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Housing delivery will be hampered by skills shortage, warns experts

Small house builders predict that skills shortages in the building industry will hamper housing delivery and will eventually overtake access to finance as a bigger barrier to building new homes, according to recent research conducted by industry experts, the Federation of Master Builders.

Key results from the FMB’s House Builders’ Survey, the only annual assessment of small and medium sized (SME) house builders in England, include:

  • A lack of available and viable land tops the list as the most commonly cited barrier (59%) to increasing housing delivery and almost two-thirds of SME house builders (62%) believe that the number of opportunities for small site development are actually decreasing (up from 54% in 2017)
  • The percentage of SME house builders saying that a shortage of skilled workers is a major barrier to their ability to build more new homes rose to 44% (up from 42% in 2017)
  • Nearly half of small house builders (46%) say access to finance is a major barrier to their ability to build more new homes
  • More than half (51%) of SME house builders view the planning system as a major constraint on their ability to grow and ‘inadequate resourcing of planning departments’ was again rated as the most significant cause of delay in the planning application process for the third year in a row
  • When asked to look ahead over the next three years, more firms cited skills shortages as a likely barrier to growth than access to finance

Brian Berry, Chief Executive of the FMB, said “Nearly half of builders believe the skills shortage is a major barrier to their ability to build new homes. The construction sector is heavily reliant on EU workers with just under one in ten workers in the sector born in the EU. Brexit, coupled with the end of free movement, threatens to further intensify the skills shortages we already face. Given that the UK will leave the EU in less than six months, house builders are understandably concerned that skills shortages could worsen and choke housing delivery. In order to combat this skills crisis, the construction industry needs to encourage more entrants into the industry and develop higher quality qualifications. It is critical therefore that the Government doesn’t pull the rug out from under the sector by introducing an inflexible and unresponsive immigration system.”

“Our research also shows that the Government must continue to address the issue of access to finance for SME house builders. Although concerns over access to finance have eased slightly in recent years, in part thanks to the Government’s funding schemes such as the Home Building Fund, there is more that can be done. Our research suggests that it is the low percentages of project cost that builders are able to borrow that remain the greatest financial barrier to increasing their levels of house building. This latest research suggests that if firms were able to borrow 80 per cent, rather than the current 60 to 65 per cent of project cost, SME builders would be able to bring forward on average 40 per cent more new homes. Given the ambitious house building targets the Government is working towards, we cannot afford to ignore such a chance to significantly increase housing delivery.”

“A lack of available and viable small sites tops the list of frustrations for SME house builders for the fourth year in a row. Worse still, nearly two-thirds of these small builders believe that the number of opportunities for small site development are decreasing. However, the recent reforms to the National Planning Policy Framework, which specify that 10 per cent of a local authority’s housing delivery must be on sites no larger than one hectare, will help to address this problem. This will help to speed up the delivery of homes and lead to a more diverse and resilient housing supply.”

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Residential sector looking positive

The residential sector had a particularly positive February with £1.7 billion contracts awarded, an increase of 13.1% on January. Residential unit numbers also increased – up by 5.4% on January at 9,850 units. Following residential in terms of contracts awarded was infrastructure with a 13.9% share and education with a 12.3% share.

Barbour ABI

The latest edition of the Economic & Construction Market Review from industry analysts Barbour ABI highlights levels of construction contract values awarded across Great Britain. This month it shows the total value of construction contracts awarded in February 2019 was £5.4 billion which is a 0.5% decrease on January, but 10.6% higher than February 2018.

The top project awarded during February was the £250 million redevelopment of Chelsea Barracks which sees Multiplex Construction Europe provide a total of 88 residential units in a single 5 storey structure. The largest infrastructure contract was the £110 million redevelopment of the former Royal London Hospital site in Tower Hamlets to provide a new civic centre and council offices. The largest overall education contract was in Edinburgh and was the £90 million redevelopment and extension of the Darwin Building for the University of Edinburgh.

Barbour ABI

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Nearly 3 million children from working families in poverty

Figures released by the Government show a further rise in the number of children from working families living in poverty. This is an increase of 833,000 children since 2010.

National Housing Federation analysis shows there are now 847,000 children from working families living in poverty for the sole reason that their rent or mortgage is too expensive. This is a 30% increase – 193,000 children – since 2010.

National Housing Federation analysis shows that since 2010 housing has consistently been a key driver of poverty among working families. And this year the number of children pushed in to poverty before they’ve even paid for housing has shot up by 287,000 children.

