Weakening space standards won’t make homes cheaper – just smaller

Lots of rumours have filled the vacuum created by the delay in publishing the White Paper on housing. The most worrying one, to my mind, is a persistent suggestion that space standards could be watered down.

This is troubling because we barely even have space standards in this country, and what we have are by no means generous, and in any case are purely voluntary for local councils to adopt.

In fact, no-one actually seems to think they are a major barrier to building more homes – with the possible exception of Adam Challis at JLL. So why is the government rumoured to be making this a centrepiece of the White Paper?

There are only two possible reasons I can think of, and neither bode well for the White Paper’s chances of success on this issue. The first possibility is that some in government believe that smaller homes will be cheaper homes, and so will help address the affordability crisis. There’s so much wrong with this argument it’s hard to know where to start, but here goes:

  • New homes in England are already very small – and this is a major problem both for those who live in them, and for surrounding communities who are then more likely to resist new development.
  • It’s not clear that smaller homes will even be cheaper: house prices are set by sky-high demand for homes in the right location (as Adam makes clear in his blog), so building smaller simply means buyers get less for their money.
  • Even if it did reduce the price of some new homes compared to older ones, how much difference would it make when prices are rising at 6.7% a year? And if prices keep rising, would we have to keep lowering space standards?
  • In any case, there’s something very perverse about hoping to make homes more affordable simply by making them less desirable. Should we also build them with big holes in the roof in order to lower the price?
  • As Pocket Homes’ Nick Cuff pointed out at the London Assembly’s recent session on this (which Adam and I also spoke at – webcast here), smaller homes actually cost more per square metre to build, because of the tighter spaces and the higher density of the expensive bits (kitchens and bathrooms).
  • Increasing the number of units by building smaller flats is to mistake unit density for people density. Julia Park of RIBA told the Assembly that, under the voluntary national space standards, the largest minimum size for a 4 person home is 92.5 sqm, which gives each person 23 sqm each. This gets almost twice as many people into the same amount of space as two 1 person flats at the minimum size of 40 sqm would.
  • Similarly, smaller homes are not the same as increased density. In many places there is a good argument for achieving higher densities through taller buildings, fewer parking spaces and other measures. But this means building in more space, not reducing the space inside each home. In fact, at higher densities and taller buildings there is even more need for good space standards, as there’s less outdoor space to compensate.
  • There’s a lot of talk about ‘exemplary design’ meaning more efficient use can be made of space – which is true, but ignores the simple fact that the existing standards already assume exemplary design, which is why they are already so small.

So allowing ever smaller homes won’t make them cheaper, better or even guarantee more people a home. So who could be behind this sudden interest in tearing up the ‘nationally described’ standards that are, after all, not even two years old? Those that actually build ‘micro-flats’ aren’t arguing for a change. Pocket Living, who specialise in building very small apartments in London, already design their homes to the existing standards – so they wouldn’t want to see their model undercut by even smaller homes.

The only other argument for this move is one that is never made publicly, and it’s this. Imagine you’ve bought a site on the assumption that you can get 100 homes on it, of (say) an average of 50 sqm each – so 5,000 sqm of housing to sell. The price you paid for the land would reflect that assumption (and others like the amount of affordable housing you have to include). If the rules are later changed to allow you to drop the average to 40 sqm, all else being equal you could squeeze an extra 25 homes on the site and increase your profit accordingly. Of course, you’d only make a higher profit if the sale price of the smaller homes wasn’t commensurately lower – so the aim here is clearly not to make homes cheaper for people.

This strategy might, conceivably, work (with lots of caveats, as in reality all else is never equal): you might be able to build more units on that site and make a higher return, thanks to the reduction in space standards. The problem comes with the very next site you buy. Now that the rules have changed, every potential developer will factor in that change and expect to make those higher levels of profit. As they bid against each other for the site, the land price will go up – so the real beneficiary will be the landowner.

The result will be higher land prices and smaller homes. Nominal house prices might stay broadly the same (if a million other factors don’t push them up anyway) but as the homes are smaller, the price per square metre will have risen. And the developer’s profits will be back where they started – if the higher build cost hasn’t actually weakened them.

This admittedly simplified example shows how cutting space standards might give some current schemes a temporary boost in profitability, but won’t do so for long. The same is true of watering down other rules – like environmental standards, or affordable housing contributions: short term profit increases are quickly priced in by the land market. That seems a very poor benefit to get from condemning future generations to ever smaller rabbit hutches – which is presumably why those pushing for weaker standards have to pretend its all about making homes more affordable.

Let’s hope the government don’t fall for it.