With just 3 years left to attain the Scottish Government’s ambitious target of building 50,000 new affordable homes,  Mackenzie England assembled a panel of experts to debate the challenges and explore how Scotland’s construction market can work together to deliver more affordable homes.

We have highlighted the main issues and the panel’s proposed solutions here. Read on to find out more about the debate discussions in further detail.

Main challenges

  • Insufficient funding of affordable housing for longer term plans/investment to be made by many of the industry participants (both public and private);
  • Difficult, contaminated and complex sites being ignored and many brownfield sites lying dormant;
  • Lack of coordination and collaboration amongst Scottish Government, Local Authorities, Housing Associations and Developers to planning, standardisation and quality. This leads to lots of “reinventing of the wheel’ and major inefficiencies;
  • The slow and cumbersome planning process creates substantial delays and many additional cost challenges;
  • There is a significant skills shortage currently and it will get worse as many people across the entire industry retire over the next few years.

Potential solutions

  • Accessible, additional and sustained investment (particularly for brownfield sites);
  • Clearer guidance and direction around the planning and management of the housing programme;
  • Review of the planning system to provide a more speedy and efficient process which integrates development and infrastructure plans;
  • Allocation of suitable land;
  • Investment in skills, training and recruitment into the industry;
  • Collaboration through frameworks to deliver efficiencies.

 

The panel

Our panel of six was expertly chaired by Andrew Richards, who has been involved in the strategic development of housebuilding companies across the UK.  Joining the debate were Allan Briggs, JLL Director and Head of their Scottish social housing consulting team based in Edinburgh; John Edwards, Partner at multi-disciplinary consultant Brown + Wallace, non-executive board member of the RICS Scotland Board and management committee member for Blue Triangle Housing Association; Jackie McIntosh, who has over 20 years’ experience delivering affordable and mixed tenure development and is currently Director of Property Development and Initiatives at Wheatley Group, Scotland’s largest housing and care provider.  Also on the panel were Development and Regeneration Manager for City of Edinburgh Council Colette McKenna, who has responsibility for delivering the Council’s own ambitious new building housing programme; Calum Murray, Director at housing and regeneration contractor CCG (Scotland) Ltd, founding director of City Legacy and chair of the newly formed collaboration of timber offsite manufacturing systems specialists, Offsite Solutions Scotland and; David Smith, Managing Director of main contractor Ashleigh Building and Chairman of Developing the Young Workforce Ayrshire.

Context 

Demand for a significant increase in the supply of affordable homes in tackling Scotland’s housing crisis has been the subject of much debate for years. In 2016 when The Scottish Government committed to building 50,000 affordable homes during its current parliament (2016-2021), there were many who doubted that a programme of this scale – the largest housing programme of its kind in Scotland since the 1970s, could be achieved. Recent industry reports indicate that by working together , local authorities, housing associations, investors, developers, house builders, contractors, design teams and supply chains ARE delivering more affordable homes, however there are significant challenges and it’s not clear that the 50,000 target will be met by 2021, or what the future holds for the sector.

Co-incidentally, on the day the debate was held Homes for Scotland, the body which represents 200 of Scotland’s housebuilding organisations, released a discussion paper outlining their perspective on Scotland’s home building industry and the housing land market, with a view to exploring the challenges their members face and solutions required for delivering at scale to meet Scotland’s housing needs. Many of the topics debated at our event, are highlighted in the paper.

Exploring the main challenges

Although the Scottish Government’s target also came with funding (delivered through the Strategic Housing Investment Framework) and it may appear to the market that there is significant Government funding available, at the outset of the debate we discovered that with this, Local Authorities only have resource planning assumptions up to 2021. This causes uncertainty around financial planning for the medium and long term and causes significant challenges in developing affordable housing programmes. Colette and Jackie also highlighted significant shortfalls in the funding identified when aligned to what is required to develop and deliver their own housing targets. This is largely due to an increase in construction and development costs over the last 18 months, and the complexities and expense involved in acquiring or remediating difficult sites.

The panel also made it clear that one of the key challenges in delivering the Government’s overall target is a lack of Scotland-wide coordination; there is no strategy in terms of implementation or roll out of the programme or a means to accurately record and report achievements.

Coupled with this lack of strategy, is a lack of alignment between delivery of the target and the fundamental principles of statutory agreements. Many Local Authority Local Delivery Plans (LDPs) identify areas for housing development but there is no coordination with the planning system: the process for gaining statutory planning consents and building warrants is often cripplingly slow. This again makes predictability of housing delivery programmes very difficult, which is also a constraint.

Delivering a quality development

When the panel were challenged about delivering the right mix of housing tenure across Scotland, it was clear that there are massive variations across the regions. Where the land is cheaper to acquire and rents are lower, Local Authorities appear to be able to take a more traditional approach to delivery and a good balance between private and social housing. However there is a definite north/south and east/west split, with larger city areas able to be more innovative and less reliant on Government funding. The developments which are delivered in partnership with the private sector – either through Section 75 Agreements (contributions outlined in a planning contract between the local authority and a developer/landowner in connection with a planning application) or other routes, tend to be very successful. However, the panel did feel that there is a need for a review of Section 75 policies, to ensure a better balance between affordable and private sales, particularly in areas where the land is difficult to develop. Jackie also highlighted that a better approach to site planning is needed to ensure that there is better on-site integration of the housing mix, not just with social housing added to the back end of a site because it’s a requirement of the planning consent. 

