Putting our houses in order

The DTLR's policy document proposes to bring one-third of all social housing, some 300,000 homes, up to a decent standard by March 2004 and build 25,200 new homes in the same financial year. To achieve these targets, A Decent Home for All lays out an array of ambitious initiatives, including huge stock transfers from local authorities to housing associations, PFI schemes for refurbishing local authority housing and arms-length management companies.

Lord Falconer, the new minister for housing and planning, expects the construction industry to be rubbing its hands with glee at the prospect (see interview, pages 45-46). But how do these construction commitments measure up to national housing need? What obstacles does the programme face? And what are the chances of these commitments being achieved within the government's timescale?

The stakes could hardly be higher. If projects are delayed and public spending gets squeezed by a recession, their budgets could evaporate. Or they might be guillotined by the next general election (along with Tony Blair's ancien regime).

Compared with the housebuilding records of previous governments, the current expenditure plans pale into insignificance. The total number of houses built in the public and private sectors last year amounted to only 166,400 dwellings. This was the lowest figure since 1924 (with the exception of the war years). Household formation, however, is not abating, with the result that the gap between housing provision and requirement is growing by some 40,000 households a year, according to the DTLR's own figures.

Even with the jump in the Housing Corporation's gross expenditure, from £789m this financial year to £1.24bn in 2003/4, no rise is expected in the number of dwellings built by housing associations. This stasis is explained by the shift in focus to London and the South-east, where site acquisition and construction costs are higher than in the rest of the country.

The total number of houses built in the public and private sectors last year amounted to 166,400 dwellings. This was the lowest figure since 1924

According to city analyst Schroder Salomon Smith Barney, total UK expenditure from public and private sources in social housing, combining new-build and repair, maintenance and improvement will rise 4.9% from £7.13bn this year to £7.48bn in 2003/4 (at constant 1995 prices). But even this highpoint is lower than expenditure in the last four years of the Tory government up to 1997.

There are several pitfalls lying in wait for housing clients and their project teams. For a start, housebuilding is being drawn into a much larger and far more complex world of urban regeneration, pulled by the new initiatives launched by A Decent Home for All.

In the words of Ian Davis, director-general of the Federation of Master Builders: "The greatest danger to the proposed cash becoming bricks-and-mortar is the government's linking of housing with education, health, crime and jobs.

Although this is laudable common sense, it means that social housing projects will have to address a wider urban agenda rather than just housing. This in turn means that projects will become part of complex and time-consuming urban regeneration schemes. More partners are involved, they may take longer to deliver, or may even slip down the programme."

Taking partners takes time
Partnering is now the name of the game, with long-term arrangements encouraged between social landlords, private developers, consultants, contractors and the rest of the supply chain. As Jacquie Cannon of Construction Forecasting and Research explains: "Even before a project can start, a long chain of evaluations and negotiations must take place, including getting agreement from financial institutions. This is all very labour-intensive and time-consuming."

Total UK expenditure will rise from £7.13bn this year to £7.48bn in 2003/4. But even this is lower than in the last four years of the Tory government

The government's plans for council housing PFIs are a case in point. About £760m has been earmarked for refurbishing council housing through PFIs over the next three years, with local authorities invited to set up the first eight pathfinder schemes last year. But Keith Carey, formerly with Laing Partnerships and now a director of HTA Architects, is doubtful that any of these will reach financial close by the end of this financial year. "PFI bidders require a much greater degree of certainty than housing associations taking on stock transfers," he says. "This calls for really serious intensive surveys, which has caused delays."

Large-scale voluntary transfers from local authorities to housing associations make up one of the most ambitious initiatives of A Decent Home For All, which pledged to transfer about 200,000 homes a year. Although the government has set up a war chest that will rise to £211m in 2003/4 to help such transfers on their way, they mainly rely on housing associations forming deals with private developers and investors to raise cash, which has been estimated by Social Housing at £1.8bn a year.

Where there are profitable regeneration opportunities, particularly in inner London, voluntary transfers have attracted developers such as Godfrey Bradman's European Land, active at Elephant & Castle. But in less profitable locations, Davis points out: "The capping of housing association rents in line with the retail prices index, due to start in 2001, may inhibit their ability to raise finance from the private sector."

