PROFILE | Housebuilding platform takes aim at supply crisis
In the four years he lived on a boat on London’s canals, Gonzalo Marquesini began to understand the problems at the heart of the UK’s housing crisis – and what it would take to tackle them. By day, Marquesini was a successful chartered cost consultant at Arcadis, a professional in his mid-20s managing several £150m-£300m developments, including two plots at East Village in London’s Olympic Park. By night, he and his girlfriend led a nomadic life, finding themselves and their boat anywhere from Hackney to King’s Cross, Maida Vale and Regent’s Park.
Despite both having thriving careers and Gonzalo having become the youngest Fellow of the RICS at 27, home ownership was a distant dream for the couple. “That whole process made me realise how broken the market is and how difficult it is for people to get onto the property ladder if they don’t have the support of the bank of mum and dad,” says Marquesini, who is originally from Argentina and spent his childhood moving around the world before settling in the UK. “That inspired me to start RenKap.”
For six months, Marquesini worked part-time to develop an idea to tackle the housing crisis, eventually leaving Arcadis altogether when he got a place on the Geovation proptech accelerator programme in April 2019. What emerged was RenKap, a development management platform to get the public sector building again. In the way Uber connects people to drivers, RenKap connects public sector landowners to suppliers who can deliver housing on their underutilised brownfield land. It consists of five products:
- Site Identification to help clients figure out what sites they own
- Site Investigation to automate tendering and managing site investigation surveys
- Feasibility to automate the viability process, collating relevant cost and income data into the client’s financial model
- Design & Planning to procure a design team for the sites, and
- Construction to procure modular manufacturers to deliver housing offsite
Going into 2020, RenKap was gaining momentum. The Geovation programme ended in March and the company had delivered its first product, Site Investigation (the others are still in development). Marquesini says: “You’re kind of in this cocoon and then all of a sudden after a year with Geovation, they’re like, ‘Alright, now go into the real world.’”
The “real world”, however, was about to find itself grappling with a pandemic that crippled the economy and shattered people’s livelihoods. Fears about the unknown grew, but what Marquesini soon found was that Covid-19 exposed problems that made fixing the housing crisis all the more urgent – and his solution attracted government attention.
Shifting the balance of power
RenKap’s goal is to become the UK’s biggest housebuilder without directly building any homes. Instead, Marquesini wants to enable the public sector to once again deliver affordable housing at scale. “The public sector is fully reliant on the private sector to build homes, which is just ridiculous,” he says.
Public sector housebuilding has declined significantly in the last half century. In 1970/71, local authorities delivered 49.5% of the 362,230 homes built in the UK. That figure plummeted to as low as 130 (0.06%) in 2004/05. Despite picking up again in recent years (4,010 in 2018/19), councils are still delivering a fraction of what they used to. By contrast, the private sector delivered 165,650 homes in 2018/19, only marginally less than in an average year in the 1970s. The result is fewer homes overall, falling short of the government’s target to build 300,000 homes per year, and, as Marquesini says, “house prices just shot through the roof from the ‘70s”.
The problem, as he sees it, is that even though the public sector owns vast swathes of developable land, it often does not have the resources or expertise to deliver housing itself. But councils have a backlog of people on housing waiting lists and they constantly have to spend money on temporary housing. They need someone to deliver housing, and so they turn to the private sector, which comes with its own complications.
Firstly, public landowners are not always aware of all the sites – especially small ones – that they own. A report on brownfield land from the Campaign to Protect Rural England in 2019, for example, suggested that small sites were missing from brownfield registers because of a lack of resources to identify them, even though these could be among the easiest sites to develop given their uncomplicated ownership. Meanwhile, running site investigation and viability processes is time-consuming and expensive, which means councils have an incentive to focus only on their largest, known sites.
Secondly, the 10 largest housebuilders in the country accounted for 47% of all new homes last year after the SME market was decimated in the previous financial crisis. These large housebuilders focus on developing the largest possible sites because they offer the scale needed for viability. “Even if these local authorities or housing associations put [small sites] on the market, it would be really hard to procure [them], because there aren’t as many SMEs as there were back in the day,” Marquesini says. As a result, small plots of land that can collectively deliver hundreds of thousands of homes are neglected.
RenKap’s solution is to let public sector landowners aggregate all their sites on one platform, helping them procure vetted suppliers – SMEs that meet RICS best practice standards – at every stage of the process. By automating as many of these processes as possible (Site Investigation, for example, identifies the surveys needed for specific sites, tenders, procures and then reports the findings digitally, cutting a process that usually takes six weeks to about an hour), the platform aims to make developing small sites financially viable, while stimulating local economies.
Once all of RenKap’s products are up and running, this would allow a landowner who has 10 small sites, for instance, to effectively bundle those together and procure a modular manufacturer who might not be interested in building for a single site but would undertake a larger project. Unlike a traditional housebuilder with limited supply chain capacity, RenKap, Marquesini says, benefits from a constantly growing marketplace of suppliers. “The more projects we win, the more projects we can give to different suppliers on our supply chain and deliver homes at scale,” he says.
The problem with land
House prices are a combination of land costs and build costs. Land costs are driven up through competition between developers and price expectations from landowners, which explains, Marquesini argues, why there isn’t enough affordable housing. A winning developer is constrained with what it can do with a piece of land it bought.