As house prices have increased and rents continue to be extortionate, the National Housing Federation is worried children are being pushed even deeper into poverty by their housing costs.

The number of working families has been rising steadily over the past decade and today 86% of families have at least one adult in work; however alongside this rates of poverty among working families have also risen.

From 2010 to 2017 the Government stopped funding new social housing. Since then there has been a drastic fall in the number of homes being built that are affordable for families. Home ownership is now simply unattainable for low income families. This has led to a huge increase in families renting privately, with many unable to afford the high cost of rent, despite being in work.

Research last year by the National Housing Federation and Crisis showed that England needs to build 90,000 homes for social rent every year to meet the current need. Last year only 6,463 homes were built.

The National Housing Federation is calling on the Government to urgently invest more money in social housing at the next spending review.

Social housing is typically 51% of market rent. Analysis shows that the average household in poverty would be around £3,172 a year better off in social housing when compared to renting privately – which is equivalent to more than a year’s worth of food for an average household.

Kate Henderson Chief executive of the National Housing Federation said “Year after year hundreds of thousands of more hard working families are falling into poverty – forced to choose between feeding and clothing their children or providing a roof over their heads.

“We are now seeing the full effects of low pay, benefit cuts and the housing crisis. The lack of affordable homes is exacerbating in-work poverty. There could not be a clearer signal to the Government that the country desperately needs more social housing – direct investment in the upcoming spending review is the only way to provide truly affordable homes for these families. This is more crucial than ever in the midst of Brexit uncertainty.”

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£3.7 million to fund 5 new garden towns across Britain

Five brand new garden towns have been unveiled unlocking up to 64,000 much-needed homes across England, the Minister of State for Housing has announced.

The locally-led new communities, from Hertfordshire to Gloucestershire, will receive a share of £3.7 million of funding to fast-track specialist survey work and planning works necessary for each new town’s development.

The funds will be spent by councils to help to deliver the homes and infrastructure needed for both neighbouring communities and future residents who will call the new town home. This includes specialist survey work and planning applications.

The 5 successful bids are:

  • Grazeley Garden Settlement, delivering up to 15,000 homes
  • Hemel Garden Communities, delivering up to 11,000 homes
  • Easton Park Garden Community, North Uttlesford Garden Community and West of Braintree Garden Community, an opportunity to deliver up to 18,500 homes
  • Tewkesbury Ashchurch Garden Community, delivering up to 10,195 homes
  • Meecebrook, in the north of Stafford borough, delivering around 10,000 homes

Councils and groups from around the country submitted more than 100 ambitious proposals with the 5 taken forward receiving an initial £750,000 to help develop plans for vibrant, thriving settlements where people can live, work and raise families.

The announcement is the next step in the government’s drive to build the homes this country needs, and follows the news last month of a £9 million investment to speed up the building of existing garden towns and villages.

Minister of State for Housing Kit Malthouse MP said “These new towns will not only provide homes for families, but will be vibrant communities where everyone, including neighbouring communities can benefit from new infrastructure – leaving a legacy for future generations to be proud of.

“I congratulate these councils who have put forward ambitious proposals, which will build many thousands of high-quality homes, and am pleased to support them as they work to make these plans a reality.”

Garden communities can take the form of new villages, towns or cities and have the potential to deliver well designed homes at an increased scale, boosting the local economy and creating new jobs.

The 5 new schemes will join the 23 existing garden communities the government is currently supporting, which are already delivering new homes today, bringing us closer to the government’s aim to deliver 300,000 new homes a year by the mid 2020s.

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Councils warn of ‘severe’ need for affordable homes

A report published today by APSE (Association for Public Service Excellence) and written and researched by the TCPA finds that 98% of UK councils surveyed describe their need for affordable homes as either ‘severe’ or ‘moderate’.

UK councils are becoming increasingly unable to meet demands for affordable housing and 98% now describe their need as either ‘severe’ or ‘moderate’, with only 1% claiming that their need is not substantial.

The survey of 166 local authorities in Britain highlights the pressure on councils to meet the growing demand for affordable housing due to a lack of new homes being built and that many of those that are being built are not affordable to those in need.

The research highlights the cumulative impact of existing housing and planning policies in England—such as the 1 per cent annual rent reductions in the social rented sector and the continued deregulation and reform of the planning system—have reduced the ability of councils to secure genuinely affordable homes available for social rent.

