Residential Construction and Housing Supply - Motion to Take Note

Part of the debate – in the House of Lords at 7:36 pm on 24th April 2019.

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Photo of Lord Bourne of Aberystwyth Lord Bourne of Aberystwyth The Parliamentary Under-Secretary of State for Wales, Parliamentary Under-Secretary (Housing, Communities and Local Government) 7:36 pm, 24th April 2019

My Lords, I apologise for the delay to this debate—by either three weeks or three hours depending on which calendar you are working from—but it is a great pleasure to introduce it. We will be looking at the residential construction sector and focusing in particular on modern methods of construction and the steps being taken to boost housing supply sustainably. I am grateful to noble Lords who have given up their time to be part of the debate and to share their experience and knowledge of this important issue.

We all recognise that the country does not have enough homes. For decades, the pace of housebuilding has been much too slow, which has meant that the number of new homes has not kept pace with our growing population. We are now building the homes that our country needs so that everyone can afford a place to call their own, helping people on to the housing ladder and restoring the dream of home ownership—but of course looking at diversity of supply at the same time.

Last year we delivered 222,000 new homes—the highest number in a decade and up 2% on the previous year. To address the housing shortage, the Government have reaffirmed their commitment to deliver 300,000 homes a year by the middle of the next decade. However, the way in which the housebuilding market operates constrains the supply of new homes, because there is insufficient competition and innovation. That is why, back in February 2017, the Government’s housing White Paper recognised the potential to diversify the market and set out clear measures for how we would do this, including by backing small and medium-sized builders to grow; supporting custom build homes to access land and finance; encouraging more institutional investors into housing, including the build-to-rent sector; and supporting housing associations and local authorities to build more homes. We have been actively implementing the commitments that we made.

We also recognise that building more homes requires a modern construction industry with greater capacity to deliver. Building more homes using modern methods of construction—MMC—including off-site and smart techniques, is a key part of this.

A number of reviews have highlighted the challenges faced by the industry. For instance, in 2016 the Government commissioned Mark Farmer to carry out a review of the construction labour market. His report, Modernise or Die, set out the skills challenge facing the construction industry and the need to improve the construction labour market by increasing productivity and innovation, including the use of modern methods of construction in housebuilding as a test case for construction more widely. I had a very useful engagement with Mark Farmer at our recent design conference in Birmingham. We agreed on the need for action to drive the Government’s agenda to increase uptake of MMC.

In addition, the report of the House of Lords Science and Technology Committee’s inquiry into off-site manufacture in 2018 across the construction sector as a whole, Off-site Manufacture for Construction, is extremely helpful and provides food for thought.

We have looked to other countries too, particularly across Europe, where MMC is embedded within the delivery model and is therefore widely used and accepted, to help inform our initiatives. Countries such as Sweden have shown how it is possible to innovate the market with MMC techniques, building more homes than traditional models allow, and delivering good-quality, efficient homes that are embraced by the public. I know that Britain can become a world leader in MMC and I want to work with the sector to make that ambition a reality. I am committed to delivering the Government’s ambitions to build more of the right homes in the right places, and keen to play a major part in delivering the ambitious package in the housing White Paper to fix the housing market.

As many noble Lords will know, I am very keen on better design and quality. Lack of diversity and competition has not been good for innovation and productivity. This is why the Government have made design quality of homes a top priority and have strengthened the importance of design quality in our revised national planning policy framework, which was announced by the Prime Minister at a national conference of planners a year ago, in March 2018. I am pleased that convening the Building Better, Building Beautiful Commission is a step in the right direction towards delivering on this priority. We have also recently announced the appointment of a head of architecture in the department. He is working to create a cross-government network to promote good design, developing a design manual to underpin design quality in national policy and ensuring that design quality criteria are embedded in government programmes.

