Pat Hayes, MD of housing developer Be First, says housebuilders have missed a trick by overlooking ordinary Londoners

Housing developers who have overlooked delivering homes for ordinary Londoners “have missed a trick” says Pat Hayes, who believes local authorities must look beyond their planning powers and embrace a return to “1930s-style municipalism”. 

“This is about an entrepreneurial form of municipalism — looking where the market doesn’t work and having the public sector step in,” he said. 

“You don’t have to do it all, but you have to act as a catalyst in the right place. To do that, you need to use all the powers that you’ve got and you can’t just do it all through planning.”

In light of the Grenfell tragedy, Hayes went on to echo growing concerns around the privatised nature of the National House Building Council (NHBC).

“It’s the one area you wouldn’t want to liberalise,” he said. 

“My view is you could possibly liberalise around planning… but you wouldn’t liberalise on building control. You’ve got to have that resource and the ability for local authorities to adequately resource and charge for that inspection function and you need a degree of neutrality on that. 

“I think planning is much more subjective and appearance is more subjective — but safety is important and fairly definitive in terms of what is safe and what is not safe.”

And while greater use of modern methods of construction (MMC) is “the way forward”, according to Hayes — and could be the most effective solution to the delivery of zero-carbon — barriers remain in place to its proliferation.

“In the UK, we’re still building in the way we built 100 years ago,” he added. “The machines are more modern but the techniques used are pretty much the same — it’s blokes laying bricks on top of other bricks.

“In my mind, this is not the way to produce good quality housing at speed and at reasonable price.” 

You can read the full article on Property Week.

 

