Residential Construction and Housing Supply

Lord Bourne of Aberystwyth Excerpts

Wednesday 24th April 2019 Lords Chamber

Moved by

[Lord Bourne of Aberystwyth]

That this House takes note of the residential construction sector, modern methods of construction, and the steps being taken to boost the housing supply in a sustainable way.

[The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government and Wales Office (Lord Bourne of Aberystwyth) (Con)]

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.

--- Later in debate ---

[Lord Bourne of Aberystwyth]

My Lords, I thank noble Lords across the Chamber for some notable contributions to an extremely important debate on many important areas of policy. It is certainly a subject to which I am very much committed. I will say at the outset that I will ensure that any points I miss in the relatively limited time I have left are picked up afterwards. I will write to noble Lords who have participated in the debate and leave a copy in the Library. I will also ensure that Mark Farmer receives a copy of the debate and I shall be keen to follow up points with him afterwards, which is important. I will also ensure that other government departments receive a copy of the debate, which has been very far-reaching.

I am certainly an idealist, but an idealist without illusions. That is the way I hope to respond to the debate. I am used to being called to account for issues relating to communities, local government and housing—that is fair enough—but one or two points were about the global challenge of climate change. I am always grateful to noble Lords who exaggerate my powers, but some of those matters are perhaps a bit more cosmic. I very much identify with the Greta Thunberg contribution; it is important that we listen to young people with that idealism and act accordingly. I was very pleased that Michael Gove responded very positively to what she said. If I may, I shall pick up some of those points later.

I shall deal with the contributions in the order in which they were made by noble Lords. Again, forgive me if I miss points; they will be picked up later by the team. The noble Baroness, Lady Thornhill, made a very positive contribution. I thank her very much for her support for many of the things that we are doing. She talked about tackling the big boys—and presumably, in a spirit of non-sexism, the big girls—and ensuring that the larger developers deliver. I think I have indicated before that we are looking closely at the big developers to ensure that they are giving value for public money and treating consumers properly. We still have concerns and we are watching them like hawks.

The noble Baroness mentioned the Building Research Establishment in Watford. I should also like to mention the very good and helpful work it does, and has done since 2005, on modern methods of construction. She mentioned the current work on modern methods of construction to help with climate change. For example, Specific, which is based in Swansea and is in receipt of government funding, is very much doing that. She also mentioned dementia-friendly housing and so on. The possibilities are considerable and it is important that we take them all on board. She also mentioned the skills shortage, which I did reference in my initial speech. Mark Farmer has reported on this, and we are acting on the earlier review. I will, if I may, expand on that in a letter.

I turn to my noble friend Lord Patten, who first of all challenged us on what examples of modern methods of construction homes can be seen. The noble Lord, Lord Stunell, also raised that issue. There are some modern methods of construction homes that can be seen, for example in Gateshead—the noble Lord, Lord Beecham, will probably be aware of those at the Gateshead Innovation Village—and in North Shields at Smith’s Dock. There are also some in Yorkshire at Derwenthorpe and they are, I think, being developed in Basildon, where Swan Housing has delivered some homes with housing association partners. Those are some specific examples, and I will give further details in the letter.

My noble friend Lord Patten also asked about the definition of “sustainability” in housing. It is in the National Planning Policy Framework, which gives quite a long definition and talks about the three overarching objectives—economic, social and environmental. Again, I will give further details of that in the letter.

I thank the noble Baroness, Lady Warwick, very much indeed for the positive points she made; I know that she comes with considerable experience as chair of the National Housing Federation. She talked quite rightly about the barriers to modern methods of construction, which we are addressing through the working group led by Mark Farmer, and, very importantly, the issues of the risk to buyers and the availability of money to borrow and so on. She was absolutely right on that. She also talked about the standardisation of some features—again, the working group is looking at that, and I accept its importance. She talked about the “drumbeat of demand”. That is a very good phrase, if I may say so, and it is important—without the demand, it is not much good putting resources here. We hope to tackle this through the work the group is doing.