Kate Henderson, Chief Executive of the TCPA, said “Our research reveals that Britain is facing an acute housing crisis with councils across the country increasingly unable to meet the need for affordable housing.

“The government must make tackling the housing crisis a priority. An ambition to increase housing numbers is not enough, we need to ensure that the homes that are built are affordable and well designed.”

By exploring a range of issues faced by councils, this study has identified how local authorities are already taking a more active role in housing delivery through entrepreneurial approaches, such as setting up local housing companies and innovative approaches to partnership working. Over two thirds (69%) of councils surveyed said that they already had or were thinking about setting up a local authority housing company either on their own or in partnership.

Paul O’Brien, Chief Executive of APSE concluded “A new wave of council homes would help support local economic growth, jobs and skills in our economy; housing could be an effective driver for a renewed industrial strategy but to achieve this we need to place local councils at the heart of delivery on housing need. That means the Government must provide the financial freedoms and flexibility for councils to deliver solutions to our chronic housing shortage.”

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Government backs plans to create new homes and jobs over next five years

Plans for public-sector land to be developed, which aim to bring forward 10,000 new homes, 14,000 new jobs and save taxpayers £37million in running costs.

Development plans which could see more than 10,000 new homes built across England and 14,000 new jobs created by 2024/25 are to be brought forward through a £15million government project.

The One Public Estate programme was launched in 2013 to make better use of public-sector sites, free up space for new homes and create jobs.

It encourages the emergency services, local councils and government departments to work more closely together by sharing sites and creating public-sector ‘hubs’ – where services are delivered in one place. So far, the programme has saved taxpayers £24million in running costs, created 5,745 new jobs and released land for the development of 3,336 new homes.

The latest round of the programme will see money and support given to more than 100 local public-sector partnerships across England, to bring forward proposals for a range of new projects on public-sector sites.

These include:

  • £680,000 for projects in Waltham Forest, including proposals to bring forward the redevelopment of the 100-year-old Whipps Cross Hospital and sites in public and private ownership for housing development in the Forest Road Corridor
  • £505,000 for projects in Devon and Torbay, including the regeneration of land around St David’s station in Exeter
  • £405,000 for projects in Northamptonshire, including plans to release land around Kettering railway station for the development of new houses and station improvements
  • £410,000 for projects in Worcestershire, including delivering new housing and regeneration around Redditch station, as part of the Rail Quarter development

The Minister for Implementation, Oliver Dowden, said “Getting the best use out of publicly-owned land can help to regenerate our towns and cities and give people improved access to the services they need.

“This programme shows that when government works smarter, with public authorities coming together, taxpayers get better value for money, new jobs are created and space is freed-up for vitally needed new homes.”

The One Public Estate programme is a joint initiative between the Cabinet Office, the Ministry of Housing, Communities & Local Government and the Local Government Association. It now covers 95% of all local authority areas in England.

Funding for the latest round of the programme will help with the creation of feasibility studies and masterplans for the potential development sites.

It is hoped the work will bring forward savings of £37million in public-sector running costs and allow the redevelopment of a large number of brownfield sites.

The Minister of State for Housing, Kit Malthouse, added “This government is committed to helping more people get on the housing ladder and restoring the dream of home ownership for a new generation. The One Public Estates programme will not only help more people find a home of their own, but also help create jobs and save taxpayers’ money.

“The latest projects to share £15million of funding will make a real difference to local communities and provide better services to residents.”

Lord Porter, Chairman of the Local Government Association, concluded “I’m pleased to see One Public Estate continue to grow from strength to strength. This latest round will see the programme now deliver more than 650 projects in total, all of which support councils to work with the wider public sector to deliver the best public services and place for their local communities.

“The delivery of new homes remains a national priority and with 95% of councils now part of the programme. It’s clear to see that local government remains committed to building the right homes for the places they serve.”

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English councils to receive over £50 million for Brexit preparations

Local authorities across England will receive a share of £56.5 million to help support their preparations for Brexit.

The Treasury announced in December that MHCLG would receive £35 million to prepare for Brexit. MHCLG has now added an extra £21.5 million funding using finance from its 2018 to 2019 budget.

Councils will receive £20 million this financial year (2018 to 2019) and £20 million in 2019 to 2020 to spend on planning and strengthening their resources.

A further £10 million will be available in the next financial year (2019 to 2020). This funding is intended to help local authorities with specific costs which may arise following Brexit.

