Quality in the Built Environment

Julia Lopez Excerpts

Wednesday 13th December 2017 Westminster Hall

[Jo Churchill]

My right hon. Friend highlights one of the key recommendations that came out of the report, several of which were very easy to implement. I will ask the Minister where we are on that and how we can move forward more swiftly, because it seems that we have been talking about these problems for well over a decade. It was first mooted that we needed to do something in 2008, and we will be 10 years on from that next year.

My right hon. Friend mentioned transparency. That is what is important to people: they want to understand. It needs to be simple, straightforward and transparent. While I appreciate that the Home Builders Federation is looking into a voluntary code, there are problems with the industry policing itself. If there were any real intent, it would not have let the situation deteriorate as it has done, and for so long.

[Julia Lopez (Hornchurch and Upminster) (Con)]

I thank my hon. Friend for tabling this increasingly important debate. I have been dealing with a case involving new homes in my constituency, where for two years the developer of a National House Building Council-guaranteed home failed to rectify problems stemming from the installation of a communal heating system that posed a serious safety risk to the residents. The managing agent told me that it firmly believed that the NHBC faces a fundamental conflict of interest in enforcing its technical requirement against the developer, because it was a major fee-paying member of the organisation. Does she share my concern that the NHBC guarantee might be providing new home- owners with a false sense of security over its independence and enforcement powers?

[Jo Churchill]

My hon. Friend is in an area of the country where there is large pressure on the number of houses being built. She brings a pertinent point to the debate. It is difficult to be independent when not independent of the entire system. I will come to that point.

There are four different redress providers in the system: the housing ombudsman; the property ombudsman; ombudsman services; and the property redress scheme. However, there are still gaps. A key point is that we need simplicity in any system we develop for the individual homebuyer, for them to understand how to navigate the system.

[Jo Churchill]

I could not agree more. Many of us sit on different APPGs, and the hon. Gentleman brought up environmental issues and the fact that people’s homes should use modern-day construction methods that give them the cheapness to be able to run a home efficiently. It should not impact on the environment. We should be using what skills we have to make homes healthier for people and communities. I trust that my hon. Friend the Member for Henley (John Howell) may well come on to the importance of design within the environment. The hon. Gentleman is right. Also, building in the vernacular is extremely important in certain areas of the country, making people feel like they are rooted and have more of a sense of place.

The NHBC guarantee currently covers most builds in the sector and purports to be independent, as my hon. Friend the Member for Hornchurch and Upminster (Julia Lopez) said. However, in the main, large house builders fund the organisation, and any surplus funds are returned to the house builder at the end of the guarantee period. It is my belief that that skews the system and leaves it unable to act clearly on the side of the consumer.

Large house builders obviously seek to make a profit, and I have no issue with that, but some of our largest house builders have paid themselves tens of millions of pounds—in one case it was hundreds of millions of pounds —in dividends this year. When we have such poor outcomes on quality, I find that challenging. For an industry that has overseen a substantial rise in profitability over recent years to oversee an equal decline in customer satisfaction ratings and a fall-off in skills training, for which it sees itself as only partially responsible, is unacceptable. Just 10 companies build half of new private homes. Arguably, that does not aid competition. As the number of new homes has risen, satisfaction has fallen. The time for Government action to step into the broken market is arguably upon us.

Research indicates that investment by these companies should be targeted at skills. They build thousands of units each year—thankfully, they built somewhere in the region of 220,000 to 230,000 units last year—but they directly employ very few skilled workers and are largely reliant on subcontractors across the industry, where the whole basis is to drive down costs rather than concentrate on quality. An acute shortage of good site managers compounds the problem, yet they seem reluctant to train and to ensure quality and delivery. Worryingly, the industry estimates that to carry on building in the same way we would need to double our workforce. My question to the Minister is why we are not building construction training schools at the heart of large sites—even those sites subdivided between different house builders—so that individuals can earn while they learn and be proud of the homes in which their communities live.

