Definitions and Size of the Market
The self-build sector accounts for a significant number of new homes in the UK although, as a percentage, it is much less than the European average. In a 2019 briefing paper, the RICS stated that “…. 45% of new housing in the USA is self or custom built, and the European average is (circa) 50%; the estimate for the UK is between 7% and 10%”.
However, an exact annual figure on the number of UK self-build home starts or completions is difficult to identify and, in truth, the closest anyone can get to is a best guess. The problems are mainly the lack of any official statistics and also the varying definitions of what actually constitutes self-build - does self-build constitute those builds where the owners actually build the houses themselves, undertaking everything from design to construction, or does it also include those individual homes built on request by a builder on land obtained by a ‘self-builder’ who only guides the general layout and finish? Or does self-build also include homes where the client selects a package or ‘kit’ home (timber-framed, etc.) from a manufacturer’s catalogue of plans, or does it include home-owners who have decided to undertake (themselves) large extensions to their existing homes and where the plans require formal planning approval?
So different people will have different views on what, precisely, represents self-build. For an official definition, the UK government describes the self-build market as: “Housing built by individuals, or groups of individuals, for their own use, either by building the home on their own or working with builders.”
As a general definition, a good summary was provided by Alex Morton of the Policy Exchange in the paper entitled “A Right to Build, Local Homes for Local People”. He stated, “The notion of self-build…does not mean that the entire process is handled by a single individual from start to end. It means that an individual or family has had serious input in the design and construction of a house, a house that they then live in for a prolonged period of time.”
Available Statistics and Research
As explained above, the lack of any official statistics covering each of the varying definitions of custom and self-build causes difficulty in assessing the exact size of the market, so different sources need to be consulted to gain an understanding.
NaCSBA - The National Custom and Self Build Association
This organisation is the voice of the custom and self-build sector and, amongst its many activities, operates the Right to Build Portal. A feature of the portal is the ability to sign up to the appropriate ‘Right to Build Register’ in the relevant local authority. These registers, in turn, can provide a guide to the number of custom- and self-builders. The latest data from NaCSBA (November 2019) indicated that, in the last 12 months, around 11,400 new registrations had been made.
The UK government’s tax agency, HMRC, does not levy a tax on self-build projects, so this does not tell us how many are undertaken; however, it does provide a VAT refund scheme (called ‘VAT refunds for DIY housebuilders’) on materials used in the project, so, in theory, if all eligible self-builders reclaim the VAT, then the number of applications in a given period should translate to the number of self-builds undertaken. Unfortunately, this figure also cannot be relied upon as a total, since it cannot estimate those self-builders who do not take advantage of the tax break. Also, it excludes those projects that are professionally managed and built for a client because the VAT on materials in such cases is not claimed through the scheme (the manager/builder would generally claim the VAT back through their normal accounting processes). However, as a pointer, it can help and in 2014 the figure for 2013 was 8,235 (in answer to a Parliamentary question by MP Hilary Benn, quoted in The Daily Mail in May 2014). Three years later, in the financial year 2016/17, there were a total of 6,545 self-builders and converters reclaiming VAT, according to Property Industry Eye in response to a Freedom of Information request.
In Autumn 2019, NaCSBA launched the ‘Self and Custom Build Homes VAT Survey’ in order to establish an up-to-date figure based on VAT returns. At the time of writing (Feb 2020) the results had not been published.
Statistics on planning application approvals (for single unit plots) are available, but these do not indicate which are self-builds and which are speculative builds undertaken by builders and developers. In its ‘Housing Pipeline Report - Q2 2019’ (pub. Nov 2019) the Housebuilders Federation reported that, in 2018, there were 11,809 planning applications (in England) for new housing units where the project size of the application related to just one or two homes.
Given the variations in size and definition, perhaps a more confident understanding can be obtained by looking briefly at the historical data from market research undertaken over the last 20 years, which can also provide an indication of the impact the economic downturn had upon the sector:
- In 2000, research firm BuildingLink estimated the number of completions in 1999 at approximately 13,000 (admittedly with a wide margin of 2,000 either side) and stated that the sector represented 9% of the housebuilding market.
- In 2006, research firm Datamonitor produced a report entitled ‘UK Self-Build Mortgages’, in which it estimated that the number of self-builds in 2005 was 19,400.
- In 2007, in its report into the sector, specialist construction research firm, AMA Research, estimated that there were some 15,000-16,000 self-build completions in 2006 and valued the market at approximately £4 billion.
- In its report entitled ‘Self-build as a Volume Housing Solution’, published in January 2009, the National Self-Build Association (now the National Custom and Self-Build Association) stated that up to 20,000 self-build homes are built every year and estimated that, as a proportion of total builds, self-build represented some 12%.
- In 2011, in another report on the self-build sector, AMA Research estimated that 12,000 self-build projects were completed in 2010.
