Reducing building heights may result in a total GDV reduction of £15m for developers

The issue of fire safety within high-rise residential blocks has come into sharp focus following the 2017 Grenfell fire, when it became abundantly clear that the UK needed to update regulations to prevent such a tragedy happening again.

Last summer, the government announced that the threshold for the introduction of second staircases into new residential buildings would be reduced to 18 metres, effectively in the region of seven storeys in height. Then in October it announced a 30-month transitional period from when the government publishes and confirms its building safety guidance for second staircases to be introduced. 

So how will the new regulations impact the development of tall buildings? 

The new policy will reduce the sales areas within schemes: traditionally, developers of residential towers in urban areas aim for at least 80% of a floor plate as “saleable” (individual apartments for sale, as opposed to circulation spaces).

With the requirement for a second staircase and the additional corridor area that this necessitates, the ratio of saleable area to circulation space would reduce by approximately 5-10%. 

In some parts of London, this could result in a reduction in gross development value, for an eight-storey development, of £1-2m per floor – and a total reduction of possibly £15m or more. 

This has a significant impact on the land values anticipated by landowners and could even lead to challenging viability when coupled with other factors such as escalating build and finance costs and affordable housing. 

Specifically, in instances where land has been purchased at a premium, developers may then look to use the requirement for an additional staircase to argue for reductions in the levels of affordable housing from policy-compliant levels. 

Alternatively, developers may look at options to reduce the height of developments to below the 18m threshold, maintaining the strong relationship between a building’s footprint and saleable area. 

Whilst this would result in fewer units, it could be that for landowners promoting such schemes through the planning process, a “less is more” approach is sought instead, to maximise the land value.

There would appear to be limited commercial value in pushing to promote for a development with a single additional storey — which could result in more units but may introduce a requirement for a second staircase and as such, it is likely that future schemes will either be below 18m or will be considerably higher.

This, specifically for urban councils, which need more housing to support a growing population,  would then have a knock-on effect and sites which have previously been consented for eight, nine or ten storeys may no longer be viable. 

Some councils may accept a reduction in scale, but it will inevitably lead to a decrease in CIL revenues, which could impact investment in local services. And would also be fewer affordable housing units delivered overall as the number of such units is based on a percentage of total units constructed.

The alternative may be for even taller developments than had previously been considered appropriate. But this will greatly increase density, which apart from being very controversial, may exacerbate social problems. 

The impact on tight development sites is likely to be greatest. Having once exceeded the height threshold to enable a second staircase to be included as a part of a scheme a developer will likely push the height as much as possible to maintain a GDV to compensate a reduced gross-to-net ratio.

For a scheme on the cusp of the requirement for a second staircase, the developer’s preference would probably be for a decreased height, unless they can secure reductions in the levels of affordable housing.

Either way, this very significant legislation will change both developers’ approaches to tall buildings and city skylines too.

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