Residential Construction and Housing Supply

Baroness Thornhill Excerpts

Wednesday 24th April 2019 Lords Chamber

[Baroness Thornhill (LD)]

I thank the noble Lord for bringing this debate to the House. Looking at some familiar faces, we have had some cracking good housing debates over the last year to 18 months. I have to tell the Minister that there is a growing consensus around the issues and around the solutions, so I agree very much with the thrust of what he said. My contribution to this debate is my firm belief that either adding to or reprioritising government housing finance, which is currently very heavily skewed to subsidising homeowners, and instead championing a social housebuilding programme unseen since the post-war boom period, could result in a steady market for the emerging MMC industry and give vital support to SME builders, who, as the Minister said, have been squeezed out of housebuilding in recent years. It would add significantly to the overall housing supply, but most importantly it would provide secure, high-quality homes to those who cannot afford decent market housing to buy or rent.

Current housing and planning policies, according to the Letwin review, show a high dependence on a few large housebuilders as the main providers of homes with what we know is a speculative development model which necessitates a low absorption rate in the market. This has resulted in low supply, slow build out and higher prices, alongside rising homelessness and huge increases in the private rented sector. This is mirrored by increasing tenant insecurity in that sector, while the Government spend billions on housing benefit and councils are spending hundreds of millions on temporary accommodation. These, alongside issues such as land value capture—whose murky depths I have no desire to plunge into, although I am hopeful that others will—point to the need that has been mentioned to bring real diversity to the marketplace if the Government are to achieve their ambition of building 300,000 homes a year, an ambition we fully support. Of that number, some 90,000 should be for social rent, compared with the less than 7,000 such homes built last year. The Chancellor’s recent announcement of the £3 billion affordable homes guarantee scheme is obviously welcome, but when will we get the details? Will it include funding for social housing? We would be churlish not to recognise that there has been some shift back to grant aid for social rent over the past few years, but after a famine, this slight increase is hardly a feast.

It is evident that to get more homes built more quickly, we need a new and separate strand of housebuilding to take place alongside the big boys currently making staggering profits year on year, thus doing very well out of the current system. A new significant social housing sector could provide that strand but it will take money and political will. The scale of building that needs to take place cannot be done on a shoestring. By committing to a serious increase in expenditure for a new stream of social housing, and looking to promote and use new technologies such as MMC, the Government can make a real difference.

Specifically, as a former elected mayor with a positive attitude to construction, my personal experience of modern manufacturing construction is mixed. It seems that there are clear issues, which the Government need to work with the industry to sort out if this particular mode of building is to be used more widely, as it is abroad. These have been well documented by many organisations, such as the Home Builders Federation, so I will not go into detail. There are simply not enough manufacturers to make a dent in the 300,000-homes target. One issue that surprised me is that there is not enough space to construct and build; for example, a local site of ours could not be used because we did not have the craning space and the road structure for it.

Although there is huge potential, the reality is that investors are slow to lend as the technology is untried and, frankly, the public perception of such homes is far from positive. People moving into one of these homes may find insurers reluctant to insure, or their insurance may be expensive; they may also struggle to get a mortgage on such a property. There are a limited number of suppliers in the supply chain, all of which need more confidence in the industry—I believe that only government can provide that—and several of which have crashed in recent years. However, I am a convert. I believe that these issues can be overcome. I also believe that there is huge potential to be innovative. For example, using MMC, would it be possible to ensure that homes are manufactured to a higher thermal value than conventional builds, thus reducing fuel poverty? The Building Research Establishment in Watford has a stunningly innovative modular dementia-friendly home all ready to go. I say this to the Minister: we could be world leaders in this field.

On a tangential but relevant point, would a well-funded MMC industry be a more benign environment for new recruits and for developing apprenticeships on a sustainable basis to bring some diversity to the construction industry, where only 9% of the present workforce are women?

However, the key issue is funding. Some significant investment has been made by government but we need longer-term security—this is not just about pump-priming—to develop the industry in the long term or, as the Minister said, the whole thing will be stillborn.

Turning briefly to the well-documented shortage of the skills required to deliver homes at the scale and speed we all want, the proposed salary restriction imposed in the immigration criteria and the loss of EU workers who have already left the country begs this question of what plans the Government have to replace these workers, let alone increase numbers to meet future aspirations. At present, the training regime is criticised for being poor and going backwards in terms of delivery. The apprenticeship levy and the construction industry levy for larger firms are hampered by restrictions on what they can be used for, so large sums of money have gone unspent. Can the Minister update the House on the impact of the recent relaxation of the rules to allow subcontractors to benefit? Does he think that it will be enough? It is fair to say that there are chinks of light and positive nudges towards a more sustainable, progressive housing policy, but piecemeal reform will have piecemeal results. We need a concerted effort and strong political leadership to address properly the shortage and quality of housing.

Regarding the impact of a range of new policies to create more homes, particularly permitted development rights to convert office space to residential space without planning permission and the proposed extension to permit shops and other commercial properties to do the same, we believe that such conversions can be successful—but only if they work with local authorities so that decent living and amenity spaces can be created. We would resist any further expansion. Are mechanisms in place to review the impact of such policies? Will the Government listen to the results of the recent consultation, which were overwhelmingly negative regarding expansion?

We welcome the lifting of the borrowing cap. We believe that the right to buy and the discount available should be discretionary and, where possible, allow local authorities to deal with their own circumstances.

Finally, I am aware that the framework for all this lies in the industrial strategy and with the Construction Leadership Council charged with delivering the five-year plan. The Farmer report concluded that the construction industry must modernise or die. As the report is several years old, can the Minister update us on progress as I was unable to find any?