Skills and homes

Originally published on September 23 on Inside Edge 2, my blog for Inside Housing

If ‘Brexit means Brexit’ should it also mean a new programme of investment in social housing?

After a referendum that saw 63% of social tenants vote to leave the European Union, the attractions should be obvious. For ‘left behind’ voters it could mean both homes and jobs. For the government, now apparently edging away from an obsession with home ownership, it could offer a big pay-off from Philip Hammond’s ‘fiscal re-set’. For the purposes of this blog I’ll ignore all the other arguments in favour.

But it could also play into the wider politics of Brexit. Theresa May’s soundbite has yet to be translated into anything substantial but seems to be heading towards a ‘Hard Brexit’ outside the single market on the grounds that the referendum was a vote for controls on immigration.

That has huge implications for the housebuilding sector and the wider construction industry. Berkeley Homes boss Rob Perrins even claimed last weekend that a block on EU immigration could cut new homes by half. That is an exaggeration that could say more about his own workforce in London than the industry as a whole but this is still a huge issue. An alliance of construction organisations warned Brexit secretary David Davis earlier this month of a skills crisis if he does not make it a priority in the negotiations to come.

And the skills prospects are worrying enough already if we are to meet the government’s target of a million homes by 2020, let alone build the 300,000 homes a year required in England. Brexiteers will argue leaving the EU will cut demand. If only things were so simple.

A report by the construction consultancy Arcadis last year looked at the labour and skills that would be required to build more homes. Based on Census data, it estimated that there were 220,000 non-UK born workers in a total construction workforce of 2.4 million in 2011. That proportion of 10.6% had doubled in the previous 10 years.

The housebuilding sector is estimated to employ the full-time equivalent of 1.5 workers for a year to build a typical home. The fall in output following the financial crisis saw the workforce fall from 330,000 in 2008 to just 210,000 in 2014. Many of those missing workers have retired or left the industry, taking their skills with them.

Getting output back up to 230,000 homes a year will require an extra 135,000 workers with bricklayers, as ever, in the shortest supply. However, it’s not at all obvious where they are going to come from. The construction industry as a whole is estimated to need a million new people by 2019 including 700,000 to replace older workers coming up for retirement.

Add Brexit-imposed curbs on migrant labour and the problems would become even worse. In the short to medium term, Hard Brexit or not, the industry will need migrant labour to fill the skills gap.

Things could have been different if the government had increased investment in housing after 2008 but allowing the industry to shrink in line with the market has left it desperately short of capacity.

But that was then: what can be done now? Two things seem to be essential and both will mean reducing reliance on the market.

First, more prefabrication. Investment in new construction techniques is starting to happen in the build to let sector and is already happening in social housing (as, for example, in the Accord factory that Gavin Barwell visited on Thursday).

Increased prefabrication will require greater certainty than a market-led approach can offer (factory owners investing now want to know they won’t have to mothball them as boom turns to bust in a few years) and a different business model. One of the main advantages is speed of construction. This will appeal to developers of rented homes and apartments for sale but makes no difference to traditional developers reliant on selling sequentially.

Second, more training. Market-led approaches to housebuilding do not support long-term training programmes that need certainty not boom and bust. That in turn means counter-cyclical investment to cover for the next slump in private sector housebuilding. That could be build to let or social housing or maybe even the rent to buy homes advocated by Renewal recently but it does mean a different approach.

Of all the forms of investment that Philip Hammond could consider for his fiscal reset, only repair and maintenance is more labour intensive than housebuilding. Investment in training and in housebuilding factories in places with high unemployment could be a Brexit dividend for areas that feel left behind. Freedom from EU procurement rules will enable government agencies and housing associations to specify more training and community benefits in their contracts. There could also be scope to combine work on new homes and repair and maintenance within localities.

Combine all these arguments and you can begin to see the outlines of a programme that could deliver homes, jobs and skills at the same time as it brings post-Brexit Britain closer together.