My Lords, I thank the Minister for his very positive opening remarks and I hope, through some questions, to encourage him to do even more. I declare an interest as chair of the National Housing Federation, the trade body for housing associations.
This is the second time the House has debated this issue in recent months. Might that mean that it is high on the Government’s agenda? It certainly needs to be—the challenge is formidable. The National Housing Federation estimates a shortage of 4 million homes in England, with 340,000 new ones needed each year. Of those, 90,000 need to be for social rent.
Housing associations have a vital role to play in boosting supply. Research by Savills found that the Government will be unable to meet their own target of 300,000 new homes a year without investing in affordable housing. Significantly, the same report found that this investment supplements private development rather than displacing it. As the Letwin review concluded, greater diversity of tenure on large sites is crucial to building homes more quickly.
It should come as no surprise that housing associations are exploring the potential benefits of modern methods of construction, which have the potential to deliver consistently higher-quality products more quickly than on-site construction. The Minister mentioned Swan Housing Association, which set up an off-site factory. It resulted in a 50% time saving against traditional construction. There are other potential benefits: Swan’s off-site factory improved the quality of its homes while reducing waste by 90% and saving 10% in cost.
Other housing associations are also delivering the homes that people need by embracing modern methods of construction. Accord, a housing association operating through the West Midlands, set up its own off-site manufacturing arm. It delivers homes for Accord, for other housing associations and for local authorities that want to build. This business recently moved into a new factory with the capacity to produce up to 1,000 homes a year.
While there is an appetite in the sector to make off-site manufacturing a success, there are barriers preventing greater take-up and government has an important role to play in overcoming them. One barrier is the insecurity inherent in any new and developing industry. High start-up costs and small initial pipelines make off-site providers financially vulnerable. Off-site products are not often interchangeable, so it is difficult for buyers to switch between manufacturers should difficulties arise. This insecurity poses a risk to buyers but is of particular concern to housing associations, given their focus on the long-term sustainability of their properties. They want the certainty that they can access the parts needed to maintain their properties for tenants tomorrow, next year and for decades ahead. The construction sector is already taking steps to develop a common set of design features. This is not about creating rows of identical houses, but rather about creating a common set of blueprints for manufacturers. Will the Minister incentivise and support these efforts at standardisation across the sector, to increase the robustness of the market in the modern methods of construction?
A second barrier is the inconsistency of demand for off-site manufacturers, which undermines the prospect of economies of scale. Off-site manufacturing works best when there is already a drumbeat of demand rather than a series of peaks and troughs. Without a regular, reliable level of demand, off-site manufacturing just is not viable. As the Secretary of State acknowledges, housing associations are part of the solution here. Their ability to take a longer-term view of housing, outside commercial pressures, gives them an important role in providing certainty to off-site manufacturers. Housing associations from across England are coming together to aggregate demand for off-site housing. They have the foresight to see that by co-operating they can give off-site manufacturers the certainty they need to operate. In turn, they and their tenants will benefit from the advantages of off-site production. I would like to see much more of this, not least by encouraging partnership working between housing associations and local authorities. Will the Minister commit to supporting housing associations and local authorities to collaborate and aggregate their demand for homes, giving manufacturers the security of demand they need to develop?
Finally, I must briefly mention planning. Our current planning system was designed with traditional construction in mind, whereby on-site providers are contracted after planning permission is agreed. Off-site construction relies on automation, limiting its ability to respond to individual applications. This makes it particularly challenging for housing associations to use modem methods of construction, as they often buy land after planning permission has been granted. Sometimes, planners and planning committees incorrectly associate modern methods of construction with rows of identikit houses and with poor or uncertain quality.
Despite the barriers, however, there is a real appetite in the housing sector to realise the benefits of MMC. Housing associations across the country are already doing just that. But there is more to be done, and more that can be done with government support. Traditional construction will struggle to deliver the Government’s homebuilding target, but a robust MMC sector can help to deliver the homes that families across the country need. The housing shortage is too acute for us to ignore the opportunity that modern methods of construction offer to deliver more homes, of better quality, more quickly. Will the Minister therefore commit to supporting the sector in overcoming the barriers that hold back modern methods of construction and explain the actions that the Government intend to take to support it?