New funding to trigger action within the UK Housing sector requires Lean thinking to be successful
VSE Key Sector Advisor - Housing
There is much concern, both within the industry and politically, that the current housing supply in the UK is not meeting demand.
However, the UK’s housing crisis is not a new one: according to figures from the Department of Communities and Local Government, housing completions have steadily declined from circa 400,000 in the 1960s to fewer than 150,000 in 2014.
Prime Minister (then Home Secretary) Theresa May suggested in May 2016 that the Government would intervene in dysfunctional markets. The initiatives outlined by Secretary of State for Communities and Local Government Sajid Javid at the Conservative Party Conference will hopefully help the industry tackle this growing problem.
Currently, private housebuilders build nearly 80% of all new homes. In 2014/15, just ten companies were responsible for nearly 50% of the new homes built. But it has not always been this way. There were several years in the 1960s and 70s when local authorities and housing associations developed more houses than all the private companies combined.
Many housebuilders use land banks to regulate the flow of new housing into the market, and to strengthen their negotiating position with landowners. Some of the larger housebuilders focus on the acquisition of smaller businesses, in order to access their land banks. This leads to a concentration of market share by larger firms.
''The issue of who builds housing is important because the Government has little control over the decisions and actions of private housebuilders. In order to unlock the market and, ultimately, the land banks, the larger housebuilders must release (or be made to release) some of their control of the market''. Katie Wall, Marketinghousing.com
Indeed, Sajid Javid recently stated that “the big developers must release their stranglehold on supply”.
''The forthcoming Autumn Statement (23rd November 2016) promises increased Government investment in housing. What doesn’t appear to be on the agenda, however, is the introduction of measures that would increase building by local authorities, housing associations and other non-profit organisations''. Katie Wall, Marketinghousing.com
The Government could do much more to increase housebuilding in the public sector. Possible measures include lifting borrowing restrictions and allowing not-for-profit and public sector organisations to use more of their reserves for housing. It is quite clear that the housebuilding industry on its own cannot supply the homes the country so urgently needs.
One of the solutions may well lie in a seemingly unlikely part of the sector: The Homes and Communities Agency’s (HCA) Home Building Fund will give other businesses in the market, such as smaller builders and regeneration specialists, the opportunity to apply for funding. This includes a number of Housing Associations who are looking to expand into the commercial sector.
For many this will mean a huge move from supplying new housing into the Public sector, to doing so within the cut-throat Private sector. Identifying the potential customers swiftly, engaging them, meeting all their expectations and doing so within a highly competitive market, are all challenges that will need to be met, in order to operate in both a Lean and profitable manner.
For many processes will have to change. As will roles and responsibilities. With such hugely expensive units to build, a housing developer (from Public or Private sector is irrelevant), simply cannot afford to get their marketing OR their operational performance wrong. Inefficiency and ineffectiveness will hand competitive advantage to the more proactive parts of the Sector.
Opportunity abounds however for those organisations keeping an open to mind and focus on the inevitable changes that will be required to succeed within their own organisations, to meet these new challenges.
This article is part of the VSE Key Sector Advisor series which features regular insight and observations through the eyes of our Key Advisors, each covering one of our six focus sectors within which we apply our Lean Management partnerships.
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