Deborah Rowntree 26 March 2019

Airspace development - the way up for affordable housing?

Rooftop development has been given significant airtime recently. The market-leading innovator in this sphere, Apex Airspace, has received just under £20m of funding from the Mayor of London and Homes England in recent weeks – representing a welcome further emphasis from all levels of government on innovative methods of housing delivery.

According to Sadiq Khan’s draft London Plan, 66,000 homes are needed each year for the next decade in the capital alone. Change is clearly required if we are going to solve the ongoing housing crisis in the UK, and embracing new, advanced methods of development is a major step.

Airspace development is the process of constructing units on top of existing residential, commercial or retail properties – building up, not out. It’s estimated that there is space for 180,000 new homes in London alone, which would represent 42% of the need identified by the London Plan. Undoubtably, the opportunities on a national scale are vast.

However, airspace doesn’t just mean building more expensive penthouses. For local authorities, one of the major benefits of this method is its inherent suitability for developing affordable housing. The £10m boost from the Mayor’s Innovation Fund will allow Apex to partner with more councils across the capital and deliver new schemes that could provide 100% genuinely affordable homes. The Government’s investment in airspace development is welcome, and local authorities should recognise how airspace can help them satisfy social housing objectives.

Taking stock

Airspace development is well-suited for local authorities as they hold extensive amounts of existing housing stock. Across the UK’s densely developed cities, councils are sitting under swathes of valuable airspace without realising how much the air above their rooftops is worth. Rooftop development helps them maximise their assets, and increases the value of the buildings simultaneously, representing a sound investment.

In addition, development is done with minimum disruption to incumbent residents, as homes are built offsite using modular construction and arrive on site 95% complete before being installed. Modular is one of the most exciting innovations across property and is favoured by Government as one of the keys to addressing delivery shortages and improving efficiency.

The result is precision-engineered affordable homes, built on top of existing developments in ready-made communities. Unlike developing on new – often brownfield – traditional sites, airspace development doesn’t involve unlocking land, identifying up-and-coming boroughs or onerous pre-commencement remediation. By building on existing developments, homes are delivered in areas which already contain the necessary infrastructure such as schools, hospitals and transport links for people to move into established neighbourhoods straightaway.

Reach for the sky

If we’re going to meet housing targets, councils need to be ambitious. However, there are undoubtedly challenges as airspace development continues to grow.

Identifying suitable buildings for adaptation is typically the first hurdle. While there is great potential to build upwards in local authorities across the country, finding the right base can be an intricate process.

For this reason, strategic partnerships are crucial. Councils need to team up with specialist developers who bring the necessary expertise to navigate the untrodden ground that a new form of development typically entails.

From a technical perspective, these challenges start with negotiating financing and bespoke contracts for deals – the specifics of airspace don’t conform to standard documentation. As such, when facilitating the deal with Homes England, we needed to be alive to the challenges thrown up by negotiations with existing freeholders and leaseholders, planning impacts on rights to light, and convincing lenders and mortgage providers to engage with modular built homes.

Building up

It is encouraging to see government embracing a new way forward – and upward. As more rooftop homes are built, the potential of airspace development to help local authorities build affordable housing will become more and more evident.

Every suitable council-owned property in the country represents an opportunity, and in the context of a national housing shortage, local authorities can scarcely afford to ignore this missed chance to provide new affordable homes.

Policy makers are already responding, and airspace was referenced in both the draft London Plan and the National Planning Policy Framework (NPPF) last year. We now hope that more local authorities will show willing to adopt this fresh approach.

Deborah Rowntree is senior associate in the real estate finance team at Winckworth Sherwood

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