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Radical steps needed to avoid decline in construction industry, says review

Radical steps needed to avoid decline in construction industry, says review

The construction industry faces “inexorable decline” unless radical steps are taken, according to an independent review that urges the government to support the building of rental properties and affordable housing.

 

The government-commissioned review, carried out by the property consultancy boss Mark Farmer, calls for tax incentives and planning breaks to boost the burgeoning build-to-rent sector. A growing number of institutional investors and some developers such as Berkeley Homes are building blocks of rental homes.

Farmer argues that build-to-rent can play a crucial role in changing the industry, as rental demand is more stable, while traditional housebuilders build homes for sale and are more dependent on the economic cycle. Traditional housebuilders have also been accused of hoarding land to maximise profits, but have rejected those claims.

The report calls on the government to increase the construction of social and affordable homes by registered providers. It argues that much of this housing can be built more quickly and cheaply using pre-manufactured modules rather than traditional bricks and mortar.

Farmer, a 25-year veteran of the industry, believes the UK should take the global lead in producing off-the-shelf components for housing. 

One example is Legal & General’s new factory in Sherburn, Yorkshire, the largest modular housing factory in the world, which will produce homes through automated processes used to make cars and other consumer goods.

Another is the drugmaker GlaxoSmithKline’s “factory in a box”, which contains multi-coloured components packed in reverse order for quick assembly. It has been developed for emerging markets and cuts the construction time from 12 weeks to four.

Farmer said: “If you buy a new car, you expect it to have been built in a factory to exacting standards, to be delivered on time, to an agreed price and to a predetermined quality. This needs to happen more in construction.”

Essential Living, which specialises in private rental homes, is building one of the tallest modular buildings in the UK at Greenwich Creekside Wharf with 249 rental homes (including a quarter at market discount rent). The fully fitted-out factory-made modules will be stacked around a concrete core, which is estimated to reduce the construction period by 25%.

To tackle Britain’s worsening housing crisis, the Farmer review calls for the construction of 50,000 pre-manufactured homes a year, on top of 160,000 traditional homes.

The report paints a gloomy picture of the construction industry, blighted by low productivity, an ageing workforce, a lack of innovation and collaboration as well as a non-existent research and development culture. Surging costs, driven by a shortage of skilled workers, have stalled numerous housing schemes that have become too expensive to build, such as Galliard Homes’ Capital Homes project in east London.

“The prognosis for the industry, if action is not taken quickly, is that it will become seriously debilitated,” Farmer warns.

He highlights the “ticking timebomb” posed by a shrinking workforce, which could decline by 20-25% within a decade. More people are leaving than joining the industry each year and Brexit is likely to exacerbate the situation by restricting the inflow of foreign workers.

He puts forward an action plan to modernise the industry and boost housebuilding, including a “carrier bag charge-style” penalty. This envisages levying a tax of 0.5% of a scheme’s construction cost on businesses that commission work that does not support industry innovation and skills development.

The report calls for an overhaul of training by reforming the Construction Industry Training Body’s grant funding model; along with a joined-up construction strategy pursued by the government, construction industry and clients. Farmer’s recommendations also include a land value tax for big infrastructure projects.

The industry minister, Jesse Norman, said: “This government is determined to support more housebuilding, more quickly and in the places people want to live. Given the launch of the £3bn home building fund, Mark Farmer’s important review in this vital sector is very timely. It makes a strong case for change in the industry, identifies areas where it needs to improve, and sets out areas for action. We will now carefully consider his recommendations.”

Paul Stanworth, the managing director of Legal & General Capital, the insurer’s main investment division, said: “With such a chronic shortage of homes in the UK … we sincerely hope that Farmer’s review galvanises the entire sector to invest in innovation and secure its future.”

 

 

Article courtesy of Julia Kollewe @ the Guardian (www.guardian.com

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