My noble friend Lord Borwick talked about the challenge of homes having appropriate access and the London factor—not that there is a different standard, but in terms of the percentage of homes available. I understand the concern, and it will be looked at when we review Part M, which is due to start shortly. Part M is part of the Hackitt review of building regulations, and of the commitment post-Grenfell to look at accessibility. It is important to note, if I may say so to my noble friend Lord Shinkwin, that it is not just about planning; it is about building regulations, which are key to getting this right. The Building Regulations Advisory Committee is due to report shortly to the department on Part M, and I hope that we can respond positively. I thank the noble Baroness, Lady Thomas, very much for what she said about people at times being prisoners in their own homes; that is a very graphic description of what happens. She is right that some planning authorities take this issue more seriously than others; that is why the work on the building regulations is so important. I hope that helps her on the timescale, but I will try to expand on that in a letter as well.

I thank the noble Lord, Lord Best, who is really the eminence grise in this area, if I may say so. To have praise from him for what we are doing means a lot. I know the work that he has been doing, and I thank him for it. He talked about the triumph of good sense. The noble Baroness, Lady Thornhill, also talked about the importance of a growing consensus on many of these issues. I am very keen to establish that; it is the best way of moving things forward. There is a consensus in the House on many of these issues—not necessarily on everything, but certainly on the macro position. There may be differences on some of the micro, but if we can agree on the macro that will be a good start; maybe we can agree on some of the micro as well. I thank the noble Lord very much for what he said and the work he is doing. He will know that we are doing work on the Housing Ombudsman service, leaseholder reform and so on. There is a lot happening in the department. I am not sure I was terribly flattered by that being characterised as U-turns—touches on the tiller would certainly be a true description. I am very grateful for what he said.

I thank the noble Lord, Lord Palmer of Childs Hill, for the positive stance he took, and as another inhabitant of the borough of Barnet, I know that he is absolutely right that the MMC, which came of age after the war, is still very much intact in Barnet. That demonstrates how homes can be made durable, which is something we have to ensure with the new generation of modern methods of construction. He also talked about the large property developers and the aftercare that they provide—and, in one or two cases, sadly do not provide. As I say, we are looking at that. He asked about standardisation of products, which is important, and the working group is looking at that as well.

My noble friend Lord Haselhurst talked about his home area in the Saffron Walden constituency. The garden community that was approved in March 2019—in Uttlesford and in West Braintree, just over the border—will I am sure be of interest to him. From memory, that will have about 19,000 homes, and it will make a difference in what is clearly a lovely area. I do not want to add to the housing pressures on that area, as he and I have now both praised it and said how lovely it is. However, work is going on there. On housing infrastructure, work is certainly going on in Cambridgeshire; I am not quite sure whether there is a housing infrastructure bid with regard to Uttlesford, but I will try to pick that up later in a letter.

The noble Earl, Lord Lytton, also talked about the large providers, which seems to have been a common theme. I thank him very much for what he does and for his work in this area. He is absolutely right that we need to watch the large providers, and that we need to support the small and medium-sized enterprises, which, as he knows, we are seeking to do. He talked about decarbonisation as part of the delivery by MMC. In a way it is like spinning plates, keeping all these things in the air at once. The carbon challenge is one of the things that MMC can help us deliver on, as well as providing British jobs, providing housing more quickly, and responding to the sort of design that people need, so we need to do that. The noble Earl talked about construction skills as well; of course, I mentioned the Farmer report, which made some recommendations in that regard. The DfE has invested money in the ConstructionSkills council, which will help with that.

My noble friend Lord Bethell spoke about the importance of ensuring, in relation to disability, that we build homes for the future. It is true that that will affect all of us, our relations and our friends. We have to realise that this is a necessary ingredient, not a desirable one, and I hope that this will inform the review of Part M when that comes forward. He talked about the HomeOwners Alliance; I will have a look at that and take it back to the department with regard to the snagging retention—it certainly looks as though it is worth looking at. He will appreciate that I am certainly not in a position to make commitments on behalf of the Chancellor, but it looks like something we should be looking at, and I will certainly do that.

