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10/04/2017

News analysis: Can SMEs and housing associations help supply?

Words: Laura Edgar
Construction work

Diversity is essential if we are to solve the housing shortage - that was the message from a TCPA seminar on the housing white paper.

The recently published housing white paper (HWP) signals a “really important” change, suggests Town and Country Planning Association (TCPA) chief executive Kate Henderson.

Henderson was one of several speakers discussing the HWP at a recent TCPA seminar.  The HWP, believes Henderson, has helped “reframe” the debate. The white paper is “pragmatic”, she added, and “much more balanced in the types of tenures that need delivering”. But while the HWP was refreshing in its admission that planning is in need of more resources, a lack of focus on viability issues was troubling. 

Henderson spoke about the need to diversify the supply mix. While the private sector and volume house builders are a “very important” part of the supply mix, “they are never going to be the full answer to the question”. There is “always going to be a gap” one that will need filling by a full range of supply options, including SMEs and housing associations, she said.

Housing associations

Alistair Smyth, head of policy at the National Housing Federation, the trade body for housing associations, told the seminar that the sector built 40,000 homes in 2015/16. Its plan to build 120,000 homes a year, set out in 2013, has recently been refreshed to include increased housing association output over 20 years so that, by 2035, 120,000 homes a year are being built by the sector.

Smyth cited two projects by way of example to explain how housing associations are a vital vehicle for diversification of supply, including Peabody’s work at Thamesmead. 

"Housing associations can access finance and be confident over the long term that they will recoup it"

Before Peabody took over that project in 2014, the buildings were owned by Gallions housing association, the land by Tilfen Land and community assets by Trust Thamesmead. Smyth explained how Peabody used its financial capability to buy all three elements and bring them together. This, he argued, is an “almost a unique example” of a housing association owning the stock, but also the land, the utilities and the community assets.

Housing associations “can be patient investors,” added Smyth.

Most of the Thamesmead site is being funded by Peabody’s own funds, cheap debt and particularly the bond market, said Smyth.

“Not all, but a number of housing associations are uniquely placed to do that because they are long-term patient investors; they can assess finance and can be confident over the long term that they will recoup it.”

SMEs

Brian Berry, CEO at the Federation of Master Builders (FMB), told the audience that, traditionally, all homes in the country were built by SME builders. 

“In 1998, two-thirds of all new homes were built by SMEs. But over the last decade or so that has dropped.”

SME builders are important because they are “good for local growth,” said Berry. Employing local people offers competition and quality. A local builder’s reputation depends on quality of output, said Berry, with its key personnel often living within the communities for which they’re building.

The FMB sees the white paper as encouraging because it talks, “for the first time,” about the importance of small builders for delivery.

“If we continue following a trend of decline, we will become an endangered species” – Brian Berry on SME builders

Builders have said they are happy to pay more to get their schemes through the planning system, said Berry –  something proposed in the white paper.

However homes will not be built unless there are people to build them. Berry explained how the FMB’s quarterly trade survey suggests that there is a shortfall across the trades, with 59 per cent of its members having problems recruiting bricklayers and 41 per cent struggling to hire plumbers.

The FMB, said Berry, is looking at developing “employer-led trailblazing apprenticeships”. 

“People should be trained in a range of skills so they can withstand any future recession.”

Photo | iStock

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