16
Examination of witnesses
Richard Cook and Alison Crofton.
Q25 The Chair: Good afternoon and welcome back to the House of Lords Built Environment Committee. This is the second part of our session in which we are going to be looking at the role of developers of different sizes and scales in the new towns programme. I am absolutely delighted to have Alison Crofton, the chief regional delivery officer at Homes England, and Richard Cook, the chief development officer at Clarion Housing Group. Thank you so much for joining us today. As you know we have a series of questions to ask from around this horseshoe. All I would ask of yourselves and my colleagues is just to keep your questions and answers short if at all possible.
Baroness Lawrence of Clarendon: My question is around housebuilding and I am going to keep my question really short. What are the most significant challenges affecting the housebuilding sector? What steps can the Government take to address these challenges in the short term to ensure that sectors are able to successfully deliver new towns over the coming year and decades?
Richard Cook: Clarion Housing Group is the UK’s largest affordable housing provider. We build about 2,000 homes a year with partners. As we sit here today, I would say the biggest challenge for our industry is viability. We have seen significant inflationary costs over the last three to five years. If you look at some statistics, it is quoted between 30% and 40%. That is through hyperinflation from all the challenges that we have in Ukraine and recently in the Middle East.
That means that fundamentally the base level of cost has increased dramatically. On top of that, we have seen a lot of legislation change. Most actually has been needed but it comes with a cost again. While that has happened, we have probably seen the value proposition stay fairly static over the last number of years. We have that squeeze between costs increasing and value staying the same. If you actually look at what that really means, it means volumes are actually decreasing rather than increasing and we have that level of uncertainty.
Development is about long-term investment. New towns is a great example. A new town will take 30 to 40 years to come to fruition and actually develop through its progress and we will go on many cycles and everything that comes with it. For the sector supply chain to invest in skills, new materials and innovation, we all need a level of stability. We probably have not had that in the last three to five years. That just means decision-making becomes more complex and lots of organisations take short-term decisions.
We are quite lucky. We are an affordable housing provider so we take the long-term view. We are 126 years old. You have to remember that companies that are in PLC organisations actually need to report every six months. You have that challenge between how you take a long-term view but also making more returns that are required of you.
Alison Crofton: I can come in and explain how Homes England works on long-term delivery in terms of large strategic sites that are complex in terms of our live delivery activity. How Homes England tackles it is that we have actually restructured as of 1 April to become a regional place-based first model. We have live discussions with the place first to make sure that we deliver what is needed on that site and for that local area.
We have also set up the National Housing Bank and the National Housing Delivery Fund, which allows us to have a flexible, very fleet-of-foot response to the challenges that the sector and partners such as Clarion have. We are also a member of the New Homes Accelerator where we form part of a partnership with MHCLG and the Greater London Authority in order to pick up the themes and challenges that partners such as Clarion experience. We use those to do cross-government relationships to improve the grit or the sludge in the system that our partners have.
We also have very specific workstreams, such as downturn planning, which we are in now. That is more or less in reaction to aspects such as the Strait of Hormuz where we work with our partners through intelligence gathering, round tables, et cetera, to see if we need to change our funding or our response to help our partners keep going in that market.
Baroness Lawrence of Clarendon: The Government were hoping to have 1.5 million in housing targets. How feasible is that for delivery? Within your industry, where do you see being able to deliver on what the Government’s intentions are?
Richard Cook: The 1.5 million target is aspirational. I am supportive of an aspiration to get houses built. We have a housing shortage in the UK so there is no harm in having an aspirational target. It is going to be very difficult to meet the aspirations of 1.5 million when you look at the statistics and the numbers that have been delivered in the first two years of the Parliament. We have to be realistic about that. To make it work, you need lots of things to come together. We are supportive of the planning reforms, I have to be honest with you; they will make a difference in terms of delivery. We have seen some very strong actions.
We are involved in Tendring Colchester Borders Garden Community as the master developer. That is 7,750 homes and that is now in planning. We have seen the intervention there from Government. We have had the accelerator team involved in that project. That has been very successful at bringing the statutory authorities and the statutory consultees together, which can also be a challenge. They have actually brought people together and shaken a few heads to get to the right outcomes.
