10 ways to boost housing output

With around 1.7 million people on waiting lists for affordable housing, but housebuilders and the public sector operating at the limits of their capacity, how can we build more homes? Construction Manager reports.

1. Planning problems 

In 2004, the Barker Review suggested that 260,000 new homes a year in England were needed to keep pace with the annual growth in household formation and depress housing market inflation. When the Home Builders Federation (HBF) reviewed that report in 2014, it calculated that the cumulative gap between Barker target and current stock was between 1,000,000  and 1,450,000 homes.

The government is now targeting 200,000 completions a year; many commentators call for 240,000. But the highest annual total delivered in recent times, under a headwind of economic growth, was 177,650 in 2007. So how do we break through that ceiling?  

One key principle in government policy is attracting new market entrants to add to overall capacity. But even with Build to Rent, custom build, and “micro-flats”, all developers are competing for a scarce product: land with (or likely to secure) planning permission.

At Wates Developments, which develops on its own account and acts as site promoter for others, managing director David Brocklebank says: “If there is more land available, new businesses will set up and get funding and be able to develop housing, entities other than house builders will be able to step into the market and then land prices might fall.

“The lack of consented land has led to a very stifled development sector where it is very hard to get new entrants in play.”  

“We need alternative tenures to take hold to break the logjam,” agrees Tom Venables, a director of design and planning at Aecom. “But the fundamental problem is not enough sites and not enough incentives for local authorities to approve them.”

Clearly, the policy, financial and mindset shifts needed to increase land supply will take a while to take effect. In the meantime, here are nine more suggestions.

2. Letting HAs build more  

Housing Associations in England and Wales annually produce around 50,000 homes (across all tenures, including private sale), according to the National Housing Federation (NHF). That 40% share of output is roughly consistent with pre-2008 levels, suggesting that the sector has been resilient – and able to step up output in the right conditions.

Adam Morton, policy lead at the NHF, says the sector badly needs an injection of public funds: although HAs are creditworthy and able to raise debt or bond finance, having more equity from public funds would increase borrowing capacity. And where grants are available, Morton says they are often split between several different “pots”, creating more bureaucracy and less certainty for applicants.

He says that other regulatory changes could also boost their capacity to borrow and therefore build: HAs that have inherited ex-local authority stock are forced to value these homes at lower levels than stock that has always been in the HA sector.

And what can contractors do to help? At London and south-east based Hyde Housing Association, development director David Gannicott is seeking upstream expertise. “There are opportunities to work together at a much earlier stage, on construction management, and spending more time on value engineering to make sure the scheme is at the minimum cost and maximum value output.“

Housing Association Peabody Housing’s Darbishire Place

3. Tackling skills locally

It’s hard to quantify the impact of skills shortages on housing output, but Arcadis has had a go. In its recent report, People and Money, it calculated that it takes 1.5 worker years to build a house. To increase output to 230,000 homes a year, we would therefore need to train an additional 120,000 workers. 

At the Housing Forum, a cross-sector membership organisation, chief executive Shelagh Grant agrees that the issue of skills is “absolutely endemic”. “For housebuilders, with rising prices, the issue is, can you build quickly enough, can your price [to developers or public sector clients] be honoured? It’s all very pressurised and how you programme and project manage jobs has become critical.”

That’s certainly the view at the London Borough of Southwark, which is building 1,500 homes by the end of 2018 as part of an overall programme of 11,000 homes by 2043. Southwark will develop 500 homes for council tenants, 500 for intermediate rent and 500 for private sale, with the first of two contracts going out to tender this month.

“It’s the same for all developers, whether council or private: inflation is a huge pressure so we need to increase the skilled labour force,” says councillor Mark Williams, the cabinet member for housing. “We need more coordination with other boroughs and Further Education colleges, and more help from government.”

In particular, Williams wants to see the skills budget, sliced from the Skills Funding Agency’s budget under Local Growth Deals, which currently goes to Local Enterprise Partnerships and the Greater London Assembly, diverted to local authorities instead.

“Councils can determine local needs, and we think the decisions are much better taken at council level.”

4. Private rented sector

The private rented sector (PRS) has promised to bring diversification to the market, but has been slow make an impact:  it was reported in March 2014 that housebuilders had lost interest in the HCA’s £1bn Build to Rent programme after the government launched Help to Buy, more geared to their sales-driven model.  

One issue is that developers often  compete for sites against schemes for outright sale. As Ian Fletcher, director of policy at the British Property Federation, says: “The difficulty has been that it’s difficult to get the viability to stack up in comparison with other forms of tenure. But local authorities are now more supportive.”

He estimates that the PRS sector will create the 5,000 new homes in London targeted by the Greater London Assembly in 2015, but said that the sector could expand output to around 9,000 homes in London with more government support.

