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The true cost of delivering new homes

PUBLISHED: 10:01 19 October 2018 | UPDATED: 10:01 19 October 2018

Pic: www.gettyimages.co.uk

Pic: www.gettyimages.co.uk

What are all the ‘hidden’ costs developers have to pay when building new homes? Tony Abel, of Abel Homes, explains the expense of building homes which many people are unaware of.

Tony Abel, chairman, Abel Homes. Pic: www.edp24.co.ukTony Abel, chairman, Abel Homes. Pic: www.edp24.co.uk

There is much discussion about property prices at the moment (where would supper parties be without that topic?!) New homes influence the value of second-hand property so let’s look at why new homes have increased in cost.

The cost of a new home is very dependent upon the land cost, materials, ground conditions and the ‘planning obligations’, so it is complex and varies considerably. It’s actually a closed circle of events because the latter items that I have just mentioned will obviously affect the land value.

The land and site infrastructure to be used for social/affordable housing is effectively given to the housing associations, because the developer is unlikely to recover any more than the actual cost of building the social home. So all of the elements are either deducted from the land value or added to the cost of the private home – probably some of each.

House builders have to pay for archaeological investigation work, which can easily run into six figures; the value to the country of some of this work has to be questioned, in my view. Ecology investigation and mitigation can be very time consuming with investigations having to take place at certain times of the year.

Drainage has become extremely onerous (quite rightly), and we are now required to hold all the surface water from a one in 100 year storm with the assumption that the large ‘attenuation tanks’ which hold all of the normal rainfall held are also full – hence there are more lagoons on new homes sites. It is definitely the case that older properties enhance flood risk, especially those that still discharge their surface water into the foul drainage.

If the state has not adequately funded the population growth in terms of education facilities, the house builder will be required to pay for more classroom space. In the event that there is not enough electricity in the area, the house builder will be required to pay for a new sub-station. Arguably the benefactor (EDF or whoever) should pay for the infrastructure that delivers new customers - actually, that is what happens with Openreach).

There will be a requirement for open space and often play equipment too, and I accept that this is the responsible thing to do, because we are creating new communities.

I could go on: there are many more hidden factors that collectively cause the delay in the production of new homes and add to the cost of the new home. And all that is without getting into the ever increasing burden of ‘red tape’ that affects all of our lives.

I’m not complaining – just explaining!

Tony Abel is chairman at Abel Homes, sponsors of this column. See www.abelhomes.co.uk

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