Transcript

Andrew Teacher: Hello and welcome to today’s podcasts on council housing. I’m Andrew teacher from Blackstock Consulting and we’ll be joined today by Pat Hayes who’s the boss of be first, which is Barking and Dagenham Council’s in house developer. Pat was previously the regeneration boss at Ealing. He is now overseeing a project in East London, which must be one of the biggest council driven house building programmes anywhere in the country. You’ve been on the east side of London for three and a half years now as essentially the boss of the housing delivery business, which is part of Barking and Dagenham council where you were previously on the other side in Ealing. To start off, what’s better in London? East or West?
Pat Hayes: I’m probably biased as I’ve lived in the forest for the last 500 years or so, I moved from the country of a very young age and become entirely urbanised. I think East is where the opportunity is, to be honest, because you’ve got you’ve got land, you’ve got that mixed of commercial and a lot of space to develop residential as well. West is interesting. I think the future West is probably much more tricky now with the decline in air travel and everything else, its reliance on Heathrow and it was very overheated and very difficult for the public sector to do anything due to lack of space and pressure on land. I think East is clearly where the opportunity is.
Andrew Teacher: Unless we expand Stansted, close down Heathrow, which won’t please some of my previous employers but you’d have a lot of Brownfield land in Hounslow to build houses.
Pat Hayes: I think there are a lot of unhappy people out in Essex living around Stansted Airport and those from Stafford District Council will lose their mind over that prospect that has been muted in the past and Stansted clearly has got locked capacity. We’ve got our own airport in East London in terms of London City, which is you know, not everybody’s favourite but it is very useful.
Andrew Teacher: Many people listen to some massive fans of London’s Sister and I think anyone that’s ever used it is a big fan of London City. Let’s talk about Barking and Dagenham, you’re essentially the council owned developer. Forgive my turn of phrase is not legally totally that the technical correct way to describe but you’re building houses on land owned by the Council using money that essentially you source yourselves. You’re doing quite a different array of stuff on you. You’ve got you’ve got some big high dense schemes, some single family housing, and you’ve even got beds and sheds. Where shall we start? The beds and sheds because that that story is ‘very now’ isn’t it where we’re seeing a logistics revolution, even British land is looking to get into sheds. So tell us a bit about that. How are you proposing to make people live above warehouses with dirty great big HGVs piping in and out?
Pat Hayes: It’s a big change for us is that we’ve got the whole south of the bar is former industrial land which is mainly now poor quality 1950/60s asbestos roof sheds, but interspersed with quite a lot of residential. The challenge for us is that we don’t want to see that whole area go and become just residential and it’s not in that position anyway. It’s really important for London’s economy and it’s really important for our borrower economy. We do want to deliver change, and we want to make places like barking Riverside attractive for their owners to sell and for people to go and live there. So in Thames Road and River Road, we’re looking at really realigning the industrial space, bringing in new high quality industrial space on the river, in the West End. We’re doing an interesting scheme with the GLA there for stacked industrial, which everyone says is difficult to make work, but we’re making it work with them. A stacked industry is effectively where you’ve got rather than your normal, conventional 1960s-70s, single storey shed, you’ve got a double layer with a ramp taking vehicles up to the second level. It’s industrial on two levels. The great thing about that is you make much better use of the land footprint, which gives you space then to relocate more uses into a more intensely occupied industrial site, and free up other space for either the public realm or housing. What we’re doing is an integrated strategy, where taking part of the area and saying look, this is going to stay industrial foreseeable future, so let’s concentrate industrial uses there.
Andrew Teacher: Are you at odds with the GLA there?
Pat Hayes: Their concern is, there’s an interest policy action for them is that the Thames road area is a housing zone, so the GLA have given us money to buy land for housing, but it’s also currently in planning to designated as strategic industrial land. The two of us are having to work quite closely to resolve that sort of policy dilemma.
Andrew Teacher: Isn’t that part of the poor policymaking we’ve had in this country? Where we don’t actually look at a blended approach that would make a lot more sense than some.
Pat Hayes: It was perfectly reasonable when this was designated as strategic industrial, it was an industrial area, and what has happened in the 1970s, and 80s deindustrialization of Britain and this started to fall into decline, and with the closure of large pop trucks that fall apart, and things like that supply chains vanished. Now we are saying that we don’t see the whole of London turn into residential and that’s not right, London needs employment, it also needs a lot of things that service the world city, whether that’s waste management, everything else logistics is clearly really important. COVID has shown that, you know, once we had too much just in time, and not enough storage, space and distribution, space and handling space. This I think is about a mature reinvention of these places, somewhere where you’re not going to turn it entirely into residential, you need to keep some areas which are predominantly industrial and quite hard in nature. There’s also the scope as we’re doing the Thames Road, as you move away from that harder industrial, you say bent over sheds, it’s not, you know, it’s just beds over like, like commercial craft creative space, to develop that type of interesting place to live. But also, providing a home for employment uses. It’ll sit there next to other lighter commercial uses, we’ve got food manufacturing, very quiet and the smaller end of the of the food sector, and then you go into your distribution sheds, and then into your other harder which is very much what you get in your traditional British town. London sort of lost that, London used to have that you know, that you’d look at the evolution of lots of parts of inner East London, you would in the past have had your Weaver’s next to your high end residential and this, and this is always getting back to them with again with the opportunities. We’ve seen how you’re working everything out. I think we are moving to a more, smaller scale office and commercial market where it’s much more akin to hope, you know, people are working far more from home and in smaller shared spaces, rather than this sort of Ford-ist approach where everyone works in a big factory or else in a big office factory.
Andrew Teacher: In terms of the stock that you’re building, how much of a focus do you have to have on pure affordable housing?
Pat Hayes: Everything we’re doing is within the definition of affordable housing.
Andrew Teacher: What does that even sit now?
Pat Hayes: Our range really is from a comparison with a council rent and the LAHA figure so essentially benefit would cover it to the bottom up to about 80% of market rent plus shared ownership units as well.