This led into a discussion around the topic of standardisation: do the panel believe that a Scotland wide affordable housing design guide and specification would assist in the delivery of quality affordable homes?  Generally, the panel agreed that there would be efficiencies to be achieved in a uniformed approach, but in reality it could never happen as there is no body to take it forward and that a “one size” approach doesn’t fit all affordable housing requirements. They agreed that there is commonality in place across materials and design and standardisation could perhaps come through offsite construction systems, where quality and efficiencies are delivered through innovation in manufacturing. Interestingly the contractor and advisor panellists could see the benefits in standardisation perhaps more than the client party panellists could: they both agreed that input of community voice is essential to the success of affordable housing programmes and the fear would be that standard designs would stifle community engagement, as well as competition and innovation.

The panel then went on to discuss delivering a quality development with David highlighting that to ensure quality is delivered on site, there must be a strategy for communication and review – clear aims and objectives, stakeholder engagement and regular design reviews throughout and post construction are essential but simple ways to ensure quality developments are delivered.

Increasing the speed of delivery

Our panel were asked how the public and private sectors could work together to help increase the speed of delivery. It was highlighted at the start of the discussion that the planning system is a major constraint in the development process. Calum and Allan both agreed that there needs to be improvements made to the system to make it more efficient:  a responsible pro-development system where development plans, infrastructure and finance can be aligned. This led to a short discussion of the Planning (Scotland) Bill, which the panel agreed is unlikely to affect Affordable Housing or smaller developments but will impact private housebuilder and developers with larger programmes.

Jackie highlighted that to speed up the delivery process she would like to see more opportunities for public sector land being brought in the first instance to affordable housing providers – eg acquisitions of redundant NHS, Police, Local Authority etc sites.  If these sites are open to the whole market then the client body can often be swayed at the idea of a better offer – the Affordable Housing Provider misses out where they could be delivering a prime affordable housing site.

Site development

The debate that followed moved on to discuss the issue of remediating brownfield sites. The Shelter Review of Strategic Investment Plans for Affordable Housing published earlier this year, highlighted that the biggest risk to meeting the target was dealing with contaminated sites. The panel were asked if they felt significantly more grant should be allocated by the Scottish Government for contaminated land which is lying dormant:  this prompted a collective ‘yes’ response!

The panel also agreed that the finance should be specifically separated for affordable housing developments on brownfield sites, as they frequently experience problems where they need to deliver challenging sites in order to deliver true communities. It was also highlighted that the contaminated land grants should be structured and monitored by a regulator body or Homes for Scotland/ the RICS and reviewed on a site by site basis to avoid exploitation.

Affordable Homes Anderston built by CCG

Off-site manufacturing and industry skills

The next question put to the panel referred back to the need for the public and private sectors to work together to speed up delivery of affordable homes but this time with a view to the use of modularisation and off-site construction.

The panel all agreed that the main challenge in the construction industry across all sectors is less about the adoption of off-site construction and more about the industry’s major skills shortage. If the future of delivery lies in the skills of the next generation, then we need to ensure not only that there are sufficient numbers but that they are suitably skilled in the right areas. The panel collectively agreed that there needs to be investment in the industry for skilling up in new technologies and delivery methods.

There is a raft of senior industry people who are due to retire – Calum highlighted this is as high as 20% in the next 5 years, and its key that this gap is filled with both training and by incentivising people to come into the industry. David agreed and suggested that a traditional apprenticeship route – training people on site and growing their skills as part of your company – is key to managing the skills shortage. His firm had over 200 applications recently for 4 apprentice jobs – so there is demand to join the industry – we just need to ensure we create the right opportunities for the future to sustain the market.

This however raised the issue again of encouraging investment in to a market which currently has no certainty in its pipeline. Colette highlighted that due to the three year resource planning targets that Local Authorities receive from Government, it can be difficult to provide any certainty or commitment to build, say, another 3000 homes, – so they can’t instruct a developer or contractor which means they can’t invest in the relevant skills required to satisfy unknown future demand.

Improving procurement

Discussion moved to look at whether early contractor involvement helps or hinders a development and if procurement methods could be improved with regard to affordable homes. John highlighted that statistics over the 5 year delivery plan to 2021 estimate that 69% of new site starts will be for small developments of less than 50 units. This presents a huge challenge in terms of procurement not only from a resourcing perspective, but also in terms of the individual planning consents and building warrants etc – which makes the whole process time consuming. The panel agreed with John’s view that economies of scale need to be explored with better use made of efficient frameworks. Many of these frameworks include early contractor involvement (Scape and LHC) and have proven to be successful in delivering benefits – we need to be delivering affordable homes that last so of course contractors need to be a key part of this! However Jackie also stressed that it’s important that frameworks don’t become complacent – with the pace of change in the industry it’s key that frameworks are efficiently managed and regularly refreshed. The panel all agreed that procurement needs to be improved so that contractors don’t waste time tendering only to spend additional months “value engineering” because the process wasn’t correctly established.