£1.5 million will be allocated in 2018 to 2019 only to local authorities facing immediate impacts from local ports, with the decision on the allocation and distribution of that funding to be announced shortly.

A further £5 million will be split by teams in the Ministry of Housing, Communities and Local Government, local authorities, and Local Resilience Forums for specific purposes such as strengthening preparations and supporting communities.

The funding will help councils to adapt to the changes caused by Brexit, ensuring their local authority is prepared ahead of 29 March, whilst also protecting vital local services.

Councils will decide how to allocate their funding. It is expected that money will be spent on resources like recruiting extra staff to ensure councils have the capacity to provide timely and accurate information to residents who have questions on how Brexit will affect them.

Communities Secretary Rt Hon James Brokenshire MP, said “Local authorities have a critical role to play in making a success of Brexit in their areas.

“I’m determined to ensure councils have the resources they need, which is why I’m releasing £56.5 million of extra finance to help them to deliver essential services and keep residents well-informed.

“I will continue to work closely with local leaders to ensure they are prepared to respond to any Brexit scenario.

“This funding will not be the only resource councils receive from central government to fund Brexit costs. The government has been clear that departments will assess and, if appropriate, fund any potential new requirements of councils as part of EU Exit work they are undertaking.”

The Secretary of State will also continue to engage with the sector through the EU Exit Local Government Delivery Board and regular communications with stakeholders across the sector.

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Bringing beauty into the built environment

A commission to champion beautiful buildings as an integral part of the drive to build the homes communities need has been recently announced by the Communities Secretary Rt Hon James Brokenshire MP.

The ‘Building Better, Building Beautiful’ Commission will develop a vision and practical measures to help ensure new developments meet the needs and expectations of communities, making them more likely to be welcomed rather than resisted.

This move follows the government recently rewriting the planning rulebook to strengthen expectations for design quality and community engagement when planning for development. The new rules also ensure more consideration can be given to the character of the local area.

This commission will take that work further by expanding on the ways in which the planning system can encourage and incentivise a greater emphasis on design, style and community consent. It will raise the level of debate regarding the importance of beauty in the built environment.

The commission has 3 aims:

  • To promote better design and style of homes, villages, towns and high streets, to reflect what communities want, building on the knowledge and tradition of what they know works for their area.
  • To explore how new settlements can be developed with greater community consent.
  • To make the planning system work in support of better design and style, not against it.

Communities Secretary Rt Hon James Brokenshire MP said “Most people agree we need to build more for future generations, but too many still feel that new homes in their local area just aren’t up to scratch.

“Part of making the housing market work for everyone is helping to ensure that what we build, is built to last. That it respects the integrity of our existing towns, villages and cities.

“This will become increasingly important as we look to create a number of new settlements across the country and invest in the infrastructure and technology they will need to be thriving and successful places.

“This commission will kick start a debate about the importance of design and style, helping develop practical ways of ensuring new developments gain the consent of communities, helping grow a sense of place, not undermine it. This will help deliver desperately needed homes – ultimately building better and beautiful will help us build more.”

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UK housing market faces challenging 2019, warn experts

The UK housing market is unlikely to see much change in 2019 with a continuation of weakening sales activity, according to the RICS UK Residential Housing Forecast 2019.

The UK housing market has lacked impetus in 2018, having continued to struggle with a lack of homes on estate agents books; affordability issues; uncertainty caused by Brexit; and prospective interest rate rises.

Looking ahead, it is unlikely that sales will grow in 2019. In the past two years, sales activity has declined, and annual completed transactions remain significantly below the 1.7million high reached in 2006. Given the obstacles in the current market it is anticipated that activity will weaken further.

As sales activity continues to falter, house price growth will continue to fade in the first half of the year and is expected to come to a standstill by mid-2019. As such, the RICS Housing Forecast 2019 suggests prices will neither grow nor fall in the near future (0%).

The stagnation of house prices is underpinned by the lack of new properties being listed for sale. In the second-hand market, not enough properties have been listed to replenish those sold. This has been evident in the RICS data throughout 2018, as average stock levels remain near all-time record lows. The number of new properties being listed for sale has fallen consistently, and in November, almost half of survey participants reported the number of market appraisals undertaken over the month was down on the year before. All these indicators suggest it is unlikely that the coming months will see a marked increase in supply across the second-hand market.

Furthermore, despite new policy announcements from Government, overall growth in new builds has slowed, falling short of targets and therefore failing to help replenish estate agents’ stock levels.

