EC Harris: we need 1.5 people for a year to build a house, but where are they?

Contrary to general opinion that the constraints on house building output relate to land, planning and finance, EC Harris is arguing that labour supply is the key factor holding down output to critically low levels.

In a report issued this week, it looks back at the past 15 years to conclude there is a relatively simple equation governing housing output in the UK: each unit built requires 1.5 full-time equivalent workers for a year – with 1.1 jobs associated with site construction and 0.4 with off-site management.

People and money – fundamental to unlocking the housing crisis also says that due to the lack of innovation and adoption of new technology in the sector, productivity has remained static over the past 20 years, and is likely to remain so in the immediate future.

That means that in 2000, the industry produced 175,000 units with 265,000 people; in 2004, boosted by EU migration, 218,000 units were produced by 300,000 people. But by 2012, with a mass outflow of personnel from the sector, output was reduced to 141,000 homes with a workforce of 210,000.

So to produce a relatively modest target of 230,000 homes – far less than the 300,000 it says is needed to address the historic backlog, the house building sector needs to scale up to employ 345,000 people.

With construction overall facing a need to recruit 1 million new people by 2020, only 20,000 trainees entering the industry each year and unemployment at lower levels than in 2007/8, the first line options are training, increased reliance on migration or changing to manufacturing techniques.

How much are people, money and materials constraining production?

Source: Home Builders Federation/NHBC

Further but also controversial solutions would be for house-builders to absorb a far higher proportion of existing skills elsewhere in the industry, or to recruit workers with related skills working in other industries, including the 24,000 people a year who leave the armed forces each year. 

According to the report, which draws on research from construction economist Brian Green, house-building’s current share of the overall construction labour force fluctuates somewhere between 10% and 25%, while CITB calculates that nearly 50% of the workforce has some experience of house-building.

On the other hand, house building’s need for specialised skills could still be a constraint: based on the ONS UK labour force survey, only 70,000 bricklayers and masons now work in the UK, down from 100,000 in 2008.

Other areas where there is an acute labour restraint include plasterers and professions such as architecture and quantity surveying – the table below shows the percentage shares of the existing workforce that house building could absorb if it can access skills elsewhere in the industry.

Which trades and professions are in the greatest demand?

Source: Brian Green/EC Harris/Labour Force Survey

Mark Farmer, head of development at EC Harris, said: “Across the UK, approximately 300,000 units need to be constructed each year to meet demand – 50,000 of these are potentially needed in London alone. However, in 2014 we delivered less than half of this.

“As the industry is currently structured, existing business models make this impossible. With the for sale market constrained by low levels of transactions, the industry has sized itself to deliver no more than 150,000-170,000 units a year.

“We need to think seriously about how we fully enable, at a national level, the development, investment and construction sectors to work together for mutual benefit to radically solve the housing crisis by doubling its output.”

The report argues that the consequences of a failure to build enough homes of the right tenures in the right locations will impact on housing mobility for generations to come: the average age of a first-time buyer is currently 36 years, with 1.7 million people on waiting lists for affordable housing, while housing benefit costs in the UK now total £24bn and are rising at a rate of £1.7m a day.

Farmer adds: “The importance of housing as a key element of the nation’s physical infrastructure is undisputed, so strategic policy-making and the public and private funding initiatives that sit alongside it now need to be elevated on a par with the likes of the National Health Service.

Farmer continues: “This is now about the need for fresh, radical thinking from both industry and government, which respects the existing house building model, but also seeks out viable routes to large-scale, additional delivery.

“This means connecting long-term money to income-led housing investment opportunities spanning multiple economic and political cycles. This in turn starts to create the right investment climate for industrialised production and skills development that will overcome the existing labour constraints affecting traditional, site based delivery.”