Building success: trends for future-proof residential developments

An increase in demand for housing is reflected in the number of homes being constructed. Here we consider some of the trends residential developers need to be aware of to satisfy that demand.

The Department for Levelling Up, Housing & Communities’ latest statistics reveal an increase in both the amount of dwellings where work has started, and where work has completed, in the quarter ending 30 June 2022 compared to the same period in 2021. While there is demand, not all developments are built equal in the eyes of investors and individual buyers. 

The characteristics in high demand…

Space became a key criterion for buyers during the pandemic – both access to green spaces, and space for home offices. But the predicted death of the city did not come to pass. Instead, another criterion was added to buyers’ wish lists as restrictions lifted: proximity to city amenities.

So, do we bring the residential in, creating mixed-use districts including residential in city centres or alternatively, bring city-like liveliness to residential spaces?

Residential developers need to build communities, not just houses.

An active area is key to drawing in prospective buyers. Savills’ Real Estate Investment in 2022: Global Outlook found that “where a sense of vibrancy has returned to urban centres, residential markets have rebounded too”. Good foundations for community can be built into an area, for instance by providing sufficient leisure spaces, spaces for local shops and public houses, or green, public spaces.

With price the key criterion for many residential buyers, building up secondary cities (outside the shadow of more established ones) would give the developers the chance to have the best offering of a balance between affordability and livability.

ESG is also a vital characteristic to incorporate into residential developments, to meet investor and tenant expectations. ESG is rising higher on investors’ agendas, actively driving the assets and locations in demand. ESG initiatives, such as decarbonisation, have driven new opportunities, giving those in the industry who embrace them a competitive edge.

Greener developments will become more valuable as the incentives to build green are accumulating. Beyond decarbonising for the sake of the environment, half the respondents to the 2022 Deloitte surveys noted that green buildings already command premium rents.

…and the cost of ignoring them

The government has acknowledged the urgent need to make the real estate sector more sustainable. Upcoming legislative changes will improve the energy efficiency of buildings and, more generally, steer England towards a cleaner, greener built environment. Since June 2022, new homes in England must be built to produce approximately 30% less carbon compared to previous standards. This is only an interim step on the path to the “Future Homes Standard”, to be fully implemented in 2025, where the real objective is for new homes to have carbon dioxide emissions 75-80% lower than those built before June 2022. After the key dates of these changes, plans for building works will not be approved unless the standards are met.

Where demand for more sustainable houses is not a sufficient incentive for developers, legislation is expected to provide a firmer push. Legislators are turning their gaze to the suitability of housing and the need for better standards for homes. Read more about the Healthy Homes Bill here.

To conclude, buyers have apparently conflicting wants - outdoor space but plenty of amenities nearby, and affordable houses but with the latest low carbon technology. Though the law does not yet require residential developers to provide all this, there are many incentives to do so for individual home-buyer demand, and increasingly, investor demand. Last year, residential became the largest sector for investment globally, and “the lack of stock in England meant that development is the entry point for many” (Savills). As noted above, a shift towards greener builds would provide residential developers with many opportunities. With record demand for affordable, sustainable housing, inaction is not an option.

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Every piece of content we create is correct on the date it’s published but please don’t rely on it as legal advice. If you’d like to speak to us about your own legal requirements, please contact one of our expert lawyers.

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