It is not an industry into which young people will be encouraged to go, given the working in all weathers, the cyclical nature of the industry and the prospects it holds. The difficulty for small builders and subcontractors in accessing and providing employment for training over the course of a national vocational qualification period means that, if work dries up and they have apprentices, they potentially fail to enable them to complete their training. There is no co-ordinated thinking. If someone is on a price for a contract, they are less likely to spend time training employees—they will be looking to optimise their income.

Large house builders take much of the gain from others’ training, but do not always feed back down the supply chain, nor do they incentivise or reward the benefit they ultimately get from others. That is short-sighted, since it is those skilled craftsmen who will ensure continuity of supply in the future. Having an independent clerk of works or similar who would look at the quality of the work as the construction is going up is one solution. Currently, there are some 700 inspectors in the industry, which equates to their inspecting some 317 units each year. We know that houses are not being inspected properly.

What about the consumer? Unless there is a challenge to the system to ensure that quality standards are driven up, there is little encouragement for those house builders who produce a poor quality product to raise their game. Some large producers concentrate on quality, but that is often reflected in the price. Should quality be a question of either/or? Snagging on new house builds ranges from issues such as backfilling cavity walls with site rubbish to splicing broken roof trusses, leaky roofs, poor electrical work, insufficient insulation and the repointing of joints on walls where purposeful demolition and reconstruction should have happened. My hon. Friend the Member for Hornchurch and Upminster alluded to the problems she had.

[Julia Lopez]

One of the interesting phenomena I have noticed in recent years is that the quality of homes developed by local authorities is substantially higher than the quality of homes developed in the private sector, for which consumers are asked to pay very high sums. Does my hon. Friend think we should be applying similar standards in the private sector to ensure that people are not short-changed?

[Jo Churchill]

That is interesting to a point, but there are also quality problems in the housing association and local authority sector. It is an overall raising of standards throughout the industry that we should be seeking.

People purchase a home, full of hope, pride and expectation that it has enduring quality and performs to the requisite levels of maintenance, costs and energy efficiency, which the hon. Member for Strangford (Jim Shannon) alluded to. Giving peace of mind to those who are working hard for it should be a given. It should not be possible to build new homes without the fourth utility, broadband, and every home constructed in the UK should be as energy efficient as possible, lowering the cost of heating but also the environmental impact. The building industry has high waste costs, which add to the build cost. The highest levels of insulation should be a basic standard: grey water collection, battery storage, solar panels, triple glazed windows and a plethora of modern, energy-efficient building materials could be used. That is often not the case, because it is argued that new and ever-better things will come along and will need to be retrofitted. That means that the industry never moves forward.

Looking ahead, there is a quality gap between customer demand and industry delivery. I applaud the Department for Communities and Local Government for getting the Home Builders Federation to look into the voluntary ombudsman scheme, but perhaps the time for any such voluntary scheme has passed. We are sitting on the cusp of the largest construction delivery ever: some 300,000 new homes, the biggest expansion in the construction of homes since Macmillan. It is imperative that we get the quality right. The domination of the market by a handful of large developers is part of the problem. It used to be the case that 60% of new homes were built by small and medium-sized enterprises, often local, which had a vested interest in the build quality and were more conscious of the vernacular and the local environment. Currently, that figure is less than 30%. Although the £1.5 billion of short-term loan finance from the Government is welcome to drive activity in that market and the modular market, there must also be quality.

Quality in the modular, or modern methods of construction, market should be easier to achieve, as should speed, but I ask the Minister what build standards are being driven into this new area of house building from the start. Organisations such as the Federation of Master Builders, the Royal Institute of British Architects, the Chartered Institute of Building, the Royal Institution of Chartered Surveyors, the Construction Industry Training Board and others have an important role to play in ensuring that quality is a given and not a “nice to have”. From a quality design to a first-class finish, including national space standards and the right regulatory environment, it is essential.

The practice of retention in the industry is currently under consultation at the Department for Business, Energy and Industrial Strategy, but it also has a part to play in quality, restricting the cash flow of small businesses. As we develop new models of finance and business for delivering homes, we need to understand how they affect type, tenure and quality.

