Delivery of new homes ’over-reliant on a handful of volume builders’, says housing minister

Housebuilding in the UK relies too much on a small number of housebuilders, the minister for housing has told a fringe event at Labour conference.

On the second day of the conference in Liverpool, known as business day, Matthew Pennycook said the industry needed to diversify.

According to the Competition and Markets Authority’s recent housebuilding market study, the largest 11 housebuilders provided around 40% of homes in the UK in 2021-22. These operated mainly through a speculative model in which land is bought in advance of construction and sale of homes, without knowing the final price they will sell each unit for.

Speaking on a panel organised by Nationwide and the New Statesman, Pennycook said: “We’ve got to diversify. There is no way we’ll build enough homes in this country without getting many more SMEs involved in building [and] we’ve got to give them the support they need to do so.”

He added that action was needed to “change the dynamics” of the housing market.

“We are overly reliant, everyone knows this, on a handful of volume builders that have a particular business model,” he said.

“We need a much greater focus on that master development role [on] large sites […] using the full powers that the government has to assemble land, to shape development so that we can bring forward more high quality, attractive, sustainable places with first class infrastructure and amenities”.

Labour’s election was warmly welcomed by other housing figures on the panel. David Orr, chair of Clarion, expressed his feeling with a simple “hallelujah”.

“Isn’t it fantastic for us, who’ve been involved in housing for decades, to be talking to a government that wants the same things that we want, and where there is energy and drive and commitment,” he explained.

“The statements that we’ve been hearing from Angela Rayner and from Matthew are all the kinds of things that we have been looking for, campaigning for, lobbying For, for years and years,”

He expressed a hope that housing associations would be given a long-term settlement, describing the impact of rate cuts introduced by previous Conservative governments.

Orr noted that Clarion was currently bringing forward a major regeneration programme in Merton and explained that the housing association “could have been doing two of them” were it not for the rate cuts.

But while Labour’s housebuilding push has been broadly welcomed in the housing sector, there were signs of a degree of frustration - despite Pennycook’s comments this morning - among SME housebuilders. 

Interviewed by Housing Today earlier this year before the general election, Brian Berry, chief executive of the Federation of Master Builders, said the organisation had enjoyed better engagement with Labour during the Corbyn years.

“John McDonnell was a good friend of the FMB and stood up and spoke about the value of the building industry and small builders,” he said at the time. 

“You hear less of that from the current Labour front bench. My impression is that they are engaging with larger businesses, trying to work with big institutions and the City.”