Residential Construction and Housing Supply

Lord Bethell Excerpts

Wednesday 24th April 2019 Lords Chamber

[Lord Bethell (Con)]

My Lords, I thank the Minister for bringing this fascinating debate to the House and for speaking about the opportunity of using technology to bring huge benefits to housing construction. I pay tribute to my noble friend Lord Borwick and the noble Baroness, Lady Thomas, for their contributions on disability. I had not thought about speaking about it, and I rather wish I had because their testimony was very moving and apposite.

As a number of noble Lords have said, a huge amount has already been done on this area including the Farmer review, the 2017 housing White Paper, Oliver Letwin’s report and our report Off-site Manufacture for Construction: Building for Change, so I do not need to go through all that. As a relative newcomer, I felt completely persuaded by the huge volume of material showing that modular off-site manufacturing brings massive benefits to the industry in terms of cost, productivity, reliability, even creativity and, most of all, quality, and that is what I want to talk about. There are really powerful reasons to support this development.

However, one thing that struck me when reading around the subject is that when one looks at the long list of witnesses for each of the reports and the evidence submitted, one voice was not heard very often, that of the home buyer. That should ring a little bell, and I will come back to it in a second.

I pay tribute to the Government for their incredibly energetic approach to trying to sponsor this idea. It is terrific to see a Government at full pelt getting behind a big idea. A number of interventions to try to push the industry to adopt this new technology have been listed already, so I do not need to go through them all. I applaud this, but I sometimes worry about attempts by government to push industries to do things. There are a couple of things that I have personal experience of that I worry about. The Government’s commitment to a presumption in favour of off-site modular demand sets a great example, and it is good to see the Government put their money where their mouth is. It is too early to measure success, but I have been involved in an effort to try to get the Government to lease land to renewable energy projects in the same spirit of leadership, and it was not a hugely successful experiment. The projects really struggled to get decision-makers in government organisations with completely different priorities to adopt a commitment to renewable energy investment, and I worry that we might have a similar problem in this area. I applaud the £13 million for research and development, but I worry whether they will come up with the triangular bathrooms mentioned by the noble Lord, Lord Palmer. I thought they were fantastic.

However my main point is about the home owner, and I wonder whether instead of all this pushing there could be some way of pulling change in the way the industry approaches construction. The HomeOwners Alliance is a representative body of people who own homes. Its survey, which is very powerful, talks in detail about the dissatisfaction of purchasers of new homes with the quality of the products they have bought. Sixty-nine per cent of people have serious concerns about the quality. My noble friends Lord Haselhurst and Lord Patten told pretty typical stories of concerns about snagging. The recommendation of the Home Owners Alliance is a “snagging retention” to give time for snags and defects to be righted and, most importantly, to incentivise homebuilders to focus on getting the quality right in the first place. That is the important connection that I want to make. If modular manufacture really delivers the quality that it promises, maybe we can build into the home-purchasing process a really powerful incentive that puts the consumer at the centre of the decision-making and encourages manufacturers to build right the first time, rather than having to come back to deal with snags.

The HomeOwners Alliance recommends a retention of 2.5% of the value of the home. Personally I would go further. From my business career, I know that it is not unusual to have retentions of 5% or 10%. Of course, the homebuilders will not like that idea. They might find that it affects their cash flow and administratively they might struggle with it, although retentions are quite common in other industries. Surprisingly, Persimmon, the housebuilder, has already embraced the idea and has offered to put in place a 1.5% retention on new-build homes, although we are waiting to find out a few more details about its suggested plan.

Therefore, this is my recommendation. Instead of all the efforts listed in this debate to try to push the industry in a certain direction with supply-side regulations, can the Minister please consider demand-side reforms that will cost the Government nothing and make the best use of market-based pressures to enact reform? I suggest that the Government introduce a mandatory, consumer-friendly snagging retention regulation. This would act as a great big industry-sized nudge for homebuilders to embrace modern and more reliable methods of production that deliver the sorts of homes that do not need endless tweaks and costly, irritating snagging to get right. The beneficiary will be the modular building industry, which, as I think everyone here agrees, is ideally placed to meet these market conditions. Lastly, I urge the Minister to launch an immediate consultation into such a measure, to take a robust attitude to complaints from the building industry and to come down on the side of the poor home-owning consumer in this important matter.