On the issue of carbon and climate change, as always, the noble Baroness, Lady Walmsley, brings her considerable experience in this area to the fore. There were some detailed questions there—I will write to her on some of the detailed points and I thank her very much for nodding in agreement to that. I agree with her very much on the importance of delivering on the climate change agenda. That was also touched on by the noble Lord, Lord Stunell, who has had experience in this department and will know of the need to reduce that 30% contribution to carbon that is generated by homes; we need to focus attention on the two areas of cars and homes, and we are seeking to do that. On that particular point on energy, we are seeking to tighten the energy efficiency rules shortly, which we committed to do. We have had a 30% improvement since 2010 and want to take that further, and I think that would have the support of the House.

The noble Baroness, Lady Walmsley, raised the issue of local government discretion on planning re sustainability. I am happy to meet her about this, but if she is talking to specific examples, perhaps those involved could write into the department with their particular circumstances. They will almost certainly vary from authority to authority, and I would not want to give a sweeping view here, but we will be keen to look at them and try to help. She also asked about the policy on zero-carbon homes. The Chancellor announced the future homes standard in the Spring Statement and committed to adopting it by 2025 but, again, I will give her more details in writing, if I may.

I have mentioned points that my noble friend Lord Shinkwin raised on the building regulations to come shortly as a consequence of the Hackitt review. I thank him very much for what he said from the heart about the importance of accessibility. That is absolutely right, and that is across the housing sector.

Once again, I thank the noble Baroness, Lady Watkins of Tavistock, for her positive tone about these measures helping with energy efficiency and improving productivity. As she said: what is not to like about this? I will have a close look at the university hospital’s digital progress to which she referred: that looks very interesting in this context. She also talked about the need to ensure that we have policy that will carry us forward. I have mentioned specific examples of money we have invested in south Wales. The Farmer working group is key to ensuring that that is more widely available, but workforce skills are also very important.

My noble friend Lord Caithness rightly talked about his career as a Minister, so he is very familiar with some of the challenges we face. I am sure that the report on the rural economy will, now that he has given his advertisement, be in my box, and I encourage my team to ensure that it is. I look forward very much to reading it. He talked about the five challenges of land and finance skills and Section 106. I mentioned skills, but I shall seek to enlarge on that in the written response that I make to Members. He also asked about the National Infrastructure Commission and the restriction on building on gardens. There is progress on which I shall update him in writing, if I may.

I thank the noble Lord, Lord Stunell, for his points on quality and quantity being the two challenges and the need for review of energy standards, which I have talked about, and financial support for MMC. I genuinely thank him very much for his welcome. As I said, we have examples on which I shall expand where we have MMC working in Gateshead, Tyneside, Basildon and Derwenthorpe. We hope to have many more in future.

The noble Lord, Lord Beecham, will know that I have great respect for what he does in this House, whatever our political differences. He is a public servant of long-standing, and it is worth marking the long period of his councillorship in Tyneside, where he has done much over the years with great distinction. I thank him for his contribution and for welcoming some of what we are doing. Understandably, he focused on some local government issues, although it is worth noting that there has been an increase in local government core spending in real terms this year, which was welcomed by the leader of the Local Government Association. To local government core spending, we can add spending on metro mayors, the stronger towns fund and many specific funds which increase the amount available in a local area. However, I appreciate that he is quite right that there is a challenge on homelessness. We have made some progress in the past year, although there is much still to do. I will enlarge on that, too, in the letter, if I may.

In conclusion, I thank noble Lords very much indeed for what has been, although delayed, a very important and useful debate for all of us. It has been very useful for the Government. I will ensure that points I have not mentioned are picked up and that we circulate what was an excellent debate very widely.

Motion agreed.