We had the statutory water authority demanding that a new sewage treatment works be built for that project. Ultimately the demand was proven not to be required and that was actually by the accelerator team bringing the relevant people together. That would have been a sticker that would have ground that project to a halt. That side of it is working.
You have things such as the affordable homes programme that we are heavily involved in with Homes England but we need that to come forward at pace. At the end of the day, how much we can actually deliver in the early years will be very much dependent upon how much money is available from Treasury. There are a lot of things riding on this.
If I look at our core business, which is affordable housing, we also do market sale and shared ownership because we build big mixed-use communities. The current housing market is not in a good place from a sales perspective. That ultimately means again that the demand side from customers is reduced and you are not building houses if you do not have a customer to sell to. There are lots of challenges—interest rates, hyperinflation and all those things that we all know about—that are always making that 1.5 million aspiration challenging. We should not forget there are some good things going on that are definitely making a difference.
Baroness Lawrence of Clarendon: Some of that sounds really positive. The 1.5 million is an aspiration but you are managing to do something, which is really positive.
Alison Crofton: Last year, Homes England delivered over 40,000 completions and over 42,000 starts, which was actually counter-cyclical to the market because completions overall were going down. We have done that by working with our partners at Clarion, listening, changing and making sure that we have changed our structure to become place first, changing our funding so that we are flexible and everything I alluded to in my first response. We just have to make sure that we really listen to our partners and stakeholders. We are very aware of the fact that we cannot do this alone. Partnership is absolutely key to this: that is public-private and public-public partnerships, and that is why we work very closely with partners such as Clarion.
Q26 Baroness Andrews: It is very good to see you both this morning. I have a question about Homes England and the housing bank in relation to the question about the target for affordable homes, particularly now as we look at the need for long-term planning in the new towns. When will we be able to see money flowing from the housing bank into that strategic new settlement and what will the transition arrangements be from the present, rather complex funding arrangements that Homes England had to this more streamlined situation? Are you working with, for example, the taskforce or some new sites? They have had their SEA done. At what point do you join the dialogue about funding from Homes England?
Alison Crofton: You are absolutely right in your observation about the complex funding arrangements and the different criteria that we have had in the past. That is exactly why we set up the National Housing Bank and National Housing Delivery Fund on 1 April. That allows us to be flexible so there is not particularly set criteria or ring-fences within that fund in order to respond to the place and to what makes the biggest impact.
In terms of the social and affordable homes programme, Homes England is responsible for about 70% of the £39 billion of the 10-year programme, which is about £27 billion over 10 years and which we very much welcomed. They are just taking us through all the applications at the moment and that will be deployed as soon as we have a ministerial steer going forward. We are working on that and can say that it has been very popular and oversubscribed, which we expected.
There are other aspects of the bank where we have changed our products. We still do equities, loans, guarantees and debt but are working on better workstreams for small and medium-sized enterprises in particular, where we have really expanded our workstream, and that is where the bank will be deployed. The bank has already started doing business. As of 1 April we have done three SME loans and we have already done a number of deals and equity partnerships going forward. We see it as a real positive that the National Housing Bank—under the control framework that Treasury has allowed us to go under—allows us to be flexible, have very swift governance and respond to our partners such as Clarion as to what they need in relation to economic and political environments.
Baroness Andrews: In relation to the new towns, the funding for affordable housing for the new towns will come out of that 70% that is committed to social housing, as I understand.
Alison Crofton: That is correct.
Baroness Andrews: Will you have to wait until those bids come in from the developing corporations or whoever will be actually running the new towns? Is it correct that you cannot take the initiative at this point?
Alison Crofton: That is correct. We wait for the bids to come in and allow our private sector partners—that are better at it—to actually deliver the houses.
Baroness Andrews: I have one final question. There was a separate stream under the old scheme for remediation. A lot of these sites will probably be quite heavily contaminated. Is that still a separate stream? From what you said, it sounds like a lot of the conditions are going to be removed, so will it be seen as a block fund?
Alison Crofton: We probably experience contamination on 100% of our sites. We are definitely a brownfield-first agency and we take that from various areas. For example, we provided a land intervention at York Central right by the station where we did a joint venture with Network Rail. We acquired land next to Network Rail that had high contamination and a very high infrastructure ask and the private sector just could not get its business model to work.
