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.
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.
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.
My Lords, “sustainability” is used freely but it is not often well defined. However, I am absolutely convinced that one thing in this country is not sustainable: land. They do not make land anymore. You cannot renew it. There is only so much of it and anyone building anywhere has an awful—I choose that word carefully—responsibility to make sure that what is built is acceptable. I say that in declaring my registered interests in two housebuilding companies and an insurance company that, happily, has gone into building off-site homes.
I will address two key issues: the importance of making new houses look good and feel good in good surroundings, and encouraging new building methods if, and only if, they contribute to better building. That still has to be proved; there is a lot of enthusiasm as if this is magically going to change stuff. We must see what these houses look like first because most of them are not in place yet. Once they are, they will of course be irrevocably using the land we cannot renew. I am agnostic; I am not against these new methods. One of the best ways of boosting housing supply—I wish that more building companies would grasp this point—is to make new homes look good, be more acceptable on the landscape in communities and outlive their predicted lifespan, which many quite small houses and terraces have managed to do over hundreds of years in some cases.
The definition of sustainable is “changeless”. Well, we certainly need change in many parts of the housebuilding industry to create places as much as houses and beauty as well as bedrooms for the hard-working people who will live in them. That should be our central concern. I do not want to get involved in great debates about beauty in housebuilding and construction, which causes much anger and wrist flapping. I am perfectly happy to see modernist houses built by people who want to build them if they can afford to and statements made by architects who want to make them. I am just as happy to see people build backward-looking houses that go back into the depths of time, using styles such as neoclassical and Georgian, if they can afford to do so. I am much more concerned about decent homes that look and feel good for ordinary people.
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.
My Lords, I first declare my interests, as noted in the register, as a house developer with sites in Bicester, Scotland and Sussex. I am also a trustee of a charity for the education of deaf children and of other charities involved with disabilities.
Modern methods of construction, as considered in our excellent Science and Technology Committee report last year, should include making houses more suitable for people with disabilities. The Government have shown great progress over the last six months on the matter. Accessibility is covered in Part M in the Building Regulations; there is of course more than one level of accessibility, and I am told that developments in London tend to carry the highest level. I am not sure of the geographic distribution of disabled people, but, as disability is so strongly correlated with poverty, I doubt that they are concentrated in London. However, I am sure of the distribution of people who may become disabled in the future—it is all of us, everywhere. We had better get this sorted out before it happens.
Some small changes will make a big difference for those with disabilities, making houses truly usable. Part of the subject of this debate is to build houses in a sustainable way, whatever “sustainable” means. Perhaps other noble Lords may cover environmental concerns when discussing sustainability, but it should also simply mean that the house can be used by anyone in the long term. A house may have a lifespan of about 100 years. The house may be sold every four or five years. The chances of no users of that house—including friends and relatives of the owners—having a disability are surely very slim. Those chances are reducing as society ages.
Housebuilders quite rightly want to build for the person who is likely first to buy that house—the customer. For many sites, this is predominantly young couples, many of whom are expecting a child or will likely be so in the not too distant future. That can have knock-on effects, of course. At a site I was developing, the landlord of the local pub was not so optimistic about the new development bringing in a flood of new customers—he told me, “Half the customers are pregnant, and that is not good for the sale of beer”.
My Lords, I shall follow the noble Lord, Lord Borwick, down the route of talking about homes for disabled people. The Minister knows exactly what I am going to say, and I believe I am right in thinking that he is sympathetic to my message, which is simple: we desperately need far more new accessible and adaptable homes built in a sustainable way now as the population ages, and disabled people live longer.
For that to be a reality, we need Part M category 2 of the Building Regulations to be mandatory all over the country, as it is in London, as soon as possible. Housing and planning authorities also ought to provide an adequate number of category 3 wheelchair-accessible properties in their areas; otherwise, working-age wheelchair users will not be able to live and work there or many older-age wheelchair users will not be able to transfer or downsize to a more suitable property. This must be considered as part of the sustainability agenda, particularly as many disabled people need a warmer home than others.
