There is no silver bullet to fix the broken housing market

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The Housing White Paper failed to recognise two key factors that could fix the broken housing market: buyers and the supply-side. Buildoffsite explains

Depending on your viewpoint the publication of the government’s long-awaited housing White Paper in February, it was either a damp squib or a genuine attempt by a cash-strapped government to try and do something about housing supply in England. Let’s bear in mind that what happens in the rest of the UK has nothing to do with Whitehall politicians.

It is certainly the case that the White Paper finally saw the light of day after perhaps the longest drum roll in history. Rumour has it that the Prime Minister was closely involved in what was set out in the 104 widely leaked pages. This is probably true. Mrs May will understand that housing or more particularly access to decent housing is a bit of a touchstone issue regarding how her tenure is judged by history and by some of the electorate.

It seems incredibly unlikely that elections will be won or lost on the basis of bumping up the number of homes being built. Certainly, there are social issues which matter significantly, and an inability to deliver the homes the country needs is hardly going to be a cause for celebration nor for that matter will it do anything to pump the economy, boost communities or create jobs.

Passing blame

The title of the housing White Paper seemed designed to have a go at just about every interest group other than central government. Inevitably the big housebuilders got the usual stick for not building enough homes and for sitting on land banks. An easy target but let’s get real — no business is going to manufacture stuff unless it is reasonably certain that it has a market. House-builders are no different – they build to meet customer demand and manage their supply chains brilliantly to deliver their products at minimum cost consistent with meeting market standards.

Local authorities also got stick for being slow to deliver planning. Aside from having to deal with local issues and concerns, the fact that planning authorities lose money in the process of granting permissions for developers to make really good money out of housing is something that government has been content to live with until now. We’ll see what changes.

Although the White Paper did not specifically address the point, it does look as if our traditional obsession with home ownership may finally have peaked and is now on the slide to reflect a different normality regarding tenure types. Perhaps the cost burden of home ownership is now no longer the talisman that it once was for those setting out on their own. For those with empty nests, the hassle and cost of maintaining homes that are too large may also drive new attitudes and a search for new solutions. No matter; the point is that no one wants to live in poor quality, or poorly built homes and the demand for decent homes of different types and choice of location is immense and an incredible potential opportunity to boost construction activity.

Five key factors influence housing delivery

One of the important factors not adequately covered in the White Paper but hardly ever recognised by politicians is that delivering the homes the nation needs is based on five, not three factors. In just about every political speech there will be mention of the need for land, the need for a timely planning process and the need for capital. What is rarely mentioned is the need for a supply side that has the people and material resources to deliver homes.  Ditto there has to be an assured or almost assured market. The government can get involved with the first three factors, but its involvement in the last two has been substantially limited. In modern times government has not been a client of the house-building supply side. It could if it wanted to do much more than empowering local authorities and providing some investment for housing associations. It could – but as yet there is no sign that it will support investment in supply-side capacity. A modern delivery industry for housing requires a lot more from government than simply talking in terms of addressing skills shortages. The harsh reality is that unless the method of delivering homes is revisited any additional investment activity on or behalf of local authorities, by housing associations or by private developers, will inevitably boost the numbers dipping in substantially the same pond for professional, technical and craft labour and materials as all other market sectors. Spot the price inflation looming just up ahead.

Challenging traditional approaches

The only viable way to get substantially increased capacity out of a supply chain that is under real strain is to challenge traditional methods of construction and also challenge the use of traditional materials. In short, adopting an industrial approach to construction – including housebuilding – that is based on the assembly of homes from factory made high-quality components and assemblies. Traditional construction methods will struggle to deliver if homes are to be constructed at scale and in short order. The struggle may well be a euphemism for lots of things going wrong. The challenge even in delivering to current – not particularly challenging standards of performance – is making the traditional industry creak. It is no accident that volume housebuilders are all starting to look hard at what offsite solutions might bring to their businesses under current levels of demand. How will the industry react to a doubling of demand?

The conundrum that we face in the UK is that the offsite supply side is still small scale but growing rapidly as clients across all markets appreciate the benefits the use of offsite can deliver. However, the offsite suppliers have no possible incentive to take risks in bringing new capacity on stream unless there is an assured market. Generally, clients in the construction industry are not receptive to requests for guarantees, and currently, the government has nothing to say regarding incentivising the supply side. Yes, the White Paper referred to offers of loans to small housebuilders to build, but there was no mention of tangible support for the offsite supply side.

So what, if anything, will give? Unless government takes this supply side issue seriously, housing need will either be met by imported product and exported jobs, or just ahead of the next election we will have another White Paper entitled “Still needing to fix our broken housing market.”

The Buildoffsite organisation is working with clients and suppliers to increase the use of offsite construction solutions in all market sectors including housing.

 

Buildoffsite

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