However we knew that if we stepped in and provided the decontamination, rails, roads and bridges, the private sector would then be interested and deliver the homes that were acquired there. We have spent probably £50 million to £70 million in terms of contamination but that also includes two new bridges, 1.3 kilometres of roads and 1 kilometre of cycleways. I do not have the breakdown in terms of contamination and infrastructure.
Baroness Andrews: As a model, will that funding continue into the new towns where you will be looking to support the private sector through the fundamental ability to build?
Alison Crofton: Absolutely. We make sure that we enable sites so that they become attractive investment propositions. Nine times out of 10 that will involve getting outline planning and putting the infrastructure in first. Sometimes that includes schools, such as Northstowe in Cambridge, and decontaminating land so the platform is ready for partners such as Clarion and private sector partners to then start building.
Q27 Lord Bassam of Brighton: You partly answered this already but the Government’s ambitious 1.5 million programme is well known and 40% of that has to be affordable. How can housebuilders of different scales be encouraged to support and deliver on that target and do you think it is still achievable? What are the barriers? What are the things that we have to overcome? What more can government do to speed this up and make it attainable as a goal?
Richard Cook: I will use two examples here. First I will use Colchester because we are heavily involved in it. Tendring Colchester is not a new town but it is 30% affordable housing under a Section 106. That scheme is greenfield and is viable with £186 million of Homes England’s housing infrastructure funding going in to do the off-site infrastructure. We are delivering the 30% affordable housing under a Section 106 and all the on-site infrastructure—namely, schools, healthcare facilities and everything else. The national and regional infrastructure had to be funded by government. That is greenfield so that works.
If we wanted to get to 40% we would either need further stimulus through the infrastructure to make it viable or we would actually use our affordable housing programme and do additionality. Our ambition on Colchester is probably to get to somewhere between 30% to 40% but that is greenfield. You have challenges when you go into somewhere such as Leeds, where there is a new town identified—we have a big project in Leeds at present of 1,800 homes. That is delivering 0% affordable housing under a Section 106 because it is not viable. We have had to use brownfield housing money.
Answering Baroness Andrew’s question, we work with the combined authority to get combined authority money. It has a slug of capital that it can use to intervene on projects to make them viable and we are using that on our Leeds project. We are using our relationship with Homes England to deliver 40% affordable housing. It is grant funded so we need that grant coming from central government at rates that work to make brownfield sites in city centres viable. It is the difference between building greenfield with infrastructure funded somewhere against actually working on brownfield sites, which are always going to be more costly and you are going to need grant funding. At the end of the day it is simple terminology. There is a bucket of cost and it is normally short of what is needed, so somewhere there needs to be some form of loan or grant that go into that to deliver the aspiration.
Alison Crofton: It is probably quite good to point out that the National Planning Policy Framework says anything up to 50% and that is regardless of whether it is a new town or any planning going forward. The industry is used to providing the social and affordable homes programme to a high percentage. Just to home in on the specific point of the question about different players, Clarion is obviously a large player that can access the grant, put in the bids quite easily and has a team behind it.
We also recognise that SMEs struggle because they do not have a team to apply for it, do not know who to contact, et cetera. We have addressed that in a couple of ways. One is going back to the regional model so we know who the regional players are and can actually provide that one single front door to those SME players to make sure that they know and can ask questions straightaway. That way they do not spend a long time going through the agency trying to find the answer to their question.
In the past we have also provided a council housing support fund and have funded £9 million worth of funding to 44 councils to give them the capacity and capability in order to provide bids for the fund coming up. We recognise that we need to make sure that we provide the grant and have access to that grant available to all the players in the market.
Lord Bassam of Brighton: Richard, I am intrigued by your mentioning Tendring and Colchester. I grew up in Tendring. My perception was that during the 1960s there was an explosion of homeowners building there. Are you experiencing any pushback from the local district councils and the villages there to quite an intense programme—it seems from the numbers you gave—that could lead to quite a growth in affordable housing?
Richard Cook: We actually have Colchester, Tendring and Essex County Council involved in this. We would say we have three local authorities because we border Colchester and Tendring and then Essex is the county. They have a combined planning team that we are working with here. We should not forget that this has been 15 years in the making to get us to where we are today. These new towns—these ambitious garden communities—do not come quickly.