Just the other day, I was speaking to a man at a social event who was taking a break from caring for his mother in Manchester. He said that she was virtually bedridden and did not go out at all because she lived on the fourth floor of a block of flats and could not climb stairs any more. This story is repeated throughout the country. Elderly people, perhaps with chronic arthritis, are becoming less mobile as the years pass, ending up as prisoners in their own homes. Or they may have had a serious fall—perhaps a broken hip—and are too fearful to move about very much. I also recently met Sam Renke, a young wheelchair-using actress, who has only just moved into an accessible home. She has said:
“Having others do almost everything for you may sound idyllic to some, but actually I felt like I was in my own version of a prison at times, having to wait for others to help me do basic … tasks”.
My Lords, I thank the Minister for his helpful introduction to this debate. I will forfeit my opportunity to offer him 10 ways for government to ensure 300,000 affordable, high-quality, well-designed homes a year. However, I recommend that he and all interested parties look out for the forthcoming reports from the Centre for Social Justice’s housing commission and from the Affordable Housing Commission organised by the Smith Institute and the Nationwide Foundation—I declare my interests as chair of these two commissions. I also declare interests as a vice-president of the LGA and the TCPA.
I want to use my few minutes to draw attention to the quite dramatically changed policy context in which we are now debating the construction of the new homes the nation needs. Over recent years there have been some quite fundamental, but largely unremarked, shifts in government housing policy, and I want to highlight and commend these important U-turns.
I have now counted over 20 significant reversals of housing policy over just the last three years or so. In essence, I detect the abandonment of a range of earlier policies which would diminish the social housing sector—the council and housing association sector—and would rely on a handful of volume housebuilders. Now, instead of that agenda—so familiar to those of us in your Lordships’ House who argued over the fateful Housing and Planning Act 2016—there are positive new measures to encourage, grow and expand social housing, while curbing the endlessly disappointing performance of the big housebuilders. In passing, I note equally the measures to redress the balance of power in the private rented sector from landlords to tenants, not least with last week’s very welcome announcement from the Secretary of State of greater security of tenure for renters.
Of particular relevance for today’s debate, the items from my long list of 20-plus policy reversals are these: first, the freedom for councils to borrow to build, in place of a tight cap that has prevented most local authorities building new homes; secondly, new grant funding for social rent—low-cost rentals—ending a virtual ban and the substitution of so-called affordable rents, which are not affordable to those on lower incomes; thirdly, dropping the flagship scheme to require councils to accept “starter homes” for sale in place of the previous planning obligations on housebuilders to ensure provision of low-cost rental homes; fourthly, pledging to close the “viability loophole” which has allowed housebuilders to renege on Section 106 planning obligations to provide affordable homes; fifthly, revival of the Government’s multibillion-pound loan guarantee scheme for housing association borrowing, which had been scrapped earlier; sixthly, dropping a controversial plan to put rents for specialist, supported housing on to a new basis that had stalled many developments for older people and others; seventhly, a full reversal of the imposition of a compulsory annual 1% real reduction in social housing rents—which has reduced the capacity of social landlords to develop new homes—and instead the substitution from next year of CPI-linked rent increases; eighthly, batting the idea of extending the right to buy to housing association tenants into the long grass and, more significantly, dropping the dreadful plan to make councils sell their best properties on the open market, when they fell vacant, to pay for the new right to buy discounts for those housing association tenants; ninthly, scrapping policies that make life tougher for social housing tenants, forcing social landlords to end long-term security of tenure and to raise rents for those who achieve improved earnings—“pay to stay”—and, in contrast, following the Grenfell Tower tragedy, promising measures to strengthen the regulation of social housing landlords and enhance the status of social housing tenants; and, finally, rather than putting increased faith in the major housebuilders, instead coming forward with at least four new constraints on them: deciding to create a new homes ombudsman to handle the numerous complaints from house buyers; outlawing appalling practices by housebuilders in selling leases with rip-off ground rents; requiring higher standards from housebuilders, not least to improve energy efficiency; and starting the phasing out of the multibillion-pound Help to Buy subsidies that have been so lucrative for the big housebuilders.
