Self- and custom-build homes: know the risks

With the Bacon review of self- and custom-building due to be published, what difficulties does England face in scaling up the sector to make a significant contribution to housing supply?


  • Tony Mulhall
  • Mairéad Carroll

22 July 2021

Sketch of house on a piece of land

The UK has a much lower rate of self-build housing than other European countries. In 2017 it was estimated to be between 7% and 10% of completions, whereas in some European countries it exceeds 60% of total annual housebuilding. So there is an expectation that, properly supported, the self-build sector could contribute significantly to resolving the housing shortage in England.

As well as self-build, where people buy a site and arrange most of the construction, there is an option for custom building homes, where purchasers choose a property on a serviced site, and a construction company carries out the work.

To encourage both forms, the Self-build and Custom Housebuilding Act 2015 was promoted by MP Richard Bacon, and requires local planning authorities in England to maintain registers of self-builders and custom builders who wish to acquire suitable land on which to build their own homes. Local authorities have three years from the date people register in which to respond. The 2015 Act also requires local authorities to have regard to the demand on these registers when exercising planning and other relevant functions.

By 2020, around 50,000 people had signed up to such registers across England. The government launched a Help to Build scheme promising more than £150m of equity loan funding in April 2021.

In 2018, Sir Oliver Letwin published a review of the rate at which projects on permitted sites were actually being built, identifying a need for more varied dwellings, tenure types and scales of housebuilder. In light of this, prime minister Boris Johnson commissioned a further review from Bacon himself. This is intended to assess the opportunities and barriers to growth for the sector, and support a scaling-up of self-commissioned homes.

Bacon is due to report back by 23 July, and the review has been taking place alongside significant reforms to the planning system envisaged as part of a new Planning Bill due in the autumn.

De-risking self-build

The Bacon review has been looking at the additional risks associated with self-build. Following a meeting with the MP and his team, RICS sent a supplementary written submission about issues that need dealing with to enable more people to build their own home.

The idea of someone finding their idyllic plot in the English countryside is likely to be exceptional, and unlike some other countries there is not much scope for a large-scale contribution to housebuilding. Landownership patterns in England mean plots are not readily available, and the desire to maintain a natural landscape means that permission to develop is not easy to obtain either.

Notwithstanding this, there is still a lack of clear information on demand for self-building and custom-build. What percentage of people want to live apart from others, for instance? What proportion could be satisfied with serviced sites? Of the latter, what percentage could pursue – and are committed to pursuing – a custom-build option?

We need better information on self-builders. What is their motivation? How do we distinguish between those who respond in market surveys that they would like to self-build and those who would be capable of seeing a self-build project through to completion?

In addition, the custom contractor builds in accordance with planning permission, building codes and other regulation, and hands over a finished product that complies with these. In contrast with the individual self-builder, such a contractor provides assurance on standards compliance.

It seems that custom-build offers better prospects for scaling up. This prompts the following questions.
  • How can you satisfy people's desire to build their own distinctive houses, but with more limited options than if they were building on a separate site in the countryside?
  • How can you help people fulfil their desire to build their own homes at the same time reducing the inevitable uncertainty and risk?
  • How can you satisfy demand for a reasonable choice of alternatives in a realistic timeframe?
Even the most enthusiastic self-builder will end up housing themselves in some other way if there are no local, affordable sites within a reasonable time frame.

De-risking for self-builders

Location, choice and time frames for occupation are uncertain enough when buying an existing or new-build house, and these risks increase significantly for custom-building. If prospective self-builders cannot find a site in a reasonable period, they can either buy an existing house and remodel it or a new build. This may explain why people are dropping off the local authority registers.

Although the three-year timescale for local authorities to respond to people on the register acknowledges the lack of resources in councils, it is considerably longer than most people consider practical. Councils therefore run the risk of losing people who might be capable of self-building. At a point where couples begin having children their priorities may change and it might be more difficult for them to contemplate building their own home.

Prospective self-builders may also expect that the process is cheaper than buying a new property from a housebuilder. That needs clarifying as each project is different. Once they realise that mortgage finance may be less easily available, more complex and more expensive than for buying a new property, they may simply turn back to the main housing market.

During the course of this process, custom-builders may also find they are being shepherded towards more conventional choices in layout and design. These may reflect the possibility of reselling into the general market in the future rather than their unique preferences.