It is of concern that large house builders set aside enormous contingency funds for what they call customer service problems—that is, poorly built houses. That has a detrimental effect on the bottom line and productivity. If they constantly have to revisit a building to address its defects and snagging, they are not building the next home. It is also much harder to put faults right once a family has moved in. I have been contacted by numerous people listing incidents and faults that caused them misery, from lintels to crib walls, from foundations to roofs, for which they cannot get redress. The letters often state that all they want is an acknowledgment of the problem, a pathway to a solution and someone to say sorry.

There is a feeling that large house builders are happy to trouser the profit and move on, and are not interested in the long-term reputation of their product. We might regularly replace our white goods; our homes we do not. They should be right the first time. We need a single, transparent, accountable body, with a remit covering the whole housing industry. Currently, someone housed by a charity would go to the Charity Commission, someone in social housing would go to the Housing Ombudsman Service and someone in private housing would go to the National House Building Council or a similar guarantee scheme. We know that in areas with a single ombudsman it is much easier to get it right.

Customers need to be aware that the guarantee often covers far less than they assume, and neither building control functions nor warranties provide any form of comfort that finishings and fittings will be defect-free. Many new homebuyers fail to appreciate that, for the first two years after completion, it is for the builder to sort the defects. Little notice is given to the customer about when the clock starts to run, or the amount of procrastination the builder is allowed in rectification. For the remaining eight years, warranties cover purely structural matters. Individuals often go to the local authority building control, but that carries no jurisdiction.

In conclusion, I would like the Minister to say whether the Department keeps records on the number of defects and on dissatisfaction rates for individual house builders, so it can benchmark them and drive up quality. I would like him to say whether the Department recognises the need for more on-site inspections by independent organisations and individuals to achieve that. A minimum number of inspections would cover both the customer and warranty, say at two, five and 10 years, as argued by RIBA. The responsibility for constructing a defect-free home should rest with the house builder. Consumers need greater leverage—the under-supply in the housing market means that normal market forces do not come into play, as the house builder has the upper hand. We saw that recently with the issue of selling on leaseholds.

House builders must put purchasers at the heart of what they do. They should aspire to deliver a zero-defect construction, make consumers more aware of the construction and warranty process, and develop quicker forms of redress to solve disputes. The next inquiry of the all-party parliamentary group will look into the primary recommendation of our last report: that an ombudsman be set up. We will take evidence from across the sector, including from ombudsmen that currently exist, builders and failed consumers.

Some simplification of sales contracts should arguably be a priority, and those contracts should be standardised, so that people know what to expect and are not blind-sided by a smart operator. A buyer should potentially have the right to inspect a home before completion—consumers can have an MOT on a car but not on £230,000-worth of house. If snagging issues are found, repairs should be carried out prior to completion, preferably in a given time period. If after inspection the buyer or surveyor deems the property is not capable of occupation, the final financing should be delayed at the builder’s cost, which might speed the job up.

An easy win for builders would be to improve the transparency of the design, building and inspection process, and as part of the conveyancing for a new house, written information should be provided to enable buyers to take issue if what they purchase is materially different from what they are sold. That information could include a version of building regulations, designs, details of the warranty and who the builder is and how to contact them.

I would like to understand whether DCLG is working on a thorough review of the warranties that exist in the marketplace. Homebuyers have said that they may well be prepared to pay for the guarantee of a worthwhile warranty, rather than continuing in the somewhat opaque market that currently exists. Warranty providers are currently covered by the financial services ombudsman. We need to establish whether warranties are currently adequate and look into clear and transparent ways in which house builders can set out, at the time of conveyancing, what the warranty actually covers, to stop the misery of individual lives being wrecked by poor housing.

Solving these issues will see an increase in trust between house builder and homebuyer. We need to see houses of improved construction, and one way for that to happen is for house builders to ensure that their annual customer satisfaction surveys are more independent, with their being obliged to publish the number of reported defects, which may well focus them on building better houses. I offer the Minister the support of the all-party parliamentary group in ensuring that the homebuyer is the most important person in the system.