On the subject of sustainability, in terms of its influence over a development’s price and design, the panel agreed it is playing an increasing role but can come at a cost and it’s a challenge to incorporate it at an early stage, so it’s an integrated part of the development.

Supply chain and skills shortage

The debate moved back to the subject of skills and in response to the question “do we have a supply chain issue or is there capacity to deliver the required 7000 new affordable homes per annum?”; the panel agreed that there is an industry skills shortage.

There are shortfalls in all disciplines and at all levels including both trades and professional services. The impact of Brexit on foreign labour will be key to how acute the problem becomes. And it appears that the problem is twofold: demand for skills is here and now and will only get worse; however there are not the resources to deal with the current demand. We need to look at alternative ways of recruiting and training to ensure that young people want to join the industry, are keen to develop their skills and knowledge and have a desire to remain a key part of the market. The panel all agree that it’s essential that the private sector develops relationships with schools and colleges as well as traditional routes through universities to encourage talent in to the industry.

In terms of supply chain, the panel highlighted that there are some inexperienced consultants in the market who are struggling to deliver major affordable housing projects, which in turn causes its own problems. The key to delivering additional homes is sufficient and reliable supply chain relationships, to ensure quality standards and timescales are met and that the relationships continue after handover, to ensure that community is at the heart of the development.

Meeting the 2021 target

So do the panel believe that the Scottish Government’s target of 50,000 new affordable homes by 2021 will be met? In a word: No – although it will be relatively close!

Collectively the panel believes that the industry will come close to meeting the target but the challenges will make it difficult.

Calum demonstrated that the Scottish Government’s own statistics show that with the current run-rate on completions, the 50,000 target will not be met until Q3 of 2023, and to achieve the target by the end of the current parliament the industry would need to complete a further 1009 units per quarter. (Based upon an average 1723 AHSP completions per annum.) John concurred that there will likely be a shortfall but reported that the recent Shelter statistics were more optimistic highlighting delivery of 45,387-49,773 units.

Beyond 2021

Andrew concluded the debate by asking the panel what their thoughts were regarding demand in the affordable homes sector beyond 2021: everyone knows that the housing crisis won’t just go away and they all agree that the industry needs to keep delivering to satisfy demand.

The panel’s general view is that there will likely be a downturn in the sector due to reported funding cuts, but that the sector needs to be sustained and defended in the future. They all agreed that it will depend on who forms the next parliament and what the budget looks like.  Everyone believes it would be disappointing if, after the delivery of the largest housing programme of its kind in Scotland since the 1970s, the effort, acquired skills and developed resources, did not continue.

Colette reported that City of Edinburgh has plans and a business case to build 10,000 affordable homes by 2027, and Jackie also confirmed that Wheatley have plans in place to continue developing post 2021, but both are dependent upon Government funding.

John highlighted that affordable housing providers are resourceful and innovative and he would therefore expect them to sustain current delivery and demand but Allan agreed that this would have to be creative if there are significant funding cuts.

SummaryAffordable Homes The Village built by CCG

So after an hour and half of interesting discussions in answer to the question of how Scotland’s construction market can deliver affordable housing, we have learned that despite significant challenges, the sector is working together and Scotland could see the delivery of around 50,000 new affordable homes by 2021 (or thereabouts!).  However to achieve this and sustain it beyond 2021, there needs to be:

  • Accessible, additional and sustained investment (particularly for brownfield sites)
  • Clearer guidance and direction around the planning and management of the housing programme;
  • Review of the planning system to provide a more speedy and efficient process which integrates development and infrastructure plans;
  • Allocation of suitable land;
  • Investment in skills, training and recruitment into the industry.
  • Collaboration through frameworks to deliver efficiencies

Once thing is clear, this is a topic that has generated a great deal of interest in the market and debate will no doubt continue as the industry approaches and works to achieve the 2021 target.

 

Mackenzie England would like thank everyone who came along and participated in making the debate a great event. Special thanks go to Andrew Richards for chairing the debate and to our panel David Smith, Calum Murray, Colette McKenna, Jackie McIntosh, John Edwards and Allan Briggs for their honest opinions and insightful contributions. Thanks also to RICS Glasgow regional committee Kerri McGuire and John Edwards and to CIOB for their support.

You can view the Homes for Scotland discussion paper “Delivering More Homes for Scotland: barriers and solutions” by clicking here. We would welcome your comments and views on the topic, which you are invited to share through LinkedIn here.

Mackenzie England will be hosting another panel debate in the autumn 2018. Follow us on LinkedIn to find out more. If you would like to be added to our email invitation list, please contact kirsty@mackenzieengland.com.


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