“The whole problem now is that the developer has to try and build something and make the money back that they spent on overbidding for a piece of land, which means that they go to the council and say, ‘Oh, sorry, the viability doesn’t work. We can’t deliver as many affordable homes as we thought because we paid too much for the land,’” he says, again calling the situation “ridiculous”.
The solution? “We’re taking land out of the equation,” Marquesini says. By getting landowners themselves to deliver housing, he believes there is more scope to deliver affordable homes than there is with housebuilders who are constrained by the cost of land, their obligations to shareholders and a need to have a long-term pipeline of land and future developments.
“We are providing a model that allows for 100% affordable homes. However, it’s up to the landowner to decide what the tenure split is,” he says. In practice, some of the resulting developments might be entirely affordable, while others might be a mix of tenures to shore up capital and deliver more affordable homes in the future.
Unlike large plots favoured by major housebuilders, small brownfield sites also have the benefit of being constantly replenished. “We’ve been building for a very long time, so that means every year we’ve got new supply,” Marquesini says.
The government takes notice
When the global pandemic hit and the economy fell into recession, the UK’s innovation agency, Innovate UK, launched a competition to fund projects focused on sustainable economic recovery. RenKap was one of these.
Besides responding to the immediate need for economic recovery, projects that aim to boost public sector housebuilding and make the most of publicly owned land align with the government’s housing goals. In late 2018, then prime minister Theresa May scrapped the cap on councils’ Housing Revenue Account borrowing in a bid to get local authorities building again. At the same time, the government planned to release land for up to 160,000 new homes between 2015 and March 2020 (in reality, it managed to sell enough land for just 48,000 homes by June 2019, according to a progress report last year).
More recently, the UK’s planning reforms – from changes to use classes and permitted development rights to the overhaul of the planning system proposed in the planning white paper – have indicated the government’s ambition to speed up housing delivery, while emphasising the need for technological and environmental innovation to achieve that. These are long-held ambitions that have been made more urgent because of the pandemic.
One other major concern that Covid-19 exacerbated was the effect poor housing conditions have on people’s wellbeing. Research from the University of Birmingham last summer showed that the virus disproportionately affects people from BAME (Black, Asian, minority ethnic) backgrounds, partly because of worse living conditions, including poor housing. In fact, 47.4% of all hospital admissions, the research found, were from areas with high barriers to housing and services. The implication is that stable housing – which local authorities have, for years, been unable to deliver at scale – would have a significant impact on people’s lives.
With a project designed to tackle these issues Marquesini and his team won ‘Phase 1’ funding from Innovate UK, money specifically meant to fund R&D on the project for three months to prove that it can work – which they have now completed. The team is now waiting to find out whether it has also qualified for ‘Phase 2’ funding, which would be a maximum of £3m to build the platform fully and bring it to the market.
Marquesini is confident. He has several major clients for his first product, including Cambridge City Council, Raven Housing Trust and Richmond Housing Partnerships, and is in discussions with Homes England, the Ministry of Housing and the Greater London Authority about how RenKap can work with them. The Site Investigation product is complete and he is expecting to launch Automated Feasibility in the first quarter of the year. If Phase 2 funding follows, he says “that means we can all of a sudden take our team from five to 21 and build all the products simultaneously – and have them all done by the end of 2021.”
That means another busy year for Marquesini. Delivering these next products would be a fitting progression for a man who has now swapped his boat for a Metropolitan Shared Ownership flat in Wembley Park. Having taken a personal step towards (quite literally) a stable place to call home, Marquesini’s next challenge is ensuring others can do the same.
Future is modular
Modular construction underpins RenKap’s vision for public sector housebuilding. As outlined in a recent report by Marquesini’s former department head at Arcadis, Mark Farmer (now chief executive of his own advisory firm, Cast Consultancy) and HTA Design’s Mike De’Ath, building homes offsite can be up to 50% faster than traditional methods while creating 40% fewer carbon emissions, key to helping meet the UK’s net-zero targets. Modular creates less waste and, crucially, 97% of the waste it does create can be recycled within the factory.
There is a “realistic ambition” to deliver 75,000 additional homes per year through modular construction, the report says, which would help close the gap in housing delivery. However, it adds: “We have seen that there is increasing modular residential activity in both the public and private sector, but it is uncoordinated and lacks the shape and size of demand required to lead to a sustainable market.”
For Marquesini, that is an opportunity. “I’m super excited because it feels like the industry is now going in a direction which I was looking at two years ago,” he says. The government and the industry are recognising the benefits of modular construction, and RenKap will connect landowners with modular manufacturers.
But the industry is not quite ready for mass adoption. “It’s a bit like the Wild West with lots of different solutions,” Marquesini says. “Imagine trying to drive cars that are all different widths down a motorway, or trying to park in a carpark, but every car is a different width and different length. That’s what we’ve currently got. What we need is standardisation.”
He expects there to be some reluctance to standardisation. With millions spent by different companies on R&D, manufacturers have developed their own designs and approaches to delivery, which they won’t want to abandon. But, Marquesini adds: “I feel like the industry does realise the benefit of standardisation.” Regulated designs and practices, he says, should unlock a bigger pipeline of opportunities and go some way to delivering that 75,000 homes per year ambition.
“I think there’s a humongous opportunity to be delivering high-quality, affordable homes at scale,” Marquesini says, positioning himself to do just that.