but virtually unknown in housebuilding – and installing baths and basins with taps and waste pipes pre-installed.

“We’re trying to introduce proven techniques to improve delivery and efficiency and create excellent quality products,” he says.

“We are looking at residential through the whole lifecycle – not only development, but investment and management.” Having run a microscope over the construction process, First Base is now researching other aspects, such as how people use their living space and the possibilities of home technology.

What does it think of conventional housebuilders?

Lipton says: “Housebuilders cater well to those who can afford to buy on the open market. We’re focusing on medium- to high-density urban development, where housebuilders have expressed concerns about tall buildings and where other softer factors, like safety, come into play.”

Where does it plan to be in five years?

As the company is still on the starting blocks, Lipton won’t say how many homes he hopes to be developing by 2010. His objectives are simply “to make a strong business and a quality brand”.

R.gen: how to make green money

In 2002 Phil Summers, Judy Noah and Fiona McAuley left Irwell Valley Housing Association and formed ethical developer R.gen because they saw a market for eco-friendly private sector homes.

“You get this impression that a green building has to look twee, but ours don’t,” says R.gen director Summers. “We’re going for striking buildings, but with a green slant.”

Although R.gen is based in Chorlton-cum-Hardy, south of Manchester, its inspiration comes from trips to Denmark, Sweden and Holland. “In terms of different materials and different construction methods they were streets ahead,” he says.

R.gen is working on three projects in and around Manchester. The first, Little Alex, is in the city’s Moss Side area and is due to be finished next January. The scheme includes 26 apartments and eco-friendly features such as solar panels, a rainwater recovery system and more water-efficient taps.

R.gen is also working on a development of 10 flats in Cheadle Hulme near Stockport, which is set to be finished in April 2006, and a 54-apartment project on the high street of Hulme, south of Manchester, where on-site work is set to start next April. Its schemes aim to be at least “very good” on the EcoHomes standard.

What is so different about R.gen?

Summers says: “We’ll only build green products and I think we’re unique for that in the north of England. A lot of companies will build green because they think it’s good for profits, but we do it because it’s what we believe in. In a housing association, building green would be the icing on the cake, but at R.gen it’s the main body of the cake.”

What does it think of conventional housebuilders?

“With building in city centres we should be leaving a legacy, but what a lot of these companies are doing is dull and it doesn’t inspire me at all. Not only would I not want to live in one of their houses, I wouldn’t even want to be associated with one. At R.gen we could build dull products like that but we don’t want to be associated with them.”

Where does it want to be in five years?

“We want to be the most contemporary green developer in the North and create homes that the public aspires to live in. We want people to say to their friends and family, ‘If you’re looking for an apartment, look at an R.gen one because they’re cutting edge.’”

Emblem homes: social landlord pioneering cross-subsidy

Housing associations are also getting in on the act. Emblem Homes is the private development arm of housing association Places for People. David Shaw, Places for People’s director of development and procurement, describes the work as a “new breed of generation”.

Emblem provides homes that are available to rent or buy, and the speculative development profit from it is re-invested into Places for People’s social housing arm as well as other activities. It is a not-for-dividend company.

One of Emblem’s initiatives at the moment is to think of different ways to help people onto the first rung of the property ladder. It is looking to provide mortgages and flexible equity schemes to encourage more and more buyers. Incentives include payment of stamp duty, 5% of a deposit and a £500 contribution to legal costs.

Shaw himself is based at King’s Cross in north London, but Emblem is based in York, north Yorkshire, and covers the market from Scotland down to the Isle of White. Emblem’s biggest scheme under construction is the £50m Wolverton project with English Partnerships at Milton Keynes. The scheme will comprise about 300 units with about 50 already in development.

What’s so different about Emblem?

“We are about making profit but it’s what we do with that profit that’s different,” says Shaw. “A common fear is: ‘if I lose my job, I lose my house’, but we will buy back some of that equity and let people rent their homes until they get back on their feet.”

Shaw concedes that the market is going to be tough in the months ahead but remains upbeat: “The market is slower than it was but we think we’re offering a unique model and hopefully it will see us through.”

What does it think of conventional housebuilders?

“There is no way I am going to knock them,” says Shaw cautiously, “We’re just looking to do something different.”

“I spent most of my career working within that sector.” (Shaw joined Places for People from Beazer Partnerships, and was responsible for setting up the Midlands and northern divisions of that company.)

Where does Emblem want to be in 2010?

“We have quite an ambitious growth plan for the next five years. We want to develop the idea of genuinely mixed communities and we have a pipeline of about 5500 units over the next three years.”

Shaw is expecting Places for People to achieve a £264m turnover this year, which he says should rise “substantially” over the next five, although he declines to be any more specific.

INspired developments: making a splash in market renewal

Inspired Developments is Seddon Group’s regeneration division. It’s been in business for four years, three as the prosaic Seddon Regeneration and one in its present incarnation.

Ken Whitaker, ID’s managing director, says Seddon’s experience makes ID ideally placed to take on regeneration where hospitals and schools are needed as well as houses. “We’re working with people who build anything from nursing homes to nursery spaces,” he says.