My Lords, first, I thank the Minister for initiating the debate and setting out the Government’s plans in quite great detail. We need to be clear about the overriding philosophy of modern methods of construction. Is it our aim to build more homes quickly, more cheaply or to a high or higher standard? Is our aim to get people off the streets and out of temporary accommodation? I suggest that not everyone will or even wants to own their own home. As the noble Lord, Lord Best, said, many need to rent.
I see the reality in my family, with three adult grandchildren renting because they cannot see themselves able to purchase. There is a need for more rented accommodation and, as the noble Lord, Lord Best, rightly said, we need more social housing. It is good to come straight after him so I can cut all that bit out of my speech, because he dealt with so many aspects of how to increase social housing. Perhaps I could add that the construction of social rent homes has plummeted by 80% in the past 10 years. Shelter is calling for 3.1 million new such homes in the next 20 years. That equals 155,000 per annum, whereas only 6,463 were built in 2017-18.
My question to the Minister and to the House is: will the use of revolutionary technology build better-quality homes at record speed? Modular housebuilding is growing in the UK, but very slowly: 15,000 per annum are now factory built. Obviously, that of the noble Lord, Lord Patten, has not been built—but 15,000 have apparently been built elsewhere.
I was, however, perplexed to read that one developer using factory build reckons the lifespan of those properties to be 75 years. History has shown in my borough, the London Borough of Barnet, that estates of prefabs from the 1940s are not only still in use but highly valued by their occupants. I have also seen the use of factory builds for student accommodation at Middlesex University. I was impressed, when I saw this a few years ago, at how the modular units fitted together, so that each bathroom was a corner triangle which fitted back to back with the neighbouring units, thus simplifying the delivery of utilities. It was mind-boggling to see how simply having triangles of bathrooms fitting together could solve so many builders’ problems. Will the new methods produce more homes more quickly and to a high quality?
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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.
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?
People certainly deserve much better places than the site in southern England I have been monitoring in recent years; I will not mention where it is, let alone its name or that of the mass housebuilder building there, for fear of making its resale problems even greater. Out of sight and out of mind from our own property though it is, it has only just been finished after many years. It has taken a long time to finish the selling of these houses. Extraordinarily enough—this is a little moral tale—the very first show house it built, with many trumpets blown, developed cracks down the side shortly after it was completed and had to be repainted. People have indeed suffered.
This is the reverse of the Government’s hope that building better and beautifully will build more homes. I do not think that many people on the boards of big housing companies ever live in the mass estates that they have built; I can find no address of any director of any major housebuilding company who lives on a large housing estate that their company has constructed. They generally live elsewhere, safely in the countryside, a long way away. I wish that many board directors would spend at least a sojourn in their own product. Generally, I do not think they do and that is shaming. I am an investor in a couple of these companies; my warning is that I like to be a smart investor and get good value for money. Well-built houses mean better profitability and that the value of my shareholding will go up. That is all I want these people to do—not build the sort of houses that do not appeal to ordinary people.
That brings me to the second issue. I welcome these brand new houses that we are seeing built off-site. They are precision built and tailored to a new world where they will be put on-site. It is very good to see factories doing this. There is the TopHat factory in Derbyshire, which is being invested in by Goldman Sachs. Builders are normally lucky to have a big bank following them so that is very good. Equally, the money managers and insurance company Legal & General, in which I also have an interest, has a new housebuilding factory at Sherburn in Elmet near Leeds, which will produce 3,000 units a year. However, we have not yet seen any of these things on-site. We do not know what they will look like. The marketing stuff is full of precision engineering, sustainability, looking after heating loss and other issues, but we have not seen a unit on-site.
For a builder, rather than being outside all year round in all weathers—like today’s weather in certain parts of the country—and very difficult circumstances, it is much nicer to be inside a factory. It is a much safer environment and we might even get better productivity by producing houses in that way, which I am thoroughly in favour of. We could also build up apprenticeships in the right way. I do not believe, however, that we have yet proven that energy efficiency and sustainability—another word they love—are magic solutions.