When Colchester was first put together with the options, with an SME at the time called Mercian Housing Association, which is our partner there, Mercian promoted that through the local plan for about 10 years. Once it was allocated it realised as an SME that it could not afford to bring that project forward. Since our involvement in that project we have spent £10 million working through getting to planning. Big costs are expended on these large-scale projects just to get to a planning permission.
In terms of the support we have really engaged—Mercian and the local authorities have engaged—so we have taken the community with us here. We have been very lucky. We are actually in consultation at present and probably the lowest number of negative reviews I have ever had on a planning permission is on Tendring Colchester. With the scale and size of it, you would be bewildered by 7,500 homes.
Lord Bassam of Brighton: That is a big number.
Richard Cook: There is a reality of sensibility with the way it has been done, the way it has been promoted and the way the local authorities have come together. Housing needs to be built somewhere. Actually this is something that is going to bring something for the wider community because it is infrastructure first. We are not building 150 homes with no infrastructure; we are building 7,500 homes here with £0.5 billion-worth of infrastructure, with new schools and everything else. They get delivered as the homes are built. That will be the success of any large-scale community extension or new town; you have to have the infrastructure.
Back to how the affordable housing comes, you need not just affordable housing but all the other infrastructure that comes with a cost. The private sector will always struggle to do that because of the initial outlay. Homes England has lots of tools that can actually assist with that and we are leaning on some. Somewhere—Colchester is a great example—we have needed government money, HIF funding, of a significant amount to make that scheme come forward and be viable.
The Chair: You are very on message, Richard; that chimes with what we said in our first report, so thank you for plugging it.
Q28 Baroness Griffin of Princethorpe: You have actually answered a lot of this but maybe we could elaborate. Apparently I have to declare an interest that I do not have an interest in this module, so it is now on record. I have not heard Section 106 mentioned so often since I was a councillor and that was a while ago. I am really interested in what you are saying about new infrastructure. Presumably the infrastructure includes clean and green because I get so upset about seeing housing developments that do not have infrastructure. I was really delighted with what you were saying about taking communities with you because if you do not we will have failed in all this.
One of the conclusions from New Towns: Laying the Foundations argued that, “The inclusion of plots of differing sizes in masterplans offers opportunities for SME developers to participate effectively in the delivery of new towns”. I expect that you will go broader at the new towns. Stepping outside London for a bit if I may, the next generation of new towns and expanded settlements will be—we hope—delivered across the whole country. How should smaller regional housebuilders be involved in their development and be enabled to be involved, which is what you were touching on? In what capacity and how can or should the Government support their involvement?
Richard Cook: Again I will talk from a Clarion perspective and then look at the wider industry perspective. The delivery of new towns and who delivers them is going to be absolutely critical. What I mean by that is development corporations or however it will be developed politically. As I mentioned earlier we have three local authorities. Everybody said, “You’re working with three local authorities on one project; you must be mad”. Actually they have all come together politically to drive this project forward. There is a general consensus. That is key and we have taken the community on that journey as well.
From our point of view we are not a housebuilder but a master developer and we are approaching Colchester as such. What that means is we control the land, we are doing the design and we are going to look after the stewardship in perpetuity. We can do that because we are a housing association and think very long term. That sets the tone. We will then bring in partners to deliver that project at pace. Different forms of tenure are also really important to us.
Our answer to that is that our ambition on Colchester is to deliver over 500 homes a year at one project. A third of it will be affordable, which we will deliver with partners and own in perpetuity. We are then looking to bring in single-family homes, which is a single-family rental model. We will have private housebuilders in partnership with us. We will be delivering things such as retirement living and mixed communities and doing self-build.
We will also be bringing service plots for SMEs forward. That is really important to us because we want diversity of tenure. We want high quality but diversity of design. Actually we also want what I am going to call more flags—more outlets and openings—so we accelerate the pace of the project. To underpin the infrastructure we want to put in, we want a pace of delivery and that is going to be really important to us. We will facilitate opportunities for SMEs in our projects, self-build as I said earlier, and community funding if that is required. That is a master developer role. The important bit is the differentiation between a housebuilder who may buy a site of 1,000 homes, build the affordable housing through Section 106 and then sell housing, which is a different route to where a master developer will bring other people.
