Airspace: Lenders must catch up

9th March 2020

Airspace developments have hit the headlines in a big way recently, writes COO Parul Scampion in an opinion piece for Property Week.

Planning policy is on board, housing secretary Robert Jenrick is on board and increasingly advanced construction methods are at our disposal. There is a clear appetite to build upwards as a solution to providing housing in dense areas.

However, for something to succeed, you need all parts working in unison and there remains a key hurdle both for developers and buyers: funding.

The majority of airspace developments employ timber-frame construction, a technique that is increasingly being used to build homes of all shapes and sizes, from airspace extensions – its light weight makes it ideal for building on top of an existing structure – to detached new-build family homes.

The government and property industry as a whole have been extremely vocal in promoting modern methods of construction (MMC). Despite this, overly cautious credit committees remain reluctant to fund such projects as they don’t understand them – an issue we are facing at a site in Bermondsey that recently gained planning permission. They need to move with the times and make it their policy to understand and support the creation of these developments.

At the other end of the spectrum, high street lenders are turning away some mortgage applicants – including first-time buyers desperate to get on the ladder – on the grounds that rooftop apartments are of ‘non-standard construction’.

The View, Putney
The View, Putney

This was the case at The View, a recent airspace project we delivered in Putney, where high street lenders declined a number of people and one gave an apartment a concerning ‘nil’ valuation. This was despite the fact the property had full Building Regulations compliance as well as a structural warranty from Build-Zone.

This could have far-reaching ramifications, with buyers forced to settle for far more expensive specialist finance – the last thing a first-time buyer wants – or give up on the home in question and reconsider their options.

This issue is worsened by the fact most lenders have exposure limits. They will not lend on more than 25% to 50% of units in a block (including the existing apartments below). This adds a further constraint, making the pool of lenders even smaller for new airspace apartments.

I call from the rooftops for mortgage lenders and the Council of Mortgage Lenders to catch up and get on board or else we face a situation where there is high-quality new stock coming to market that is unsellable. This is a travesty given the current housing situation we face. Indeed, recently, The Housing Forum released a report that said MMC (incorporating timber-frame construction, among others) was vital for the government to meet its target of delivering 300,000 homes a year.

So, with clear appetite from developers and government to build upwards – and buyers queuing up to get on the ladder – we need a green light from lenders at both ends of the development cycle towards rooftop development to help us move forward.

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