A consequence of these lower levels of stock is the impact this will have on those contemplating moving home. Respondents to the UK Residential Market Survey have pointed to a sustained decline in the number of new enquiries they are receiving from would-be buyers throughout 2018, resulting in a fall in the number of agreed sales being made. In the near term, it is doubtful that activity levels will improve.

Uncertainty created by the Brexit process is causing buyers and sellers to sit tight in increasing numbers, according to the November 2018 RICS UK Residential Market Survey.

In the lettings market, the sustained demand vs supply challenge prevails, which is likely to squeeze rents higher, albeit modestly, over the coming four quarters.

Tarrant Parsons, RICS Economist comments “Demand has tailed off over recent months, with Brexit uncertainty causing greater hesitancy as the withdrawal deadline draws closer. That said, the current political environment is far from the only obstacle hindering activity with a shortage of stock continuing to present buyers with limited choice, while stretched affordability is pricing many people out.

“For the year ahead, this mixture of headwinds is unlikely to dissipate, meaning sales volumes may edge a little lower. On the back of this, house price growth at a UK level seems set to lose momentum further, although the lack of supply and a still solid labour market backdrop will likely prevent negative trends.

“It’s not all bad news for the outlook however, as sentiment could be lifted if a deal were to be reached on the withdrawal agreement before too long. Furthermore, mortgage rates are set to remain favourable, with any changes in monetary policy expected to be minimal over the next twelve months.”

Hew Edgar, RICS Head of Policy, adds “We would hope that uncertainty around Brexit will be resolved toward the beginning of 2019, allowing for fluidity to start to return to the housing market. However, there are a number of domestic hurdles to overcome, such as a lack of supply, labour shortages, and the infrastructure deficit, amid increasing material costs.

“Throughout 2018 as the supply pipeline remained weak, a number of policy proposals were made to address the market issues, most notably land value capture across the UK, and vacant land tax in Wales; but discussions around innovative policy measures need to continue through into implementation. It will be interesting to see if the divergence of policy in the constituent parts of the UK will bear results and we will continue to monitor the effects of housing policy through our market surveys.

“Looking at transaction levels, residential property taxation is in urgent need of review; and this goes for both SDLT and the current council tax system. Both affect buying behaviours and therefore market activity, with council tax being particularly outdated.

“If the Government wish to alleviate market concerns, that will persist Brexit or otherwise, then all possibly approaches and outcomes should be considered, including looking at tackling the rising number of long term empty homes – which number 250,000 across the UK; a figure that borders on the Government’s new homes target.”

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Volume of new homes being built continues to rise

Homes England have recently published their latest official housing statistics, which show the number of homes being built in England continued to rise in the first half of this financial year.

Between 1 April and 30 September 2018, programmes managed by Homes England started building 15,766 homes on site and completed a total of 15,704 homes. These figures represent 15% and 31% increases on the first half of 2017-18.

Affordable homes represented 63% of the housing starts (9,909 homes) – a 42% increase on the same period last year – and 71% of the housing completions (11,091 homes), a 19% increase on the number of affordable homes completed in the first half of last year.

A total of 5,857 homes for market sale were started in the six months to 30 September 2018 – a 13% cent decrease on the same time last year – however, the number of market sale homes completed in this period was up 69% to 4,613, compared to 2,737 last year.

Of the affordable homes started, 5,714 were for Affordable Rent – a 26% increase on the 4,526 started in the same period last year. A further 3,702 were for Intermediate Affordable Housing schemes (including Shared Ownership and Rent to Buy), representing a 71% increase on the same period last year. The remaining 493 affordable homes started were for Social Rent, an increase of 68% on the 294 started in the first six months of last year.

Of the affordable homes completed, 7,943 were for Affordable Rent – a 10% increase on the 7,219 completed in the same period last year. A further 2,841 were for Intermediate Affordable Housing schemes – an increase of 50% on the 1,900 completed in the same period last year. The remaining 307 affordable homes completed were for Social Rent, an increase of 76% on the 174 completed in the first six months of last year.

Nick Walkley, Chief Executive of Homes England, said “These latest figures show the overall number of homes being built continues to rise, reflecting the hard work being carried out by the housing industry to build better homes faster.

“However, while they are encouraging to see, we cannot be complacent. We know there is more work to be done to meet the Government’s ambition to deliver 300,000 new homes a year, so we will continue to intervene in the housing market and use our land, powers and influence to make homes happen.”

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