We are also going to be creating 6,000 jobs at Colchester. We should not forget new communities. It is not just about homes; sustainable communities are about jobs and opportunities for people. We do not build offices or industrial but we will bring partners in who specialise in that. Getting jobs created on our project early will actually drive demand and make it attractive for people to want to live there. That is the success of Colchester. If we deliver it at pace, instead of being a 40-year project we can deliver this community in 20 years and we will have a sustainable, long-term community that we created. That is so important to us.
Baroness Griffin of Princethorpe: Just before I bring in Alison I have a slight supplementary. Does this include design for life: homes that will be accessible to a child or somebody with a condition when they are 80?
Richard Cook: Again we are designing what I call multi-age communities; that is probably the way I would think of it. We design homes for life and we design them to healthy living standards. You talked about sustainability. Everything will be built to future homes and new legislation that is coming. It is going to be a decarbonised project. We are also looking at what our embodied carbon is as we work through that project. We are looking at that whole sustainability wraparound delivering a community.
Alison Crofton: We strongly agree that allowing multiple players such as SMEs to develop our sites creates a resilient and sustainable market. It is what local places want and need and it delivers the right product. We do it via a number of means. We also play a master developer role. For example on Northstowe in Cambridge we have a parcel of land where we have made the development ready and we have TOWN, which is a co-housing, co-community designed phase where the local residents then design their own homes, like a self-build design. They are going to be on our master developer sites right next door to Keepmoat, which is a large developer across England.
Where we also play to make sure that we get an SME angle is that in our bank we have particular SME funding workstreams. For example, we have an SME lending alliance that allows the micro-SMEs to be able to access funding where they cannot normally access mainstream funding. When I say micro, it is anything from two homes and above. We have actually invested and have approval to invest over £47 million-worth into that SME lending alliance between 2020 and 2030. We have had really good success rates on that. They can then use that to purchase land or develop alongside Clarion.
We also have something called the SME accelerator loan, which allows SMEs to gain funding from Homes England. At the moment with the SME model they have to develop a site and get the funding from the completions, and then they can start the next site. The whole idea of the SME accelerator loan is that we can fund them to build out their existing site but then also purchase the next site. Instead of being very sequential in the SME market, it allows them to accelerate and do multiple sites in tandem, allowing their business to grow. We have really good examples of that where we have given Yorkshire Homes £3.38 million to build 21 homes. It has also allowed them to purchase the next site and we believe that it has accelerated their business model by about 12 months.
We are trying to make sure that we not only do the funding packages for the SMEs but also have the master developer model. We have worked very hard over the last 12 months to make sure that our disposals process is faster for our SME partners, that we do freehold instead of leasehold and that we are there to work with them and understand their model. I will admit there is definitely more that we could do in that space but, with it being one of our strategic objectives and one of our investment themes, we will do more in that space.
Q29 Lord Bailey of Paddington: How do the next generation of new towns and expanded settlements provide an opportunity to engage with new and emerging technologies? In your view, would that have the most potential to support delivery? What steps are the Government taking to ensure that the risks are balanced against potential opportunities? You made a comment earlier that Homes England provides infrastructure, and obviously that is a kickstart to getting things done. Nobody wants to put in the sewers; somebody has to pay for that. We are bad at infrastructure on most levels in this country. Is new technology an opportunity to make the finance go further or just to give more speed?
Richard Cook: We can look at innovation and technology across everything that we do. I will probably look at the innovation side of how we build our homes if that is all right. Hopefully that answers the question. That is really important. Again we have been through ups and downs with many conversations around modern methods of construction and everything else. That sector has really struggled.
I look at Colchester as a real opportunity to refine and learn what we do and make it more efficient in building. We are building 7,500 homes in one place so for us it is about how we build those homes and build them efficiently. That is actually about job skills and training at the beginning and making sure we create a long-term platform to grow our workforce on that project. It is also to work with people who can actually design and develop efficient new ways of building houses. I am going to call it the flat-pack type system. We build a factory close to or on our site where we manufacture housing. That would probably be our most efficient way of using technology and innovation at Colchester.
That comes with risks because we still need warranties and the warranty market is still pretty fragmented around modern methods of construction. Ultimately if we are going to actually invest in that technology and manufacturing on a project such as that we are probably going to need more than just Colchester to make it efficient. Actually you need that longevity and that supply, and you can probably see that from the whole modern methods of construction and manufacturing breakdown over the last few years, where many companies have gone into administration. They did not have the demand and the output that kept them consistently efficient, as any factory needs. That is how I would look at the innovation side of it and what we would want to do on our large-scale project.
