With the economy continuing to battle strong headwinds, cultivating strong relations between clients and suppliers will prove vital if the country is to stand a chance of meeting its housebuilding ambitions, argues JV North chair Wayne Gales
Right from the start, COVID-19 wasn’t going to cause the usual kind of disruption to housebuilding.
Whereas, in 2008, when the collapse of the Lehman Brothers sent global financial markets into immediate full-blown panic, with Armageddon only avoided by the US government’s $700bn emergency asset relief programme; the pandemic stored up trouble.
The current economic shock was arguably already on the way before the pandemic – remember Brexit? Now, the sector, and affordable housebuilding providers in particular, face economic challenges exacerbated by Russia’s invasion of Ukraine and poorly considered fiscal policy from Liz Truss’ government.
The result is a seismically shifted market, higher interest rates, and recession. As the financial squeeze tightens around the housebuilding sector, its response will be key.
Responsible registered providers can – with the right government support in place and with long-term rental certainty – tackle the housing crisis, in doing so helping to retain capacity and talent within housebuilders both large and small.
Of course, we need to change our approach to do so. The days of fixed-price schemes at a time of high inflation will be few and far between, if at all, so flexibility is going to be vital for all stakeholders moving forward if we are to keep building much-needed affordable homes.
When designing JV North’s four-year £560m contractors and consultants framework in 2021, we wanted to ensure contractors and consultants felt valued and recognised as key, long-term delivery stakeholders.
Without them, we simply can’t build the quality and quantity of homes we want and need to. Nor drive much-needed innovation and change to secure investment to replenish the ever-diminishing workforce that fuels the industry and progress modern methods of construction.
An engagement day we held for contractors and consultants appointed to our framework allowed us to discuss opportunities, better understand the challenges, explore how to work together more effectively, and share market intelligence.
Delegate feedback was excellent, and in addition to those appointed, we are being flexible by separately running tenders for smaller schemes and offsite work via the Dynamic Purchasing System portal.
This allows SMEs to access work and gives our members alternative contracting options while supporting local economies.
Contractors and consultants want to work with organisations they feel valued by and stand shoulder-to-shoulder with them, not just when things are going well.
“Our sector has always been counter-cyclical in many ways – we continue building even in the most difficult of times”
Clarity is therefore more important than ever, so all parties have clear and reasonable risk and reward boundaries and understanding; we need to look beyond narrow economics and consider broader long-term value.
Understandably, there is collective nervousness due to inflation and interest rate rises, supply chain and demand-driven prices, and a weak pound impacting imported materials.
There’s no easy answer to all of this. But if all stakeholders see the bigger picture, are willing to have open conversations, are prepared to listen – and if you also have a long-standing relationship – then that is a better place to be.
From our most recent conversations with Homes England, it is clear they want to listen and fully recognise the pressures we are facing. Taking a view on schemes they might not have previously looked at demonstrates new flexibility, as does the 20% grant drawn down uplift at start on-site taking it to 95%.
Our sector has always been counter-cyclical in many ways. Invariably, we continue building even in the most difficult of times. But this can only continue if there is some certainty, which includes future rent increases being viable to support investment in both existing and new homes, while also affordable to those we serve.
Interest rate rises and reduced mortgage offers will likely see some housebuilders mothball schemes, only releasing onto the market properties they know will be mortgageable and profitable.
If we keep building, the supply chain could be diverted across to supporting the development of even more affordable homes. This could stabilise costs and retain capacity. (I want to end on a positive, so won’t dwell on planning policy, loss of Section 21 as a growth corridor for affordable homes of all tenures, or the limited capacity in the planning system right now.)
So, if we cement relationships, maintain the government commitment and longer term certainty we desperately need, there’s an opportunity for us to play our part keeping the country building and help prevent the economy from contracting further, whilst continuing to supply much-needed affordable homes.
Image: Wayne Gales, chair, JV North
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