For too long we have been overly reliant on a small group of large developers delivering in mostly traditional ways. To increase rapidly the pace of building and reach our housing delivery ambitions, we need to increase the range of producers in the market and the types of homes that they are delivering. We need a market that is more focused on the consumer, delivering to those parts of the market that are currently not well served—in short, a diversified market that can lead to more homes being delivered faster, with significant financial benefits, while delivering high-quality new-build homes. I know that modern methods of construction have a key role in powering the future of housebuilding, building high-quality homes with a smaller carbon footprint at a much faster pace, while embracing the latest technology and promoting British jobs.

New technology and innovation has improved productivity, quality and choice across a range of sectors in the United Kingdom, and we want to see the same happen in housing. We have been actively implementing the commitments we made in the housing White Paper to diversify the housing market. We are backing our housebuilders to deliver, with £2.5 billion of our £4.5 billion Home Building Fund, which particularly champions SMEs and more diverse builders to harness MMC and other cutting-edge building technologies. For example, we recently announced £9 million of funding from the Home Building Fund for a deal with Apex Airspace to deliver homes on London rooftops. These rooftop properties will be built on five sites across the capital: Tooting, Wanstead, Walthamstow, Putney and Wallington. They will be largely constructed off site before being winched on top of buildings, minimising disruption to residents. It is expected that the first three sites, comprising 32 homes, will be ready by this summer.

We have also delivered on our commitment to set up a joint MMC working group with lenders, valuers and the industry to overcome existing uncertainties about the performance and durability of MMC homes and their acceptability for warranty and insurance, and to identify measures that could give greater confidence in the quality of these homes, to allow lenders to overcome their existing caution and increase lending to match that of traditional builds. At the design conference I referenced in Birmingham, I announced one of the outcomes of our MMC working group’s work: an agreed definition and categorisation for all MMC. This definition framework has now been published on GOV.UK and will help guarantee consistency in MMC definition and categorisation across the sector. This is perhaps not glittering and exciting at first sight, but it is extremely important in ensuring that we have standardisation and the ability to move forward in helping people borrow money.

The group is also finalising details of its most important output: a unified quality assurance scheme for assessing all new technologies to guarantee their acceptability for mortgages and warranties, which will be launched this summer. All these are key parts of making sure that we use more off-site construction to meet our challenges. The Government are also keen to see local authorities go further, and the £450 million local authority accelerated construction programme will take direct action to disrupt the market in a new and innovative way. Furthermore, our affordable homes programme encourages bidders to use innovative ways of building. Homes England is working with 23 strategic partnerships—this was announced at the end of last year—and so far all 23 have indicated that they will incorporate MMC in meeting the challenge of providing more homes.

There is a real opportunity to seize the benefits of new technology here. It is encouraging to see new entrants into the field, such as Ilke Homes from Yorkshire, which plans to deliver 2,000 MMC homes per year in the next two years, and TopHat of Derbyshire, with capacity to deliver 2,000 homes per year across the country, as well as interest from housing associations such as Swan Housing, which opened its factory in Basildon in 2017. In addition, local authorities around England also recognise the benefits of MMC and are interested in supporting the growth of this innovative approach to housebuilding.

It is important that large housebuilders, too, see a role in this. The Government want to create a shared vision for a diversified housing market that embraces innovation, and we look to large suppliers too. It is encouraging to hear about some large developers, such as Barratt, Berkeley, L&Q and Crest Nicholson, which are already embracing MMC and actively looking into future opportunities. The Government expect other large developers to embrace this agenda as well. Diversifying the market, both by increasing the mix of producers and tenures and ensuring that it delivers a greater variety of products, will result in additional homes. These are challenges that we must respond to.

We announced £34 million at Budget 2017 for construction skills: this will also help. I know that there are still many out there who have yet to see how using MMC can benefit them and their customers. We want to support the industry to showcase what it can achieve. We want to see solutions that increase productivity and quality. We also want to challenge the public perception of MMC homes and give customers information about new technology, how it works and what the benefits are. I beg to move.