The push and pull factors behind building new homes in the UK

The number of new homes delivered last year, the lowest annual completion rate in a decade, tells a story of an industry adapting to change and where the cracks in the traditional contracting delivery model have come under strain.

A new regulatory environment has not been helped by the wider macroeconomic picture, where energy price shocks have rocked supply chains and procurement costs.

New building safety regulations and a still evolving regulatory system, persistently high procurement and land costs and higher sustainability and quality standards introduced by the Future Homes Standard, are slowly compounding to reveal those in our industry who are adapting to deliver housing in a new environment and those who will have to quickly make significant changes to stay in the race.

In the meantime, completions of homes are grinding to a halt due to viability challenges while people continue to desperately need suitable homes. Why an industry would not be able to deliver enough of a product for which demand is soaring is a question with a complicated answer.

First, adapting to higher costs of building safe and sustainable homes will mean rethinking project economics, especially on large scale regeneration schemes that require multiple funding options. Until last year, the Building Safety Regulator was still coming to grips with processing new build applications, which added uncertainty to project costs due to extended timelines for approval, but has accelerated since to an average of 22 weeks, according to the latest data.

The new Future Homes Standard will start to come into force next year and will also add to the cost of a project, in order to achieve the low carbon heating and high energy efficiency targets set by the regulations. In the case of projects where viability was already a challenge, it is back to the drawing board for now.

However, these changes and new standards will require all businesses to make significant investments to upskill their workforces and establish the right processes and ways of working that are compliant with the regulations.

Second, we are looking at a stretched construction supply chain where fewer businesses are under pressure to respond to new standards and deliver the skills and materials required to build, and to provide consistency of quality across the industry. The pace at which SME sub-contractors can adapt to this changing regulatory environment is accelerating but at a different rate across parts of the supply chain. Main contractors who have made the right investments in their own businesses to adapt to regulations, can support the supply chain to move in the same direction, but it can’t happen overnight. The traditional sub-contracting model means that we rely heavily on these SMEs to adapt and upskill, which won’t happen at an even pace and will impact the industry’s ability to deliver to new standards in the medium term.

On the other hand, while a changing regulatory environment has put the delivery model under pressure, central and local government have proven that they listen to the industry’s challenges. In London, a final package of support was announced for housebuilding earlier this year, including a temporary relief from the Community Infrastructure Levy (CIL), the expansion of the Mayor of London’s planning powers and a new time-limited planning route. Outside of London, changes to the planning system, including the use of land on the “grey belt”, are translating into larger numbers of planning applications for homes. At the same time, the Building Safety Regulator has been accelerating the speed at which it processes applications for new build developments and we are seeing real change in and transparency of the timeline for approval, which will help us keep project costs under control.

As has always been the case, the answer to the industry’s challenges is greater collaboration and innovation. What we can do as main contractors is continue to innovate while the industry adapts to changing regulations. From data-enabling our businesses and investing in the right competencies and skills to backing cost-saving technology and innovation on sites, we can make it easier for clients to engage us early on in the development process and unlock much needed housing for delivery, built to the highest safety and sustainability standards.

Paul Woodhams is managing director of regeneration at McLaren Construction