Andrew Teacher: So it’s local market not London market
Pat Hayes: Local market, which is probably the only realistic market because we are the only main provider of really good quality purpose built rental accommodation. There is a lot of rental accommodation, and none of its purpose built a lot of its council right to buy, which is the challenge for us, which you might set up in part is how can we deliver housing people want to a good quality at the price they can afford, you know, and that’s what we’re doing 500 units a year, 3000 units by end of next year.
Andrew Teacher: You’re doing some great stuff, and I grew up around Ilford so although I’ve spent the last 30 odd years losing the accent, that  was where I come from so some of these places where you’ve got projects coming out of the ground like Chadwell Heath, or places that I remember bounding around and playing cricket long time ago. You’re looking at different sorts of product, and one area that you seem to be quite favourable towards is MMC, modern methods of construction off site. Where do you sort of stand there, Pat? Because I mean, you’ve always been pretty outspoken on being quite progressive.
Pat Hayes: I think that the big thing for me is that MMC is the future and it’s absolutely standard in most other European countries. In the UK, if you look at it, we’re still basically building in the way that we built 100 years ago, the machines are more modern, but the techniques used are pretty much the same, it’s blokes laying bricks on top of bricks and then putting plaster board on them and yet, we’re using diesel cranes and vehicles and things that that but in my mind, this is not the way to produce good quality housing at speed and at reasonable price. There are reasons why that has arisen in part because we’ve got a market, which is dominated by a relatively small number of contractors operating on very low margins, so the standard model is to squeeze the supply chain, squeeze their subcontractors, which again, is done by the traditional method. It works in that way, in the traditional method, once you’ve gone over to MMC and stuff is being produced in a factory, then your price is much more fixed and it’s harder to squeeze your supplier spec is much more fixed in terms of clock. So as a client, we think MMC is the way forward, and what can we do to help promote that industry in its fledgling form and the problem at the moment is, it’s, you know, to the degree that a lot of people in it are great on the technical side, but not great on the business side, so you get a lot of business failure and the main contractors are very slow to embrace MMC for the reasons I’ve just described.
Andrew Teacher: And we’re seeing it on this debate around the future home standards, and that that’s obviously come out recently. And the government put out consultation about a year ago, they were saying, essentially giving us a choice on reducing carbon emissions in housing, saying that you could go for a 20% reduction in 2025, or 31% reduction. Also, of course, the volume of housebuilders have lobbied for the weaker standard, even though we’re actually delivering zero carbon homes right now, in places like Greenwich, southeast London. They’re using companies like ilke Homes to deliver these schemes. Do you have a view there? Should we be going right now, Pat, for tighter standards on energy?
Pat Hayes: Absolutely, and we’re trying to do that the balance is encouraging MMC and bringing it forward, driving down carbon costs and improving energy costs in use. This is at the same time as maintaining affordability for the end user. This is why we’ve created our own design team, effectively, now we’re becoming a much more informed client, in terms of being able to manage contractors and architects. Press on all those areas of the continuum effectively, so that were pressing very hard in terms of: we want a much higher green standard, we want higher quality and better place for somebody to live in. But we also want the price down by getting the design as efficient as we possibly can. In Barking and Dagenham we’ve got an energy home, Chancellor energy company, as well, so we’re looking at private wire on the lake scheme, a scheme which has been envisaged from conceptual outputs, this is going to be done by MMC, and it’s going to be designed, and again, to a very high environmental standard. However, that’s always going to have a private wire, energy network effectively, so it’s all built in. So we’re trying to square every side of the circle effectively. It’s a big challenge and there’s a big pressure between, quality, and price and environmental efficiency, and they are difficult, and it’s a real challenge. I think it’s going to be a challenge for a lot of developers, which is why the house builders have backed off a little bit.
Andrew Teacher: And where do you see it? The other obvious challenge that you have right now, along with everybody else, is safety. And there have been some incidents in Barking over the last couple of years, some unfortunate fires and a lot that a lot of the housing stock you have across the district is pretty out of date and not fit for purpose. Even new stock, as we’ve seen, through the cladding saga, which is continuing to roll, even new stuff is seems to be seems to have its share of problems. What’s your view there? With the added scrutiny, how are you ensuring that that some of these vagaries on building regs are being ironed out?
Pat Hayes: We’ve always taken the view that regardless of where the building wrecks were, we were going to have our own standard in terms of materials, high to which certain materials were used, we’ve taken for the time being, the decision not to use CLT You know. There are lots of reasons that pushed us away from planning with attending, most of what we do is brick built, partly because it looks nicer, wears better and weathers better. It’s a proven material in terms of terms of safety and long term maintenance. There is a real issue with fire safety at the moment, it’s a big cost pressure, and it’s given an opportunity for quite a few people, if you’ve got a certified product, you’re in a really good place and you can charge a premium price for it and everything else. It has exposed some, deficiencies in the regulatory process and now in the inspection process. The Research Establishment is clearly way under-resourced for the materials it needs to be checking.
Andrew Teacher: There have been reports have been there recently, the last couple of weeks about failings of NHBC and some of their testing and question marks around that.
Pat Hayes: I think the opportunity now is to really revitalise council building control and see that’s the gold standard and use that far more often. You alluded to the fire in Barking on the Barking riverside schemes or Bellway block and that was NHBC inspected. It also complied with the rules at the time. But again, you can see why that had certain weaknesses in it. And this system probably wasn’t robust enough.
Andrew Teacher: I’m interested in your views as someone that has spent their life developing all sorts of buildings, largely working in the public sector. Is the privatised system of building control that we have in this country fit for purpose?