In Manchester, the Home Group housing association hopes to improve financial viability of PRS schemes with a “flexi-rent” concept. As some schemes stall because of councils’ expectations on Section 106 affordable housing, this approach swaps firm commitments up-front to a more market sensitive approach linked to rental values, helping reduce the risk for both sides.

Essential Living is developing this discount market rent scheme for the London Borough of Greenwich

5. Ask the architects

When New London Architecture crowdsourced ideas on boosting output, architects proposed “over-developing” on public buildings, floating canal homes, and allowing owners of suburban semi-detacheds to develop their back gardens.

More realistically, Pitman Tozer and de Rijke Marsh Morgan (dRMM) proposed stripping homes  down to structure and services and taking 40% off the build cost.

dRMM’s “Wood Blocks” makes use of cross-laminated timber (CLT) to build shells quickly and cheaply, with an option to add prefab bathroom, bedroom or kitchen pods. The product would be aimed at groups of residents, who might work with a developer, but who would embrace a bottom-up, DIY ethos, a system that has become popular in German and Austria.

The firm and partner organisation Bright Forest are approaching local authorities to find out about self-build sites, and is looking at a pilot project in Kent.

Pitman Tozer’s Naked House concept design for a site in the London Borough of Enfield

Meanwhile, Pitman Tozer has not put so much emphasis on the construction techniques, as the business and delivery model: it has teamed up with the London Borough of Enfield and Naked House, a group of housing activists who formed their own developer. They are now collaborating on a template scheme that would show how the concept would work.

Director Luke Tozer says that 20 sites have been identified as possibilities, from which one was chosen to work up an indicative design for nine flats. “The proposal is based on the idea of a Victorian warehouse, a simple concrete frame and brick skin that can be divided up.”

Alex de Rijke says that a large part of the proposals is about achieving higher density while avoiding design defects. “Accommodation in London is ludicrously expensive and with spaces and windows that are too small, and at a lower density than cities with generous spaces,” he says. 

6. Offsite and MMC

The dawn of the offsite era has been heralded often, but the trumpets have been fainter since a string of insolvencies among offsite fabricators in 2010-12. The Housing Forum’s Shelagh Grant says: “What our members are saying is that they would consider modular and volumetric methods if there was a broader supply chain; they’re looking for supply chain security.” Solve that problem, and capacity could increase.

But there are signs offsite is regaining momentum. New suppliers are arriving, including north-east based Orca, a specialist in light gauge steel. Laing O’Rourke is investing in a new Advanced Manufacturing Facility for offsite housing next to its existing plant in Steetley, but another recent convert is Barratt Developments, which in July announced it would deliver up to 20% of its programme, or 3,000 homes, using offsite techniques.

Oliver Novakovic, technical and innovation director at Barratt Developments, says it has examined up to 150 offsite solutions, selecting 15 to trial in pilot projects at live sites, including prefabricated utility cupboards, roof cassettes and light gauge steel frames.

“It’s about achieving better predictability where costs are fluctuating, and there are also materials and skills shortages, but it’s definitely also about stepping up output,” he explains. “I think we are slightly ahead of the market, but others will look to follow us, perhaps six to 12 months behind.”

Novakovic believes that, despite perceptions it is struggling, the offsite supply chain does has the capacity to help boost output. That view is shared by the University of Salford’s Professor Mohammed Arif, adviser to the Modular Allianz consortium, a group of around 20 northwest housing associations and Manchester City Council which is seeking offsite suppliers for a programme of at least 500 homes. The idea is to stimulate an industry that has focused on schools, hotels and prisons rather than much-needed housing.

Arif says that the US experience shows that set up and running costs for offsite manufacturers are less than perceived. “If you look at a basic manufacturing facility in north America, you can establish a factory with about £0.5m and have it up and running in two to three months – it’s not that onerous.”

7. Custom Build

Since the downturn, custom build has been touted as the route to bring new developers to the market and now, with new legislation supporting the concept, it could be time for a breakthrough.

“Custom build has the potential to increase the volume quite quickly. We now have an Act of Parliament: local authorities need to keep a register of land suitable for self build, using websites such as custombuildhomes.co.uk,” explains Andy Frankish, new homes director at the Mortgage Advice Bureau, who believes that custom build could deliver10,000 to 30,000 units a year in three to five years.

“Custom build gives landowners another option: they can sub-divide a plot into sections that would be sold to different ‘enabling developers’ within an overall outline of what can be built.”

In the coming years, Frankish says custom build could form part of councils’ Local Plans, and tie in with the requirement to provide “affordable” housing via Section 106 agreements.  

He also sees it as a way of getting SMEs back into the market by assisting cash-flow. And if adopted widely, it could help rebalance the housebuilding economy. “It puts the consumer in charge and takes out the profit margins the big developers get, which in turn drives land to value ratios. That results in a more affordable product.”