The overriding problem in stock transfers, however, is that deals cannot go through without approval by the council tenants, and the more ambitious the scheme, the more suspicious the tenants tend to become. Earlier this year, a proposed regeneration scheme at Vauxhall in south London was turned down by tenants. The consortium behind it, led by Wimpey, had wasted two years of intensive planning work.

In the opinion of Peter Phippen, veteran senior partner of PRP Architects: "The key problem in the delivery of housing is the planning system." As with any development proposal, housing is beset by the nimbyist reaction of local authority planning committees, who are fearful of objections by their electorates.

The key problem in the delivery of housing is the planning system Peter Phippen, senior partner, PRP Architects

Even worse aggravation is caused by section 106 "planning gain" agreements in Greater London, the South-east and a few high-value towns such as York, Harrogate, Oxford and Bristol. The House Builders Federation has slammed planning gain deals, in which planning permission is granted to private housebuilders in exchange for affordable housing, as a backdoor tax. "If the level of affordable housing on a site is raised to 50%, as is proposed in London, then the whole scheme becomes unviable for the private housebuilder, and there's no new housing of any type produced," argues Giles Atkinson, the HBF's planner for London.

As far as social housing contractors are concerned, the most frequently cited problem is the skills shortage. Not only are traditional trade skills, such as plumbing, carpentry and bricklaying, in short supply in the South-east and other areas of intensive building work, but housing authorities and consultants report a shortage of professional surveyors and architects.

Training schemes are being set up by local authorities, housing associations and their partnering contractors. Liz Willis, policy officer of the National Housing Federation, which represents housing associations or registered social landlords, believes that regional development agencies could do more to support construction training. And John Perry, director of the Chartered Institute of Housing, suggests: "As there are a high proportion of asylum-seekers with building skills, we would like them to be given permission to join in housing construction."

Is Egan the solution to all ills?
The government has a panacea for the industry's concerns: the Egan agenda of partnering and lean management. Within a couple of years, it will be mandatory for all housing associates bidding for corporation grants to be fully Egan compliant.

However, the corporation's evangelism is greeted with a certain amount of scepticism by the building industry. For a start, registering for Egan compliance is little more than a box-ticking exercise. Proof of whether or not they are implementing these principles must wait until corporation officials carry out audits over the next 12 months.

It’s very difficult to make day-to-day housing repairs profitable. It’s time consuming, orders get misplaced and tenants are often out

Noel Foley, Hackney council

Willis points out: "As far as we can see it, only the big players in construction are interested in the Egan agenda. More small and medium-sized enterprises and subcontractors need to come on board." On the local authority side, even Noel Foley, strategic procurement manager for Hackney council and an Eganite, is sceptical about the timescale of implementation. "For the 400 local authorities," he says, "implementing the Egan agenda is a 10-year programme that will stretch well beyond the next election."

Then there is the problem posed where affordable housing is built directly for housing associations by private housebuilders under section 106. Even Clive Clowes, head of procurement at the Housing Corporation, concedes that "trying to get private housebuilders to take on Egan is a task too far for us. They've got to want to do it".

Prefabrication, or off-site manufacture, is the construction method favoured by Egan, and the corporation has set in train seven pilot projects using selected timber- and steel-frame systems, with a budget of £80m over two years. However, despite various experiments, prefabrication could take years before it has an impact on housebuilding again. In the first year of the corporation's Kickstart programme of pilot projects, only £24m of the £40m allocation has been spent, and Beazer Partnership's pioneering Amphion project of volumetric timber-framed housing stopped after the company was acquired by Persimmon.

Finally, there is the question of how profitable and attractive to building contractors and consultants social housing work is. The NHF's Willis says: "The government is expecting year-on-year efficiency savings as part of the Egan agenda. The government is assuming the RSLs can deliver against this agenda, and obviously the pressure to increase efficiency will fall on the RSLs' construction partners. These partners want to see their profit margins increase, while the RSLs will want more for less. What incentives will builders have to cut costs?"

Foley, of Hackney council, says: "It's very difficult to make day-to-day housing repairs profitable. It's time consuming, orders get misplaced and tenants are often out."