Pat Hayes: I’ve never thought it hasn’t been. It was a very strange thing to privatising the way it was privatised, which was a very blunt privatisation in terms of you open the market up to competition, you leave the local authority with very limited powers but limited statutory powers and you enable developers to use whoever they want. It’s the one area you wouldn’t liberalise. My view has always been you could possibly liberalise around planning and have more code based planning system and things like that, but you wouldn’t liberalise on building control as you’ve got to have that resource and the abilities of local authorities to adequately resource and charge for that inspection function. You also need a you need a degree of neutrality on it, planning is much more subjective and appearance is much more subjective, but safety is really important.
Andrew Teacher: So that that essentially means having a lot more focus on building regs and letting the planning be a little bit more liberal?
Pat Hayes: Yeah, I mean, I was always quite like that the Dutch system, which effectively is that you use height and massing requirements, and then you have the building regs which regulate the quality and appearance of schemes. It gives you a lot more of the artistic design of individual houses. I think that’s worth looking at always in terms of how we can improve our current system? Our current system is it doesn’t look a lot of important things that Harrison feel how safe is it? How strong is it, you know? But it’s quite prescriptive in terms of appearance.
Andrew Teacher: Let’s talk about funding. Obviously, with everything you’re doing, you don’t have a fixed model. Let’s sort of explain the model first for anyone doesn’t know – everything you do, you retain an interest in the land, you fund it largely through public works loan board or through other partners. Is that the broad summary?
Pat Hayes: Essentially, the Barking and Dagenham model is that we’re the development manager for the council, we’re also the planning side and transport guarding control. Our primary model is that we’re building housing on or industrial units. In some cases, on land the counsellors bought and the council to date to use public works loan board, because it’s available, the process is easy, and the rates are pretty competitive. However, if that rate moves the other way, or if the private sector lending rate improves, not enough improve a huge amount, then we would borrow from an institutional investment, such as pension funds and banks even. We always look at it in terms of balancing our risk and exposure on Public Works loan book borrow.
Andrew Teacher: What should we be expecting to see from you over the next year or two and what do you think other councils could learn from what you’re doing?
Pat Hayes: I think that the main thing is about councils actually being confident. For us the market the market has failed as the old house builder model doesn’t work in our borough because the value hasn’t been there and demand of the section have also been an issue. This is a council that’s actually saying, we have to do something to improve the place and the things that were are therefore  doing is building a lot more housing, of good quality that will attract people in but also will house the community that’s already there in a better form than their house at the moment. We’re also taking forward other industrial developments which other councils aren’t necessarily doing. The industrial stock isn’t sufficient, it isn’t good enough quality, so we’re not going to change it all, but at least we can act as a catalyst in certain places for a revitalization of industrial stock, where we can we can use our money and our planning powers to bring that forward better and quicker. In other areas, we’ll just use our strategic influence, such as with Dagenham, where we really want to ease that towards a bit of a rail port, logistics hub based around the food industry and around energy and everything else in the automotive industry. We’re using film studios, again, and its a marvellous ambition to say, look, we want this industry here to replace what industry we’ve had before. And then again, we’ve used our land assembly powers, but done a very commercial deal so that we’ve got the double win there is that we’ve got a major player in the in the film industry developing buying land, which we’ve assembled and got planning for. So we’ve used our enabling powers by buying that site to put a studio and it’s the council’s Modus, financial return on the transaction, but it’s got a studio. That’s exactly what we what we should be doing. Our message to other local authorities is, if the markets not failing in your area, you probably don’t need to do anything and you shouldn’t think I have to do this because other people are doing it. This is about an entrepreneurial form of municipalism of the 1930s that says where the market doesn’t work, the public sector has to step in, you don’t have to do it all but you have to act as a catalyst in the right place and push and pull in the right place. And to do that, you need to use all the powers you’ve got, you can’t just do it all through planning.
Andrew Teacher: What then does the future look like for East London? Obviously, you’ve got film studios, that you’re that you’re welcoming in and a fair amount housing, but some would say the housing you’re building isn’t going to be affordable to people currently living there, how would you respond to?
Pat Hayes: Every social housing unit that we’re knocking down, we are replacing with like for like, and we’re only doing affordable housing. Actually, the interesting thing about our model is that we can make this work commercially, but it’s all at sub market price and in a lower value area of London, to be honest, so that 80% of our market price is, is very affordable. I’ve always thought it doesn’t actually matter about percentage of market pricing things, it’s actually about what can someone doing a real job, afford in rent terms. Look at our posters on the various sites, this is housing, which to drivers, nurses, teachers, cleaners, all those people can actually afford it, there’s a continuum from our cheapest to most expensive, but it’s always in that range that’s affordable, an ordinary Londoners salaries, and it’s very much pitch to ordinary London’s demand for it. There will be no doubt price inflation as well as there is wage inflation, but we will always endeavour to be providing a product that is for the for the working Londoner. Commercially, that makes sense and it’s been one of the tricks that house building industries missed in the in the UK because they rushed to the higher end all the time.
Andrew Teacher: That’s a very good point. It’s always a pleasure to speak to you and fantastic to see you back on the on the best side of London. Best of luck with everything and hope you’ll come back and give us a bit of an update in the new year. Once you once you’ve got Netflix.
Pat Hayes: Excellent. Absolutely. Thanks a lot. Brilliant.
Andrew Teacher: So that’s the end of this week’s podcasts. Thank you very much for listening. You can subscribe by searching PropCast on Apple, Spotify or any of the other platforms where you can find podcasts. If you’d like to get in touch with us just drop an email to andrew@blackstock.co.uk if you’ve got any suggestions for future issues, guests, or subject matters or any other things that you’d like us to feature on these sessions. Hopefully we’ll have some more prop tech for you over the next couple of weeks and some other surprises as well. So thanks very much for listening. Stay tuned and we hope to see you soon.

Participants

Pat Hayes

Managing Director

Be First London

Andrew Teacher

Managing Director

Blackstock Consulting