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The State of the Region - The Housing Forum Topical Debate for the East of England

18 March 2009 | Darren James

Kents Hill Park Training and Conference Centre in Milton Keynes played host to the latest Housing Forum panel debate on the housing market in 2009 and beyond. A panel of cross-industry experts deliberated the consequences facing the market from an East of England perspective led by Guest Chair was John Cross, Chief Executive of Bedfordshire Pilgrims Housing Association.

The panel was drawn up from regional industry experts. These included:

Alan Carter, Head of Strategic Housing Services, City of Cambridge Council
Andrew Vickery, Partner, Trowers and Hamlins
Tim Breyer, Managing Director, The Breyer Group
Andy Brewin, National Partnering Business Manager, ICI Paints Akzonobel

The session began with an instant e-voting poll of delegates perception of current pressures.

53% of delegates believed that the market difficulties would get much worse before they got better.
42% of the room predicted that we would build less than 100,000 houses next year.
40% believed that it would take 5-10 years for the market to return to pre-credit crunch levels, with 47% predicting a more optimistic 2-5 years.
51% believed that the East of England region would fare better than the rest of the country through the difficult period, with 32% expecting it to suffer the same.

As guest chair, John Cross kicked off the discussion by analysing the current economic climate and its legacy for the East of England. It was noted that the downturn occurred very quickly and we now realise that the outlook for the industry is now much worse than predicted 12 months ago. However, the debate should not be about how bad the market is, it should be about how we should overcome these difficulties and what the market will look like after the recovery. The availability of loans for development is an issue and new banking facilities are becoming increasingly rare. Borrowing margins are at relatively high levels although the Bank of Englands interest rates are at an all time low. John believed that the turbulent climate brought opportunities for some housing organisations. There were stalled projects and available land that Housing Associations could invest in at a time when few companies could afford to. Housing Associations should be very clear about their original social purpose and understand risks when negotiating higher grant rates as the heart of Housing Associations do not lie in new housing alone. Existing residents are a major imperative. 4 million households rely on their Housing Associations to keep up the work on decent homes and invest in communities.

The Strategic Housing Role

Alan Carter described the strategic housing role as setting the local housing aspiration. Cambridge City Councils target is for 1500 new affordable homes to be delivered on an annual basis. Waiting lists for social housing are continuing to jump but the pace of development is slowing down so there is a case to investigate building Council housing again, as a contributor to the overall provision.

DIscussion from the audience raised the following points:

Councils will only ever build on small scales due to the technical barriers but there is a definite need to fulfill customers needs
Councils do possess the skills and financial expertise to develop large scale housing schemes.

The Issue of Procurement

Andrew Vickery guided the discussion on partnering agreements during the difficult trading times and the implications on procurement. Regulatory pressures and the need to advertise for contractors affects partnering and the supply chain.

It is widely accepted that there is a major risk of back tracking on the gains made after the Egan report a decade ago and the industry might resort to re-tendering for cheapest price. However, this does not equate to best value and, although we are in a climate of ever-shrinking budgets, the benefits of partnering should not be overlooked. Long term partnering agreements can result in stability for our contractors and a collaborative approach from the beginning of a project can result in less maintenance issues in the long term.

Discussion from the audience raised the following points:

The Housing Forum has seen framework agreements with large numbers of companies listed on them which resembles approved providers lists. There is very little to gain from these large scale agreements.
This approach has gone back to the pre-Egan days which poses a significant problem for the future.
As no one knows what will happen in the medium to long term it is very hard to plan for the future so companies have to be prudent and keep afloat in the present.

Will the housing industry look different in 5 years time?

Our third speaker, Tim Breyer, referred to his approach to running a regional contracting organisation. The Breyer Group has been established for over 50 years and 80% of business is in the social sector. Medium sized Housing Associations are seeing some recovery although the levels of refurbishment are slowing down due to the lack of capital receipts gained from housing sales. In Tims experience clients are committed to partnerships due to the benefits that have been gained in the last ten years, but is seeing evidence of clients re-tendering schemes and reducing costs by up to 10%. It is recognised that organizations emerging from the recession will learn from the mistakes of the past and be proactive in saving for a rainy day. We have seen £100million companies resorting to mass redundancies due to failures during the boom years.

Tim highlighted concerns about reversion away from frameworks as savings in early procurement can be lost. Breyers approach and strategy for the next five years is to go for stability through continuing focus on partnering. For the contractor, this gives benefits of keeping settled staff and the opportunity to invest in issues and processes that have environmental benefits.

Long term environmental initiatives should be the focus for organizations that survive the downturn as sustainability seems to have taken a back seat as companies plough their resources into surviving the recession.

Audience discussion included:

The viewpoint that as an industry we will continue to make the same mistakes that lead to boom and bust for decades to come unless real change is achieved.
Land owners will always seek the maximum payment for their land.
Why do we, as a nation, aspire to be owner occupiers, especially at a time when obtaining a mortgage is an issue?

Building in Quality

The session was rounded off by Andy Brewin with a discussion on the importance of improving long term maintenance. Customer satisfaction is key and long term maintenance costs will be critical in the future environment. Frequency of maintenance is disruptive to customers and longer lasting components can justify a higher price on this issue alone. Manufacturers could play a greater role in engaging with developers in building in long-term performance. Tenant satisfaction can be achieved by this collaborative approach. For example, by working with a paint company, developers can manage the use of colour and make small changes that can have a positive impact on peoples lives.

Manufacturers engagement can give clients a whole cost scenario and information on when components need to be replaced. The quality of products used is vital and it is important to note that a home is made up of many, many smaller components and each component needs to be paid equal attention. Creating homes and pride in places is important in todays society. However, Andy did realize the budgetary constraints put on clients and developers in the present market and so highlighted the need to make the very most of the limited resources that we have. A whole life cost approach is hugely important, and not only in the context of new builds.