Government infrastructure funding is key to housebuilding - Rodney Whyte

"Build back infrastructure" is not as snappy or alliterate as the build-back-better mantra favoured by politicians who believe that post-Covid-19 there is an opportunity to do things differently.

But it does have a serious point, at least in my view, when it comes to kick-starting housebuilding projects and going some way to addressing the country’s chronic housing crisis.

The global pandemic continues to impact on both consumer and corporate spending and confidence, and in the housebuilding sector this has led to stalled developments and investor nervousness in committing to schemes, particularly in marginal areas which perhaps are most in need of new housing and investment.

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Traditionally, it has been the developers who shoulder the initial cost, and therefore risk, of installing the necessary roads, sewerage, communications and water supply infrastructure that any housing development requires before the first brick has been laid. This upfront investment, which can total millions in larger projects, is factored into the unit sale price and is gradually recouped as the development reaches completion.

But what if governments were to put aside convention and forward fund infrastructure specifically for housebuilding projects? By building-back-infrastructure to enable development, Holyrood and Westminster governments would send a strong signal to developers and funders to revisit projects which are at risk of not proceeding due to heavy up front costs and questionable viability.

A simplified framework to facilitate future developments would have a significant impact on so-called marginal viability areas where the housing market is not as strong as the Central Belt hotspots, and where housebuilders may take the view that the risk of investing potentially millions upfront in infrastructure is too great.

Separate and distinct from the ongoing work of the Scottish Futures Trust, the current economic situation calls for role reversal and a willingness by big government to take a proactive lead in delivering infrastructure to prime development sites.

The tax payer would not be out of pocket as developers would be committed to repaying government expenditure retrospectively as the units are rolled out and missives exchanged, much in the way that planning gain is collected at present via Section 75 Agreements.

Jobs would be created in the initial stages of putting the infrastructure in place and through to the construction phase of delivering the new homes. The creation of additional educational hubs would not only support new communities but may reduce the strain on existing school rolls, generate planning gain investment and ultimately Council Tax receipts.

Improved road networks or other transportation links, for example new rail stations for large scale projects, are attractive to a mobile workforce who will commute to work, while appealing to employers who need access to skilled workers. And of course these new communities contribute to local economies, supporting the retail, leisure and hospitality sectors

As vaccines continue to be rolled out at pace, schools reopen, and business and commerce look forward to shrugging off the Covid-19 cloud which has hung overhead for more than a year, let’s hope the Government call to build-back-better is not simply another disposable slogan, but something which can be gainfully deployed.

Rodney Whyte, Partner and commercial property specialist at Pinsent Masons

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