RICS suggests the following improvements to the system:
  • reduce the time frame in the formal local authority model
  • increase provision in the private sector as part of the permitted housing mix through planning permission on large sites
  • dwelling typologies should offer options not available in the mass housing market, but not so unique as to limit future resale or be incompatible with neighbouring dwellings
  • make mortgage finance available that does not place the self-builder at a disadvantage relative to the rest of the housing market.
The sector should also provide impartial consumer guidance explaining the challenges that consumers may face if they choose a non-traditional method of purchasing a home. This should outline:
  • available options, distinguishing between custom-build and self-build, as well as covering methods of construction such as off-the-shelf kit houses to more bespoke options
  • how to work with professionals such as developers, architects, surveyors and contractors
  • planning and building control
  • how to access finance.

Dealing with challenges for developers

In RICS placemaking and value research a number of large masterplanned sites were found to have self-build options that is serviced sites. The master developer saw these as time-consuming and not adding much in overall schemes of perhaps 2,000 dwellings.

RICS suggests that policy makers make the following improvements to encourage developers to support self- and custom-builders:
  • set up a clear process for completion once the contract for the site sale is signed
  • balance the level of participation required from self-builder with the need to progress the build when setting expectations/deadlines for completion
  • provide dedicated support for group custom-build where a number of people come together on a joint project to ensure all participants are taking decisions at the same pace
  • offer a range of options within broader typologies
  • offer a compatible range of design and layout options within the design code in accordance with the masterplan; this will begin to apply more rigorously under the new planning system
  • make available a certain proportion of serviced sites
  • limit the timeframe in which self- or custom-builders can take up sites before land is returned for general housing purposes on a phased basis; for instance, after a certain time 50% of a site reverts to normal housing provision, and so on, with such plots perhaps being specified for SME builders.

Supporting communities

Most settled small communities seem to find the idea of new housing in their area unappealing, despite the need to accommodate their own natural growth. Yet such communities probably have the capacity to absorb small numbers of serviced sites incrementally without stretching engineering services or the community infrastructure, and may also provide some intergenerational vitality.

In our response to the Bacon review, RICS suggested that policy makers make the following improvements to increase the acceptability of projects to settled communities:
  • investigate the scope of small settlements to accommodate a few self-build sites
  • try some pilot projects
  • set up small clusters of sites that will suit self-builders' aspirations.

Mitigating risks for lenders

Another party needing assurance about self-build projects will be the lender. A self-build home is a construction project, and all construction projects come at a greater risk than housebuying: this is why even construction loans for professional developers are made at higher interest rates than those for completed properties.

Moreover, self-builders are usually inexperienced at handling a construction budget, which often exceeds £100,000, and at ensuring the project is completed within the agreed budget and deadline. Costs increase where there are changes in specification, particularly during the course of construction and these are more likely where the self-builder has no previous experience. Agonising decisions must be made during the construction project, with cost consequences for any delay.

So lenders are more inclined to offer finance RICS suggests that policy makers instigate the following improvements:
  • establish fixed-price contracts between the self-builder and the developer/contractor with critical completion dates
  • build houses to designs with broad appeal.

Understanding the market

Prospective self- or custom-builders need to distinguish between data that helps them understand the reality of the market, and data or information used for marketing.

Generating useful information requires reliable and meaningful data correctly interpreted. Extrapolating from international figures without understanding the underlying socio-economic, landownership patterns, market and cultural conditions will lead to false conclusions. Wider landownership patterns and more permissive development policies in rural areas are usual in countries where there are high percentages of self-build housing.

Better information on the self-builder is required.
  • What is their motivation?
  • How do we distinguish between those who respond in market surveys that they would like to self-build and those who would be capable of seeing a self-build project to completion?
Many people who would answer positively that they would like to buy their own house from a housebuilder, would not have the capability to do so. Expressing a desire to do a self-build house is not a sufficiently reliable indicator of an ability to fund and complete a self-build project. More searching questions are required in market surveys. Better proxies for the volume of the self-build and custom-build market and how it subdivides are needed.

In conclusion

Some of the suggestions above may not be mutually compatible if implemented fully, but they prompt questions that may help us understand the obstacles and how to help more people build their own houses. As ever, compromise is needed to achieve the best results for all participants.

At a time of extreme housing shortage, it is telling that in England legislation is still required to enable self- and custom-buildings. Many of the countries whose self-build statistics are being looked at enviously may in fact need legislation to prevent some of it going on in the wrong places.

Tony Mulhall MRICS is senior specialist, land and resources, at RICS

Contact Tony: Email

Mairéad Carroll is senior specialist, residential property, at RICS

Contact Mairéad: Email

Related competencies include: Planning and development

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