ID is a selected partner for three market renewal pathfinder areas – Salford, Stoke-on-Trent and east Manchester, but is best known for its partnership with Riverside Housing in Liverpool.

Although Seddon’s contracting arm has a traditional image, ID has the kind of branding and website you’d expect of a Clerkenwell loft developer. The site sets out the company’s “ID-ology” but this has substance as well as style: the company aims to use benchmarking and key performance indicators to achieve build quality, and to add value through innovation.

The earliest building work on the pathfinder projects is set to start in east Manchester in early 2006. In the meantime, ID has busied itself building flats, mostly in south Manchester.

What’s so different about ID?

Whitaker says: “We have the ability to draw on a wide range of solutions to problems on site because we’ve got such a broad range of partners. The other fundamental difference between us, and even our housebuilding business, is we’re getting involved a lot earlier in the process, in consultation and masterplanning.”

What does it think of conventional housebuilders?

“We need to diversify, but the traditional approach is still important because it has proved it can deliver. If we were relying purely on regeneration schemes to deliver the homes we need for the next generation of people growing up, then I’d be worried.”

Where does ID want to be in five years?

“We’ve been selected as partners for three Pathfinders so in five years’ time we’ll be on site with these. I’d like to see us succeeding with those and proving that the Pathfinder areas have been a success. And I’d like people to look at us for inspiration when they’re scratching their heads and need a more imaginative approach.”

Merlion group: in the the affordability business

Merlion Homes isn’t used to being the centre of attention. From its founding in 1991 until a couple of years ago, the business struggled to market its concept of shared-equity homes built without grant funding and part-sold without a rental element. “We seemed to be pushing against a lot of closed doors,” says Alistair Baker, chief executive of the Winchester-based group. Now, Merlion are in demand and top housebuilders such as Bellway are offering their own shared-equity homes.

The prospect of competition doesn’t concern Baker. “Competition is a good thing. The more people jump on the bandwagon, the bigger the market will get,” he says.

Three years ago the boot was on the other foot. Merlion launched an open-market sale operation through its Infinity Homes arm, which mixed private-sale homes with the shared-ownership ones in the South-east. Perhaps more crucially, it marked the group’s arrival as a housebuilder proper, as up to then the company had acquired all of its shared-equity stock from housebuilders.

By next year, the group will be building most of its homes. Last year Merlion turned over £15m and Infinity £6m. Next year, turnovers are expected to be £30m and £40m respectively, and Baker says the two operations could provide 1000 homes by 2008.

What’s so different about Merlion?

Baker says: “Most housebuilders put a 0% margin on affordable housing. They don’t recognise that it could be 30% of your business. We’ve got a business model that is based on dealing with it.”

Infinity Homes has also made its mark with its branding, taking its cue from the “30-something iPod generation”, according to Baker. This goes some way to explaining the scheme names I:One, I:Two and so on (the company has got to I:Ten so far).

What does it think of conventional housebuilders?

Until five years ago Baker worked in private sector housebuilding. “I know affordable housing has always been a pain in the backside to housebuilders. They have tried to brush it under the carpet.”

Where does it want to be in five years?

Turnover by then could be between £50m and £100m, says Baker. “We’d like to be a medium-sized housebuilder and still be innovating. I’d like to change the industry.”

INtro homes: a foot on the property ladder

Intro Homes has a helpfully self-explanatory name. Part of the John Laing Partnership and run by JLP managing director Peter Taylor, Intro was created in 2004 to help struggling first-time buyers get onto the property ladder in London and the South-east JLP was originally the affordable housing division of John Laing Homes, until a management buyout in September 2003.

Although it has gone into private housing, Intro is proud of its roots within the affordable housing sector, and is licking its lips as rival private-sector housebuilders scramble to redefine themselves as urban regenerators in an attempt to court the government.

Stuart Miller, deputy managing director at JLP, says a big driver behind the company was to have “cross-subsidised housing. We wanted to come up with a brand that was clearly aimed at the starter homes market”.

One of Intro’s biggest schemes at the moment is the £30m Victoria Green project in Edmonton, north London. The 32 apartments that comprise the first phase (out of a total of 174) are on the market from £149,950 for a one-bedroom apartment and from £179,950 for a two-bedroom flat. To make the process easier for buyers, Intro is helping them with the deposit and legal fees.

It has also launched a 70-apartment scheme at the Millfields recreation ground in Hackney, north-east London.

What’s so different about Intro?

Stuart Miller says: “We have a very close association with the social housing market, which is good, particularly in the current market. Other housebuilders see it as a necessary evil but we thrive in that area and historically we’ve always had that link.” JLP has also established John Laing Training, which helps about 1000 people a year in north-east London.

What does it think of conventional housebuilders?

“You don’t really have a market for conventional housebuilders any more because they always have to adapt to changed circumstances – regeneration being one example.”

Where does Intro want to be in five years?

“We see growth in both sides of the business, social and private. We are aiming for a combined turnover of up to £130m within that period.”