As the two new faces at the helm of the Altrincham-based housebuilder, Northern managing director David Ward and North West managing director Lee Sale have laid out their plans for increasing turnover, mixing tenures, and partnering with local authorities to meet ambitious Government targets.
Ward joined Lovell as MD of the North in January, from Keepmoat, while Sale joined as MD for the North West from Jones Homes at the start of February.
Lovell is part of the Morgan Sindall stable of companies, which includes the eponymous contractor, Muse, and interior designer Overbury. In financial results announced last week, the group reported national turnover of £3bn, and a 23% rise in profits.
In the North West, Lovell recorded turnover of £60m for the year, and according to Ward, is on track to hit £100m turnover by 2021.
This target is “totally achievable” said Sale, as across the region Lovell “currently has an order book of £385m, is on track to complete 440 units in 2019”, and has a further 1,000 units where the company is preferred developer or in exclusive negotiations.
In the North West, Lovell is on site on schemes in Altcar Lane in Leyland, East Avenue in Openshaw, and Oaktree Grange in Chorley. With a focus on partnerships, projects include recently work with Foundations, Liverpool City Council’s housing arm, where Lovell is set to start on the development of 100 homes in Yew Tree.
Core to Lovell’s strategy, said Sale, is to be “preferred partner for the public and private sector, bringing forward greenfield and brownfield land. We have a good order book, particularly with councils on strategic sites. We have a role where we can backfill in the areas where local authorities are struggling to work in, and we are agile, we deliver multi-tenure, with PRS, market rent, extra care, and open market sale homes.”
This mix of tenures is crucial to Lovell, particularly in the face of Government reports such as the Letwin Review which criticised the housing sector for lack of agility and variety of product.
“We see mixed-tenure in the first instance, where other developers may just see it as a possible option. In our average site, we’re delivering 30% affordable, 30% open market, and 30% for either private rent, shared ownership, or extra care,” said Sale.
Part of Lovell’s strategy of focusing on partnerships, is to bridge the gap between the Government’s housing ambitions, and the increasingly strained resources available at local authority level.
According to Ward “the Government is pushing on the figure of 300,000 homes needing to be built, and is driving to use local authorities to spearhead that volume, at a time when councils have lost skills, and have lost budget. We can work to unlock local authority sites which have previously been blocked for all those reasons, or wouldn’t be as attractive to the open market due to location or other challenges such as infrastructure. Partnership working is the only way we can bridge that gap and get that volume built.”
Life after Help to Buy
Brexit notwithstanding, changes on the horizon including to the Government’s Help to Buy initiative, means that Lovell is currently looking at how to lower risk across its projects.
Sale said: “The end of Help to Buy is something particularly we’re preparing for, so we’re reviewing stock, to reflect the cap being introduced to homes below the value of £225,000, and looking at the mix of our types of homes to de-risk the pipeline.”
Does this mean Lovell will only be delivering lower-value homes?
Apparently not, according to Sale. “We’re not focusing on just homes below that cap. Statistics show 48% of first homes are bought through Help to Buy, but only half of buyers actually need it. There will be a correction period, which is why we need to be agile in terms of that mix of tenure, but we also expect the market and mortgage providers to deliver new products which will fill that gap.”
Geographically, while Lovell operates across the North West, Greater Manchester is a key focus area, particularly given the target of 201,000 homes outlined in the rewritten Greater Manchester Spatial Framework.
With the GMSF, Sale said he had been “frustrated in terms of timescales”, but now the revised plan was being consulted on, his main hope was that “with a revised target, we hope that can be brought forward quickly, and not all at the back end of that delivery period in the 2030s”.
As well as Green Belt release, which according to both Sale and Ward is “absolutely necessary” to enable Greater Manchester’s housing numbers, faster modes of construction are also essential.
Accelerated build methods are “the main solution”, according to Ward. Lovell currently use a closed-panel timber frame on many of its homes, which are manufactured off-site, and its national house types are designed with pace in mind.
While these house types create efficiencies, is there a risk then that homes will look formulaic, without reflecting local styles?
Ward thinks not. “The internal lay-outs are the same, but externally will be dictated by each area’s Local Plan policies, such as materials, roof levels, and will be altered to suit.
“Accelerated construction all drives the efficiencies, speed of construction, overall delivering a lower price paid for by the customer and bringing more homes to the community.”
Outside of the North West, Lovell is proving the capability of accelerated construction methods, such as at the former MOD site in Salisbury, where it is completing 24 units a week, which Sale said “must be some kind of national record”.
While modular is also gaining pace in the market, the build cost remains more expensive per traditional unit, particularly in the North. Does this put Lovell off moving into module delivery?
“Yes, modular can be more expensive per unit, but it’s all about the pace, which overall makes it cheaper. There are fewer people on site, for less time, and the human cost is usually the biggest one in development. The affordability problem can be answered by pace of delivery and efficiency,” insisted Ward.
Both Sale and Ward agreed the industry had “finally turned a corner” in terms of modern construction methods. “There’s a real feeling that MMC is being taken seriously, factories are appearing all over the country.”
Regions shouldn’t take it as a sign of failure if there isn’t a modular factory on their doorstep. “Every local authority wants one in their area, but it loses efficiencies. If there are more factories it dilutes the numbers each is able to deliver, so they can’t compete on volume,” said Ward.
“And if in the market, as there is, there is a glass ceiling on the price the consumer is willing to pay for the end product, then homes need to be produced to meet that level. If there’s an inefficient manufacturing environment, those projects won’t sell. If the modular issue becomes all about why there isn’t a factory in my back yard because I want the job creation, then I think councils are being short-sighted.”
For Lovell, modular roll-out is a matter of ‘when’ rather than ‘if’.
“We’re talking to a number of suppliers, and there is absolutely a scheme out there with someone’s name on it, because we are definitely going into it,” said Sale.