Carillion is already building 150 custom homes at Trevenson Park, Cornwall, in a joint venture with developer Igloo

8. Strategic planning

The new Housing and Planning Bill is to force local authorities to produce and adopt a local plan by 2017 or cede control of their housing future to central government. The National Planning Policy Framework, introduced in March 2012, was supposed to accelerate local plan production, and therefore planning consents, but it hasn’t quite happened that way: according to a survey by Savills in March 2015, only 25% of council have adopted an up-to-date plan post-NPPF.

Savills said that a significant proportion of out-of-date plans were found in south east districts where housing need and demand is greatest, and in major urban areas such as Liverpool, Manchester, Newcastle, Portsmouth and Southampton.

This and other measures in the Bill – including a new register of brownfield land, and allowing housing schemes linked to major infrastructure projects to apply for planning permission via the Planning Act have been welcomed, but Aecom director Tom Venables urges more action. “We need strategic allocation of sites, a sensible look at the green belt, and including housing in the remit of the newly-formed National Infrastructure Commission,” says Aecom director Tom Venables.

Barton Park in Oxford is a town extension project by Grosvenor and advised by Aecom

As Venables says, Crossrail lacked a strategic planning link between housing intensification and the new line, and the limited remit of the new NIC could be a missed opportunity to  address housing when looking at Crossrail 2 and the Northern Powerhouse.

But there are other problems with the planning system, Venables says. ‘One problem with the London market is that the plan stops at the GLA boundary.There needs to be more linkage with the rest of the south east.” This is an example of problems with authorities’  “duty to co-operate” on housing provision across borders, a requirement of the Localism Act 2011.  

But it’s a duty without incentives, leading to stand offs between authorities with different aspirations: Labour controlled Stevenage District Council and Conservative North Hertfordshire have been at odds for at least 15 years.

However, the Housing Forum’s Grant points to good examples of local authorities working together, such as Cambridge City Council and South Cambridgeshire District Council forming a development partnership to build at the southern edge of the city.

9. Speeding up traditional construction

Discussions on accelerating site-to-occupation time often centre on offsite. But, given that the bulk of the sector is using traditional brick-on-brick methods, shouldn’t we be accelerating these instead? It could shorten programmes, or release labour to new sites sooner.

“Offsite is part of the puzzle, but unlikely to always be the right way to do it,” says Ron Lang, studying for an engineering doctorate at Loughborough University.

His research, sponsored by Aggregate Industries, is looking into methods of solid wall construction. “It’s about increasing delivery, and delivering to high quality: around 20% of claims under NHBC warranties are linked to problems with the external walls,” says Lang.

For his research, he asked an experienced bricklayer and apprentice to build six different types of wall, filming them to carefully analyse the effort needed and the efficiencies possible. The wall types covered brick cavity walls, proprietary thin joint systems, standard block-built cavity walls with render, and solid walls with external insulation.  

Test walls were built over the course of a day to the height of one storey, up to joist-bearing level, including a window, and to a length of 3.5m with a one-metre return. “We asked the pair how long it would normally take them, we tried to make the test as realistic as possible,” he says.   

Although it’s likely that the bricklayers worked more carefully than usual because of the “observer effect”, issues were identified. “Current solutions are tricky around the window heads and lintels, where it gets quite complicated to get the sequencing right. Or you might get the insulation in, then it gets wet overnight before the windows go in,” says Lang. 

Lang will conduct detailed interviews with the bricklayers before making recommendations on what the experiment suggests should be the future default. 

But what about those bricklaying robots we keep hearing about? “There are so many ways to speed up the process, just by simplifying the details, so why go to the other end of the scale?” he asks.

10. Ditch the contractor

Traditionally, HAs have contracted or procured through design and build contracts to mitigate risk: with a fixed price contract they know the outturn cost.  

Hyde Housing Association is one of a growing number of HAs exploring construction management as a procurement route: essentially, it’s going directly to the supply chain to procure around eight different packages.

In one scheme nearing completion, for around thirty two to three-storey homes in Chichester, Hyde thinks it can demonstrate a 15% saving against what it would have cost going down the D&B route. “It’s relatively simple scheme, which limited the risk and encouraged us to try a new approach,” says development director David Gannicott.

“The rationale behind it is that 50-60% of the cost of providing a dwelling is a the build cost so anything we can do to reduce those costs whilst maintaining quality, means less borrowing for us, or that we can produce more homes.

“The key to it is legendary organisation, putting in extra advance planning time, and picking schemes at an early stage with detailed risk analysis to ensure the savings are delivered,” he concludes.

Hyde Housing Association is building 204 homes in the forth block at Kender Triangle, New Cross, London