The garden communities and new towns give that opportunity because they are at scale. Maybe when the next seven come forward, that should be an exam question for whoever is actually running the project: what are you going to do around actually driving efficiency through delivery and production? That is going to be a part that is really important. I said at the beginning that costs in our industry have been astronomical over the last four to five years. They are always going to keep rising and inflate. We have to find efficiency in what we do now to try to stop that acceleration of inflation.
Lord Bailey of Paddington: What would need to change? To be polite, the construction industry is small-C conservative. Forgive me if I am wrong but I do not sense a willingness to adopt new technology. Even for new towns, as you say, you would need quite a pipeline to get it off the ground. How are you going to overcome the disaster of last time? If I had a modular factory beforehand, I am not doing it again because I got severely burned. How are you going to get past those cultural pieces?
Richard Cook: This is just my view. I have been in the industry for a long time. The leap to modular came without the thought of actually what the modular is going to supply. I will use this as a real-life example. The worst-performing stock we have in our portfolio was the modern methods of construction in the 1960s and 1970s where it was not thought through: things were built very quickly, and we are now living with the aftereffects of that. We all step in as asset owners to make sure we have longevity. When you are getting a modular product coming out of the factory with a piece of cladding on it that really has a lifespan of 10 to 15 years, that is not what we are really looking for.
The other bit is that it is bizarrely constrained by the size of the lorry that you can put it on. Housing and homes are not designed around lorry sizes. They could be but that would actually need to go down a certain route of design and space standards, and everything else that we already have embodied would need changing. To make it efficient you have to design it efficiently for the factory and the module. What we have been trying to do is back-engineer the factory and the module into the legislation we already have.
Lord Bailey of Paddington: That is the best answer we have had to that question.
Richard Cook: We are trying to sticking plaster an answer.
Q30 Lord Bailey of Paddington: That is an excellent answer. That makes sense now. Let me just come to Homes England. Is there anything you can do with things such as digital twins? You operate at scale. I come from an engineering background. The idea that I would build something without my partners being able to look at exactly the same object that I am looking at seems ridiculous to me. Why does that not happen in construction? Is there anything that you can do with your scale? Homes England will be around for ever; it might get a new name but it will be around for ever. Is there something that you could do to encourage these modern methods of construction to come on?
Alison Crofton: We have a strategic objective to foster innovation. To date it has mainly been about funding modern methods of construction, which is well publicised and has been very high risk, and companies have gone into administration. We have taken that risk in terms of funding them but it was essential in order to show what is required to make those businesses work, in terms of a car manufacturer type of thinking instead of construction and housebuilding thinking. We have funded and I would say our role has mainly been through funding.
What we have done as part of an innovation that is different to funding demonstrator sites is use our land to provide either research or valuation or help suppliers learn about products—for example, for different modern methods of construction that we have across the region. We have a handful of sites where we have done 100%, compartmentalised or type 2 MMC. We have learned and shared that evaluation research across the industry and see that as part of our remit and role.
In addition to that we have had demonstrator sites on future home standards where we have pulled the future home standards forward to show what is required in the supply chain and what works from a customer and end user point of view. Again we have shared that with the industry. I would say our area of focus has been on funding in terms of companies for modern methods of construction and the demonstrator sites.
Lord Bailey of Paddington: The funding will always remain the most important part. Richard, I cannot tell you how you have cleared that up for us, or at least for me; I have had lots of fluff up until this point. It then suggests that there are parts of construction that are homogenised and have high standards, such as sewers, railways and overpasses. Could they be more innovative, when their product is standardised by law? Is there an opportunity to push that? To my mind infrastructure is the thing that is holding back most of this stuff. As a developer I will arrive in a place if there is infrastructure and look for a bus lane and so on. Could we really push that particular part of construction so we can get those delivered much more quickly?
Richard Cook: You mentioned something earlier and it got a little lost. If we go back about 10 years, we had a BIM academy that was set up by the Government and was building information modelling and digital design. Anybody who wanted to work on a government project was required to use BIM. I would say large-scale infrastructure projects are very good at using technology to do design. You then come down to the level of housebuilding and actually it is not done. It is still done in traditional ways and things like that. The industry can definitely get better. We need the golden thread. We design everything digitally in our business and we want the golden thread for safety because ultimately we own the assets.