On that point about sustainability I shall end. I do not think my noble friend the Minister used the word in his speech—he may have done and I am sure he will correct me later if I am wrong, although it is used in the Motion—but I have never seen a proper government definition of sustainability in housebuilding. I ask him to define what the Government mean by sustainability in relation to new houses being built, if not in his wind-up speech then certainly in any letter he circulates later. I see him enthusiastically nodding his head in acquiescence to my request.
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 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?
I made an application in the early 2000s for a site in Runnymede, then and now in the constituency of my right honourable friend the Chancellor, and I had intended to make every unit accessible—both the commercial houses and the social houses. They were to be built to lifetime homes standards—invented, I think, by the noble Lord, Lord Best, or his organisation —and I was told that this would be the first purely commercial development to that standard; hitherto, it had been used only for social housing. Connoisseurs will detect the subtle hand of the late great Sir Bert Massie in persuading me that undertaking this task voluntarily would enable him to argue that it was reasonable for everyone to do it. From my point of view, if it brought forward the development of the site and the planning permission by several years, the cost was unimportant.
I was told by professionals that it was a bad idea. Disabled people are less likely to be wealthy, so why would I make every house fit for that purpose? I was told I was going to be building a ghetto for disabled people. But my plan was much more sustainable. Buyers may not be disabled now, but they may be much less mobile in the future. In any case, we all spend time in a wheelchair, though it may be called a baby buggy when we are small—we will be lucky if it is only at the beginning of our lives that we need wheels.
Boosting the housing supply by sufficient numbers simply will not happen as long as we maintain a system of central planning. Central plans have never worked well, whether for tractor production in the Soviet Union or a plan-led system for houses. Only the market, not the Government, has the information needed. If we are to have plans, make them as local as possible—as we are doing—but do not believe they are going to work. The Soviet Union failed to run five-year plans for tractors, but we ask councils to plan for housing up to 25 years ahead.
The only solution to the housing crisis is to relax planning laws and to grant more planning permissions. We are making some progress in that direction. We did not plan our way into the housing shortage, so why should we be able to plan our way out? So grant more permissions with a high level of accessibility built in. Say to the developer, “If you want a quick permission, be the exemplar”.
It is understandable why people may be against granting more permissions, particularly those who will be affected by more houses being built which block their view. Housebuilding planning is particularly strange, as the neighbour has a binary choice—object, or do not object. There is no middle ground, but there could be if ownership of the benefits was shared by local people, not by “the community”. People who live next door to a development could be given the opportunity to invest and receive a share in the development, for instance. That would remove the binary choice, because they would say, “I do not like the development, but at least I will make a profit out of it”. Given my earlier points about building houses sustainably so that they accommodate disabled people, I believe the current system of highly restrictive planning laws puts the apparent needs of councils against the very real needs of disabled people. Is it really more important that we have public art than accessibility?
We know that the costs of local plans are borne by developers. A developer pays corporation tax, Sections 106 and 278 and CIL costs, and the cost of providing 40% social housing. But there are two forms of tax—those costs and delays. We must be careful not to overtax. The argument goes, “There is a shortage of houses”, and the answer seems to be that we must tax the only people that produce them. The biggest cost for a developer is the cost of the land and the delay in planning. Every time there is a delay, the time-based fees of professional advisers go up. That is the reason why the small builders and developers have almost disappeared. The money spent on fees is a big speculative risk.
Talking of costs, I have often wondered whether councils might view planning applications differently if they were faced with the cost of housing benefit. The lack of housing drives up rents, which makes them unaffordable to so many people whose only option is to turn to the state for support—a council delays planning permissions, and central government picks up the cost of housing benefit. What if councils had to pick up the bill for higher housing benefit because of decisions they make at planning meetings? It is worth thinking about. Housing benefit is being wrapped into universal credit, but if that were localised, would we see councils start to grant more planning permissions?
We have a localised system designed to encourage more housebuilding—the new homes bonus paid by the Treasury to councils. But it has some problems. Why is the payment made over four annual instalments? That seems to me to cancel out the idea that this is a “bonus” payment for granting more permissions. Perhaps finding a way for local authorities to bear the cost of restrictive planning, or to reap the benefits of good planning, might be more effective.
