Recent government commitments to social housebuilding look impressive. But how much can really be delivered over the next three years?
When it comes to public-sector housing development, the lights have switched to green. Government expenditure on social housing construction and refurbishment will jump from £3.48bn this year to £4.41bn in two years' time. To turn the cash into new and improved affordable dwellings, the DTLR has a detailed and comprehensive action plan in place, entitled Quality and Choice: A Decent Home for All, published last December.

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."

Social housing: Key aims

Government expenditure in England is to rise 16% to £4bn between this year and next, followed by a further annual rise of 9% to £4.4bn

The bulk of the spend will go on refurbishment to bring one-third of social housing to a decent standard

The rest of the UK

Total capital investment in council housing this year is £356m. In addition, Scottish Homes has earmarked £175m, along with a further £120m of private investment, for housing associations to build or improve 5100 dwellings. Wales
In contrast to other UK regions, capital investment in social housing in Wales is falling from £87m in 1998 to only £62m this year and next. However, starting next year, about 193,000 council houses could be transferred to housing associations, triggering a £1bn investment in refurbishment. The procedure is for the Welsh assembly to allocate capital to housing associations in partnership with local authorities. Northern Ireland
The target for public sector new build in Northern Ireland is 1400 homes at a cost of £61m, with another possible £35m coming from the private sector. The Department of Social Housing allocates capital to local housing associations.

The sharp end: three pioneering associations

Construction crusader
Places for People
England’s second largest housing association, Places for People (formerly North British Housing Association) is planning a bold move to tackle what it describes as the “perilous state” of the construction industry. The group, which operates nationally, has the long-term aim of becoming the main contractor on all its building projects. The aim is to circumvent the growing difficulty of finding a suitably skilled main contractor in the market. “By becoming main contractor on our projects, we hope to improve our suppliers’ training methods and have more control over our projects,” says David Shaw, group director of development and procurement. Shaw admits that there is no timeframe for the project, but says the move is the surest way for the housing association to meet the efficiency savings demanded by the government. The group has a construction spend of £10m this year and is looking to build 1500 units – an increase of 30% on last year. To meet this target, the association is now looking to partner with consultants and – in the meantime – contractors. “Housing associations in the past have continuously reinvented the wheel; builders come in and do their work and then they are off again. But through partnering great efficiency savings can be made,” says Shaw. Taking stock
Whitefriars Housing Group
Last September, Coventry council disposed of 20,000 of its council homes in the country’s largest housing stock transfer. The Whitefriars Housing Group, an association set up to take on the housing, is planning a £240m refurbishment programme over the next six years. Last June, Whitefriars signed up Carillion Housing – which has since merged with Lovell Partnerships to form the UK’s largest social housing contractor – and Wates Construction to tackle the refurbishment programme. “We are following the partnering agenda using national contractors, as this is the only option open to us with a project of this scale,” says Mike Brown, head of property development. “We see the big issue facing us as resourcing appropriate labour.” Stewart Davenport, managing director at Lovell Partnerships, says: “Partnering with an association – especially on a stock transfer of this size – provides us with a fantastic opportunity to actually train people.” Winning designs
Ujima Housing Association
Although only 17th in the ranking of English housing associations by size, Ujima has walked off with this year’s largest development allocation from the Housing Corporation, worth £39m. This is earmarked for the development and refurbishment of 1085 dwellings to rent this year. That allocation illustrates the shift in government policy towards increasing affordable housing in London and providing homes for black and minority groups. Ujima’s other claims to fame are three Housing Design Awards won over the past two years. These are a testament to the housing association’s independent approach to design, despite its dependence on private developers for land through section 106 “planning gain” agreements. Walter Menteth Architects designed all three schemes and both Ujima and the designer attribute their success to a close, informal relationship. Walter Menteth, senior partner at the architect, says: “Ujima ensures that for each project there is a single point of contact, which helps a lot.” The architect also appreciates Ujima’s use of traditional contracts such as JCT and is convinced that a project based on partnering agreements would not produce such successful results. “Partnering agreements would just mean more bits of paper and make the design process more formal, which I don’t think would benefit anyone,” he says. Sue Belk, Ujima’s development director, says whichever form of contract is used, good design is a priority. She insists that this does not have to cost more, but if it does, then Ujima is prepared to subsidise it with its own money.