The bit you talked about is where does the acceleration come? We could debate railways, high speed and everything else but we are not here to do that today. There will be 1,000 learnings coming out of HS2 as to how it could have been done better but there is some amazing innovation going on there as well. Procurement is where innovation can come. How do we procure to get schemes going quicker and to be more efficient and standardised in the public sector? That will be helpful.
If I come back to projects such as what we are doing, we are using a lot of MMC. As Alison said we are thinking about it a bit like how a car is manufactured. In our large-scale project that is relevant to the new towns in Leeds and the urban extensions in the major city centres we are using precast concrete, precast cladding systems, modular bathrooms, modular kitchens and modular service risers. We are using those in all our high-rise projects. For the smaller houses we are now using flat-panel timber frame and modular roof systems. It is definitely moving on.
The challenge at present is that the efficiency that it brings does not get recognised in the cost base. Until you start doing it on a real mass market basis you do not get the efficiency because everybody counts what the bottom-line number is rather than thinking, “Do I save three weeks in the programme?” and everything else. That is and always has been the challenge for our industry. I have over 35 years in the industry. Everybody always looks at the bottom line first rather than actually saying, “You know what? If we do this investment that bottom line will go down in five years’ time”. We are all really worried about what the bottom line looks like today and the environment we are in at present makes that even more challenging.
The Chair: In the interest of time I am going to suggest that we take the next two questions from Baroness Miller and Baroness Andrews together.
Q31 Baroness Miller of Chilthorne Domer: That is really interesting and you have very widely covered some tensions between speed of delivery and innovative design, which is very helpful. Is there much demand among customers for innovative or experimental design?
Baroness Andrews: I have a very specific question. Do you see the new towns as an opportunity to develop, innovate and test out some really innovative building materials and products that we have heard about? Is that compatible with the standardisation that Mr Cook has been talking about in relation to modular constructions? Can we have both? Can we have beauty, innovation, brilliant new materials, innovation in that sense and good design as well as mass development?
Richard Cook: Can I pick the first one? That is relevant; it is about customers, design and innovation. Customers ultimately always come back. It is location, location, location. Affordability is key to people and actually probably comes above location now. Can I afford it? Can I live where I want to? Then the bits they look for are quality and functionality in a home; does it work for me? Future-proofing is definitely becoming more important, especially around energy. We have seen that and people are interested.
Is there a premium for innovation and for investing in energy efficiency at present? Probably at the top end of the market because people can afford it. Not really in the mid-market because actually it comes back to that bit I said about what is affordable. We all have aspirations about what we want. If we look at somewhere such as a new town, we should be able to meet parts of that through the new town because we are going to have a real diversity of product for every marketplace there. That hopefully answers the question around what customers are after.
Coming back to innovation and everything else, there is a whole opportunity for innovation. The thing that will probably hold us back is legislation. I will use an example of timber. We cannot now use timber on external buildings above 18 metres for all the reasons that we all know. Timber is an unbelievably sustainable and innovative material but we look at other legislation that restricts things.
The other bit that sits behind it will always be that ultimately we need warranties. Warranties are provided by insurance companies that want to know that the material is innovative and going to last, and rightly so. As an end user—as Clarion—we would look at that, as my customer who is going to buy my market sale home wants to know that innovative material is still going to be on their house and not have deteriorated in five, 10, 15 or 20 years.
Let us be honest: the homes that we are building in these new towns are going to need to last 60 to 100 years—if not longer—because that is how long our housing stock takes to regenerate, renew and everything else. We have to think long term. We are definitely interested in innovation as an organisation but we have to look at what the risk and legislation look like. We should always be trying to get people to innovate and come forward with great ideas. I guess we have to look at places where government can actually facilitate that. The industry does but ultimately we are going to need government to facilitate that through legislation.
The Chair: Alison, do you agree?
Alison Crofton: Yes.
Q32 Baroness Barran: This is just a chance to hear your ideas and creativity. If you could persuade the Government to prioritise three things—that could be to do more of something they are already doing, do something brand new or stop doing something they are doing—to encourage homebuilders to be new town builders specifically, what would you recommend?
Richard Cook: My wish list?
