How Government initiatives impact SMEs in construction

Another week has passed away and I actually heard someone say “it’s nearly Christmas” – how depressing, but even more so was then realising my wife has already started Christmas shopping! Depressing resonates in the industry at the moment with the consultancy framework changes and the affordable housing exemptions.

The consultancy framework sounds quite glamourous, surely most things do with consultancy in the title but the government’s troubled framework is about to be launched with 23 opportunities valued at approximately £2.9bn. Now the change of the framework from 6 to 23 is apparently to aid SMEs which I don’t totally get as they will still be competing with the large behemoth firms now I guess the upside would be boutique specialist firms that can really impress on a small section of the framework.

The whole framework has been fairly comical – first UK SBS left the management to CCS after controversially axing the procurement process and then there was the high court challenge by Turner & Townsend and then heavy criticism for no SMEs being awarded a place in the first round.

The framework will be split into 23 lots - one lot covering the whole of the UK, two covering overseas work, and 20 covering four individual disciplines across five UK regions. The current procurement timetable expects the framework to go live in March 2016 - nearly three years later than originally planned.

So that’s point one but then we have the small sites affordable housing exemption that was recently thrown out by the High Court. Building some sites requires a level of income, particularly a large number of small developments built by SMEs and to suddenly find out a certain percentage of the site needs to be affordable renders the site uneconomical! This scenario happened when recently the High Court made a landmark ruling that overturned the small sites exemption from affordable housing provision. It was a strange ruling given developments of 10 homes or fewer were excluded from the requirement to provide or contribute to affordable housing.



It does come as a somewhat humiliation to the DCLG who did inadequate consultation on the affordable housing provision. The small sites exemption was intended to speed up the planning process for housing, support local builders and reflect the difficulty of stacking up smaller developments. This ruling effectively renders many sites to potentially be abandoned.



So in the modern day where we should be encouraging our #SMEs there are two examples here of how they suffer. The framework at least has changed and will potentially help but as for the wider market for house builders there will need to be a revisit to whether a site would be viable without exemption from affordable housing.

 

Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.

Enjoy the weekend

Lee

The Government is moving (slowly) in the right direction on housing

I’m not very political and over the last few elections have flipped between who I vote for, focusing on the promise and past delivery. The Conservative government is pushing forward a radical policy agenda - nowhere more so, perhaps, than in housing and to me it is good to see that high on the agenda is home ownership (via various initiatives), holding housing associations more to account and getting rid of initiatives that added nothing. Everyone know about the right to buy policy but changes to zero carbon and removal of the housing association’s rent settlement were post-election surprises.

A recent PwC report showed that home ownership is going backwards as we enter generation rent (available PwC Generation Rent report) and is at its lowest level for a number of years – though people still desire to own their own home.

The Conservative manifesto pledge was to build 200,000 starter homes, sold to first-time buyers at a 20% discount to the market rate. The original thoughts around this was that the homes would be built on former industrial sites and surplus public land however this now appears to be a requirement heading for all “reasonably sized” sites, effectively the new “affordable housing” obligation on private developers. The details will be included in the Housing Bill, so let’s wait and see but sounds like a U-turn to me.

Housing associations are rightly concerned about right to buy. The track record for delivering more housing stock is low and if you increase purchases this will dwindle the stock altogether. An even worse problem and although statistics show the waiting lines for social housing is falling, that’s simply because people have been told they stand no chance and therefore removed from the list.

The push and drive of the Government has helped, don’t get me wrong, with the builders’ finance fund for example which has been designed to restart developments of between 5 and 250 units. Its main objectives is to help smaller developers and is open for draw down up to 31 March 2017 – get in while you can.


We cannot forget that housebuilding was at its lowest in a significantly long time and with initiatives such as Help to Buy and the reforms to the planning system under the National Planning Policy Framework, the housing market has returned. There is work still to do to increase supply to satisfy demand but one step at a time ey! You need more homes built for people who need them in places they need them. Is that too much to ask!

Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.

Enjoy the weekend

Lee

Solutions to housing but do they deliver

Over the past few weeks I have had the privilege of reading the submissions for the Variety Yorkshire Residential Awards and the one striking point is that whether you are a national house-builder, local house-builder, a PLC or a local SME that everyone is being increasingly innovate in how they deliver housing. Since 2014 there has been shift in the attitude to towards solving the UK’s housing supply problem and actually become a key political talking point during the 2015 election (though that feels a lifetime ago!). The overall crisis of affordability and ultimately supply continues to rumble but discussion around solution is becoming increasingly common.

 

So what do you tackle first? Well most people you talk to say the price, the market continues to rise ahead of wage inflation and those in London and to an extent the regions simply cannot get on the property ladder – not because of the banks but because the deposit far outstrips most twentysomethings savings. Affordability is linked to supply, while supply is low prices will rise. So how do you get close to building 250,000 homes a year?

 

• Help to Buy: Everyone has heard of this and to be honest it is performing well in driving housing sales. It was also good news that it has been extended. It is estimated nearly 40,000 homes have been sold under the scheme and supports first time buyers onto the property ladder. There is an argument though that although it has kicked started and invigorated the market it’s not solely going to solve the issue.
• Small developers fund (“SMF”): I’ve said before that national house-builders don’t need too much help as they already do things on such a grand scale that they must be doing something right. Small and medium house-builders however still struggle to secure financing. The SMF will provide loans that is hoped will unlock 15,000 homes but the life of the fund is too short to really kick start much and this needs rethinking as financing is the greatest challenge to a SME yet they have potential to unlock land that large house-builders deem unviable. In all fairness simply an extension of the funds life and greater promotion, even targeting companies would be the best idea.
• Garden Cities: We’ve done then once so let’s do it again. Sounds such a dream place to live, a garden city but in reality it won’t solve the problem particularly when the Housing Minister stated the Government is unwilling to show its support. Now I think if you throw support behind and select appropriate sites, i.e. those for commuting to London, Birmingham etc then you can create something special and the scale of them attracts the national house-builders.
• Increase density: You could follow suit with London where residential now is followed by the word “tower” – land is limited so simply build more. It works in London where there is a need for smaller apartments close to the busy business districts or for those who commute from the countryside but would it work in Sheffield, Leeds or Newcastle to the same extent. Doubt it!
   

There are many options that could help solve the current predicament but many suggested ideas are limited in the time available to them but only provide a short term solution with few offering large scale help. Created a drive behind public funded housing, like the good old days, seems an expensive but longer term answer. It needs funding to get it started but once the churn starts then it could have legs. All the above though miss out one person, the community. If a community don’t want a development they will do their best to stop it. Working with the community more closely from inception can mitigate this and allow developers and communities to better the community.

 

Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.

Enjoy the weekend

Lee

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