New approach to client-supplier relations vital to keep country building

JV North Chairman Wayne Gales says partnership working with suppliers, long-term government support and commitment to affordable housebuilding is vital to keep the country building.

You could see right from the start that Covid-19 wasn’t going to cause the usual kind of disruption to housebuilding.

Whereas in 2008 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.

In some instances the current economic shock could be said to have been already on the way before the pandemic or at least simmering for many years earlier – remember Brexit?

The position the sector, and affordable housebuilding providers in particular, faces today has of course also been exacerbated by the invasion of Ukraine and some poorly thought through fiscal policy from short-lived governments.

Since then, the market has shifted seismically at pace; the interest rate rise won’t help but felt necessary to curb inflationary pressure.

The sector has a long history of adapting to such challenges, spotting and capitalising on opportunities.

So how it responds once again in the coming months and years will be key given the recent rent settlement and continued capital support provided by government through the Affordable Homes Programme, especially now we are in a recession.

Michael Gove’s reappointment should be welcomed here, then, in that he already has experience and knowledge of the sector and understands the importance of regeneration and he re-committed to a manifesto pledge of building 300,000 homes every year (let’s leave the planning reform backbench rebels to one side for now).

Government support will allow us to continue building affordable homes, as well as play our part in supporting economic growth and helping sustain the housebuilding sector that is already under stress and in decline.

We saw in Barratt Homes’ trading update late last year that demand was cooling privately and this will filter down through housing contractors at all levels.

As the financial squeeze hits the housebuilding sector, responsible registered providers can – with the right government support in place and with long-term rental certainty – play their part in meeting the housing crisis, and, in doing so help 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-price inflation will be few and far between if at all, so flexibility is going to be of paramount importance for all stakeholders moving forward if we are to keep building much needed affordable homes for rent, rent to buy and shared ownership.

This is something we considered when designing JV North’s four-year £560m contractors’ and consultants’ framework in 2021, to try 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 combat challenges faced such as vital investment to replenish the ever-diminishing workforce that fuels the industry and ongoing development in modern methods of construction and greener, cleaner, more efficient homes for customers.

This is needed more so than ever given the growing cost of living crisis.

Recently we held an engagement day for the contractors and consultants we appointed to the framework with our 12 housing association members present to discuss opportunities and 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 on our new Dynamic Purchasing System portal.

This allows SMEs to access work and gives our members alternative contracting opportunities while supporting local economies.

Simply recognising that times have changed sends a strong message.

We need to evolve our offer to reflect the challenges all stakeholders are facing.

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, but also during challenging times like now and the foreseeable future.

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.

There is understandable collective nervousness due to inflation and interest rate rises, supply chain  and demand driven prices, a weak pound impacting imported materials and limited capacity in the sector.

There’s no easy answer of course 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 that 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 and so too does the 20% grant drawn down uplift at start on-site taking it to 95%.

Further evidence can be seen in two new house funding programmes for homelessness and older people announced recently. 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 and gradually slow, only releasing into the market properties they know will be mortgageable and return a good profit.

Will this offer an opportunity for the sector? If we keep building, the stretched-to-breaking-point supply chain side could be diverted across to supporting the development of even more affordable homes (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 limited capacity in the planning system right now).

In doing so, costs may stabilise and capacity retained.

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.

This article appeared on Housing Digital