Baroness Barran: If you were our next Prime Minister, which is apparently statistically entirely possible.
Richard Cook: The industry probably feels that we have been legislated to death over the last five to seven years. As I said right at the beginning, some is for good reason. We need to absorb what we have. It is very difficult out there in the environment that we are in. For whoever you are—industry and everything else—it is challenging out there. We need to embed legislative change, learn from it and actually improve from it as an industry. That would probably be my first ask. If we are looking at legislative change, working with the industry as we bring it in would be the starting point. If we are going to do it, be ready for it.
The Building Safety Regulator is a good example of where something was implemented without the systems, processes and people in place. As a business that has cost us millions of pounds and at least 12 to 18 months on a project in terms of delivery. If we are going to do something we have to think it through because that is really important for us. Then we can plan for it, which is what we need to do. If we are going to develop and make big investments—we are investing over £600 million a year in new homes, the majority of which are affordable housing—we need to be able to see that visibility and plan for it.
I have worked across the world and the other area where government can play a significant part is to actually focus on and be the enabler of infrastructure. New communities will thrive and people will accept them if there is a plan around infrastructure. My private sector colleagues will probably want to tell me off because I have spent most of my life in the private sector but the private sector is not best facilitated to do that. You have development corporations. The successful regeneration scheme I look at—I will use Newcastle because it is near where I live—is the Quayside in Newcastle. The success of Newcastle Quayside was down to the Tyne and Wear Development Corporation because it put that infrastructure in first and then the developers were able to come and do that.
Homes England, devcos and those types of things can do that but there is definitely a place. I use Vienna as the best example of it. Vienna has the model as the state. It plays in the land market, gets zoning planning for the land, puts the infrastructure in, works with affordable housing providers to deliver the affordable housing and then lets the private sector deliver private sector housing and placemaking as master developers. I know that it will deliver success.
Why we think Colchester has been so successful to date is because we have worked very closely with the public sector, Essex County Council, Homes England and MCHLG. Everybody has had to come together there to make that successful to where we are. We have not actually started digging on that site yet other than the roads, but actually in 20 years’ time I hope and know that it will be a successful project. That is collaboration and partnership. If these new towns are going to be successful, infrastructure is absolutely key to it.
Baroness Barran: You have one more according to my maths. Just very briefly, if you had three things, what would be your third? Do you want a moment to think and we will just give Alison a chance?
Richard Cook: Yes, come back to me. Alison might have a bigger wish list than me.
Baroness Barran: You have two big ones. You do not have to have three.
Alison Crofton: I can answer from a Homes England perspective. The agency’s role is to enable housing to happen quicker in the right place with the right design. Things I have already referred to in terms of our structure and doing it place first is exactly why we have put that into our structure since 1 April. Our flexible funding, and allowing access to that funding with fewer criteria to a myriad of market players, has been absolutely fundamental to it.
The idea is that we de-risk. We make the investment attractive so that partners such as Clarion and other housebuilders will take the risk and invest in that proposition. We will do that with various examples in terms of funding for the contamination as we have done as a landowner in York Central, Northstowe in Cambridge and Burgess Hill in mid Sussex. We have multiple examples of that.
The funding of partners in terms of providing them cash flow—the return on capital employed—is very important to our housebuilding partners. We allow that to either profile payments or help funding of that infrastructure first to make sure that that is delivered without the private sector having to start that site. We look at infrastructure funding and the pipeline; that is really important to our partners. We try to ebb, flow and flex what we do for our private sector partners. That is why we have to constantly have the flexible funding with the long-term funding of the social and affordable homes programme that we now have in place. Our new structure within Homes England allows us to be more fleet of foot. It is really important that we are flexible and get approvals quickly so partners such as Clarion can just get on and do what they do best.
Richard Cook: Very briefly, I am going to make my third one relevant to new towns: accelerate the cash flow of the affordable housing programme. The sector is ready to deliver on it and we are working really well with Homes England, but we are constrained by the Treasury cash flows. We could do more now. You talked about the 1.5 million ambition. Our sector is primed to do it. I am just putting that in there. Why would I not? I am in the sector.
The Chair: Thank you very much. That has been a fantastic discussion over the last hour or so. We massively appreciate your time. I am sure we all value everything that you have had to say. That is the end of the meeting.