- In July 2013, Homebuilding & Renovating magazine published what was then a regular quarterly market report on the sector. Based on the VAT refund statistics from HMRC described earlier, the UK Self-Build Market Report for Quarter 2 2013 stated that the sector accounts for approximately one third of all detached new builds in the UK, that the value of the self-build sector to the construction materials market in the year to 30th June 2013 was estimated at around £2.3 billion and that the number of self-build homes completed in the UK for the year to 30th June 2013 was 10,635 (this apparently represented a 10.5% decline year-on-year).
- In 2014, the research firm AMA Research published ‘Self-build Housing Market 2014-2018’ and estimated the value of the self-build market at over £3 billion and the size at between 10,000 and 11,000 homes – typically representing 7-8% of total house building output and around 10% of total private house building output.
Types of Self-Build
The main types of self and custom build can be summarised as follows:
- Managed by a self-builder using a main contractor
The self-builder generally finds the plot, employs an architect to undertake the design and a main contractor to undertake the main components of the build. The self-builder may undertake some of the minor works and handle some of the planning administration.
- Managed by a self-builder using subcontractors
This is a popular approach for self-builders looking to economise on professional services and labour costs as much as possible. In addition to finding the plot and choosing an architect (or sometimes a pre-designed house plan), this route generally involves them taking responsibility for detailed, step-by-step, management of the project, including submitting planning applications and the employment of sub-contractors for specific aspects of the build. This route will often involve the self-builder undertaking much of the building work himself and employing sub-contractors for specific tasks requiring professional skills. Self-builders undertaking this approach are thought to save up to 30% when compared to self-building using a main contractor.
- Self-build collectives and community projects
This route involves groups of self-builders coming together to build a number of houses so that the collective skills and labour of the group can be pooled and shared by all, making it a very cost effective method of self-building. Co-ordination of self-build community groups is undertaken by organisations such as The Community Self-Build Agency.
- Package or ‘kit’ homes
This method also involves the self-builder finding and purchasing the plot and then using the services of a prefabricated home manufacturer who, in general, will provide a comprehensive range of house designs which can be modified and finished to the self-builder’s requirements. Once a design has been agreed upon, the manufacturer will generally undertake the planning application process and erect the house, which has previously been prepared offsite in kit form. These homes are often timber-framed systems, although other construction materials, such as steel, are occasionally used, but are generally uncommon.
Characteristics of Self-Builders and Projects
The concept of self-build has really only developed as a mainstream housing option in the last forty years. In 1978 the number of self-build projects was estimated at just 2,000, so the concept of it as a mainstream option is relatively new. The increase in uptake can be attributed to a combination of affluence, consumer demand, media attention and the availability of finance, with many main-stream lenders offering dedicated self-build mortgage products.
The decision to self-build is not spontaneous and is likely to have been contemplated and planned over a period of years rather than months. Key factors driving people to undertake a self-build project include:
- Financial – in general self-build is thought to save the owner some 20%-30% in costs when compared to buying a comparable ‘built’ home.
- Design and location – self-build enables people to achieve exactly the home they require in terms of layout, accommodation, and room size. It also provides them with complete control of the specification process in respect of the products and materials used, i.e. energy saving, environmentally friendly, modern or traditional designs/finishes, etc.
- Accommodation – the cost savings enable self-builders to trade up in terms of house size, whilst remaining within a smaller ‘built’ home budget.
It seems generally accepted from studies, articles and anecdotal evidence that the typical self-build house is likely to be detached, have two storeys with four bedrooms, be between 1,500 and 2,500 sq ft, and have a higher than average inclusion of innovative, energy efficient and environmentally friendly systems, products and materials. Bungalows are thought to account for less than 10% of all self-built homes.
Outlook and Prospects
The prospects for the market are thought to be positive. In January 2020 NaCSBA reported that recent research indicated that, in the last 12 months around 11,400 new registrants had signed up to the Right to Build register, which represented a small increase on the previous year. This, along with other industry commentaries, suggests that the trend is on an upward trajectory and it seems likely, therefore, that the sector will continue to grow, perhaps significantly. Underlining the developing prospects for the sector, NaCSBA also point out that, in its House Builders’ Survey 2019, The Federation of Master Builders’ (FMB) revealed that self and custom build was a vital source of work for its members, finding that, during the previous year, over half of its members had constructed a home to the plan and specification of a new owner.
That there is potential for growth is undeniable, but the entrenched problems of land availability, planning approval and finance have traditionally acted as a brake on the sector. However, the prospects for expansion are boosted by UK government activities, which includes legislation designed to supplement other activities which address the UK’s serious housing shortage. In its 2017 white paper titled ‘Fixing our Broken Housing Market’, the Government refers to the need for between 225,000 and 275,000 new homes to be built every year to meet demand, whilst pointing out that only an average of 160,000 annually have been built since the 1970s. On page 49 of the paper, it affirms its support for the custom and self-build sector, explaining that it sees the sector as part of the solution to providing more homes and sets out some of the programmes and schemes it plans to implement.
The National Custom & Self-build Association
Association of Self-build Architects