The self-build boom that failed to get past the foundations

The coaltion's pledge to revolutionise the construct-your-own market has had a slow start, but there are signs of change, reports Graham Norwood

Three years ago the idea of constructing your own home was poised to undergo nothing less than a "revolution" – the Government's own word – as the self-build sector was championed by politicians as one of the solutions to the UK's housing crisis. The then housing minister Grant Shapps pledged that the proportion of new homes being self-built would rise from 10 per cent to 25 per cent.

Fine words, but the reality is very different. The latest market report from Homebuilding & Renovating magazine, considered the sector's most authoritative source of information, shows that in the year to September 2012 the number of self-build homes completed across the UK was 11,870 representing only about 9 per cent of the total volume of new homes.

The number of new self-builds completed in the third quarter of 2012, the latest available data, was 2,820 – ironically, well below the number completed in the quarter during which the coalition came to power in 2010.

One of the reasons individual self-builders repeatedly give as a reason why their projects fail to get off the ground is finance. Even if they succeed in finding a plot which is the right size, affordable and likely to get planning consent for a home, they may not be able to get a mortgage for the build.

A Government press release issued last May claimed "the number of mortgages available to self-builders [is] set to rise by 141 per cent" but independent experts say that is not the experience they find in the market place.

"The self-build mortgage market hasn't recovered in the same way as the mainstream – it has actually got worse," says Calum Kerr, a self-build specialist at mortgage broker SPF.

"Lloyds TSB and Halifax pulled out of the self-build market last month while the building societies who offered a large proportion of self-build options pre-2008 now need to keep far more on the balance sheet for development funding than they do for mainstream lending. This is putting them off offering it in the first place" he says.

As with securing a mortgage to purchase an existing home or a mainstream-market new build property, the big obstacle for many is saving enough for a deposit.

Mortgage brokers say prospective self-builders should aim for a minimum of 25 per cent of the cost of the plot and the build, plus an additional 10 per cent readily available for emergencies. So if you are looking at a £100,000 build cost and £100,000 for the land (typical costs across much of the UK but rather less than would be required in London) you will need a £40,000 deposit and a further £10,000 in your back pocket just in case.

If you can raise that, the mortgage you can get from remaining self-build funders such as the Ecology Building Society – which says it funds up to 70 self-build schemes in a year, representing 65 per cent of its residential mortgage lending – tends to be one of two subtly different types.

Small chunks of funding are released at frequent stages (often monthly, when a project's progress has been checked and signed off by a surveyor) or larger sums are released less frequently when the assessed value of the build has reached agreed thresholds. The latter may require the self-builder using their own funds in between payments.

Unsurprisingly, few first-time buyers are likely to be self-builders as the funding model still favours those who are already asset-rich through owning a home before.

"Many enquirers tend to have paid down existing mortgages and may therefore be asset-rich and have land that can get consents. But they need to unlock equity to be able to embark on their dream project" says Jon Lee of Ecology Building Society.

But getting a mortgage is not the only obstacle. You have to compete with developers for a plot, liaise with planners, and then supervise and undertake building work, which can easily take up to a year. During that period, many self-builders and families live in caravans on site to save costs and maximise working time.

Yet despite the dismal completion figures, many experts believe genuine progress is being made to turn self-build into a large and more accessible housing option.

"The Government's done a fair bit on a macro scale. The new National Planning Policy Framework forces councils to not only assess local demand for self-build but also to allocate land to meet it. So far about 1,500 plots have been identified and far more are on their way as councils get to it," says Homebuilding & Renovating's editor Jason Orme.

The Government's Homes and Communities Agency has a pilot scheme to allocate parcels of publicly owned land to self-build projects. Whitehall has also announced a £30m loan scheme to persuade developers to sub-divide larger plots, releasing them for self-build. Some local councils are pioneering "self-finishing" whereby under-construction social or private housing is completed by self-builders to their customised requirements. Cherwell council in the Cotswolds trains would-be self-builders how to fund and manage projects.

"The problem is, there are two self-build worlds. The individual wanting to build on the edge of the village still finds it hard to get a plot, funding and consent. Nothing much has changed for him or her" admits Mr Orme. "But larger developments and sites are being identified and more local authorities are being pro-active.

"That means in the next few years we really will see more self-build homes. It just takes a lot of patience" he says.

In the meantime, completion figures will remain low. As revolutions go, this one is a slow burner – and has trouble building the barricades.

Case study: If you want to understand the hardship and joys of self-build, just ask Kim Siu and her husband Mark Thompson

They are a few weeks away from moving into their four-bedroom eco-house at Moray in north-east Scotland. The build has taken three years, half spent living in a static caravan, but their search for a site and funding took a decade.

"We couldn't get into the mainstream housing market as homes were too expensive, so self-build was our only way," explains Kim, who has four children aged 13 to 23.

"We spent years looking for a site. Most were just too expensive. Then we tried loads of mainstream lenders who rejected us because we were building an eco-house," she says.

The couple eventually found a three-acre, sloping agricultural plot for £30,000 and got an Ecology Building Society mortgage. Work started in early 2010 and by the time they move in over Easter the build cost will have hit £140,000.

"Self-build requires immense patience and endurance. Now that it's almost over I can see it's as creative and exciting as giving birth," says Kim. Her enthusiasm for self-build led her to set up an online guide at downtoearthsolutions.org to promote self-build to first time buyers.

"We know how difficult it is. But we can explain how fantastic the end result is, too. It's totally worthwhile."

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