As for MMC, I gather that both category 2 and category 3 homes can be built this way, so I assume that this means that they are adaptable—for example, having strong enough bathroom walls to allow grab rails to be installed. But it would be quite unacceptable for a developer to refuse to install enough accessible and adaptable homes because they do not fit with MMC. Yes, we need a lot more homes but surely not at the cost of accessibility. Will the Minister ensure that accessibility requirements are included as part of any future rollout of MMC?
However, it is not just developers who want to use every inch of space for homes which are not accessible or easily adaptable. Not enough local authorities have targets in place for accessible homes. Last year, the housing association Habinteg analysed the accessible housing policies detailed in 263 of the 365 local plans across England. It found that, although 65% of the local planning authorities reviewed made reference to the lifetime homes standard or category 2, only 32% made a firm commitment to deliver a specific proportion of new homes to that standard, with just 18% committed to the category 3 standard.
We know that a review of the Building Regulations is being carried out. Will the Minister tell us about the timescale? We need category 2 of Part M made mandatory as soon as possible. Do we really need a long consultation about it? Of course, some property developers—not the noble Lord, Lord Borwick—will say that there is not much need for accessible and adaptable homes, but we know that there is a huge unmet need, so I urge the Government not to delay for another minute.
I see each of these turnarounds as a triumph of good sense and a credit to the relevant Secretaries of State and their Ministers. All of us can now build on the near-universal recognition that housing shortages and deficiencies will not be cured by volume housebuilders and “the market”. More, not less, government intervention —through both investment and regulation—is sensible, positive and necessary. I am not saying that the reorientation I have described means that everything is now sorted—sadly not. But what has changed is that so much housing policy is now facing in the right direction; what is needed now is for it to move forward further and faster in the direction now set. Government now has the opportunity to embrace further shifts in the same direction and accelerate progress—for example, with greater funding for social rent, with the adoption of Oliver Letwin’s recommendations for capturing land value, with more progress on garden towns, with changes to standards of accessibility and energy efficiency through Building Regulations and, yes, by promoting and incentivising modern methods of construction. If government sustains its significant shift in emphasis to more proactive governmental input, there will be new hope for the tens of thousands who need a better housing solution.
How can the Government force the larger developers not to sit on land banks and to release units only at a steady flow so as not to depress prices and profits? This is the problem at the heart of our housing crisis, which I last highlighted in this Chamber two and a half years ago. Have attitudes changed since then? A report in the past few days showed that housebuilders still sit on enough land to build well over 800,000 homes. The number of plots in the nine largest builders’ land banks has risen since our debate in November 2016, in which I spoke, to about 838,000. Those are plots on which they could build but have not built—and this is despite government reviews and policies.
In 2016 I pointed out in this Chamber that on a large site with planning permission, builders will rarely sell more than 150 units per annum. This enables them to sell at a price to delight their shareholders by not depressing the price of the properties they are selling. Is there truth in the assertion that the fault lies with the local authorities—as I have heard said this evening? In the local authority planning system it can take years to get planning permission, given the time it takes to hear applications and appeals. Is that the problem? If that is the case, what are the Government doing to rectify it? There is a problem with overall planning and with specific planning permissions? Or does the slowness in obtaining planning consent suit the large developers, which are happy to sit on land going up in value and are keeping high the value of developed homes? If this is the case, what are the Government doing to break the logjam?
Will modern forms of construction also provide more homes for rent and purchase, and will the Minister comment on some suggestions for government action, such as support for the UK’s modern methods of construction supply chain and funding for innovation, using research and development tax credits to encourage innovation and trial of new products and technologies? The noble Baroness, Lady Warwick, who is not in her place, mentioned standardisation. Various companies are building under the new methods of factory build, but are they consistent with each other? Is there standardisation? Otherwise, we will end up with systems that do not interlock, as with so many things in this country.
Will the new system develop new skills of factory building rather than bricks and mortar on site? Will it improve design quality? We are not looking for mass building at cheaper cost—“build ‘em high”, in the old Tesco format. We are talking about improving design quality. Will the Minister tell us whether the Government will encourage post-occupancy evaluation, to let the occupants tell us whether it is working? Finally—looking at the time—could the Government support a review to subdivide large sites to create more variety in the same area?