People & money essential to solving UK housing crisis

01 July 2015 Consultancy.uk

In order to meet the required amount of new houses in the UK, the construction industry will need to refocus its investment on recruitment and innovation, research by EC Harris shows. While the industry needs around 135,000 new workers in 2015, around 700,000 plan to retire in the next decade, resulting in a need to focus additional efforts on expanding the workforce. According to the firm, as the number of trainees has been declining since 2005, the industry’s best option will be to focus on labour migration.

Natural and built asset design & consulting firm EC Harris, part of Arcadis, recently released a new report, titled ‘People and money: fundamental to unlocking the housing crisis’, in which it calls for urgent new solutions to expand the capacity of the UK house building industry. According to the firm, current financing and business models are inadequate to meet housing needs and focus should be put on labour and money instead of planning and land availability.

Housing completions in the UK

EC Harris stresses that the UK Government should create the conditions to build more homes that people can afford as “availability and affordability of housing is a vital foundation of the UK’s dynamic and sustainable economy.” For the UK to meet its housing demands, around 300,000 new units are required each year, which the UK market has not been able to accomplish since 1977-1978. Since 1990, the industry has not been able to produce even two/thirds (200,000) of the required units, except between 2004 and 2007, with sharp decreases since then. Currently, the housing market only produces 140,000 units per year.

“Across the UK, approximately 300,000 units need to be constructed each year in order to meet demand - 50,000 of these potentially needed in London alone. However, in 2014 we delivered less than half of this,” explains Mark Farmer, Head of Development at EC Harris and one of the authors of the report.

Consequences of the failure of the UK to build

According to EC Harris, the consequences of a failure to build enough homes will have impacts for generations to come. As a result of the lack of suitable, low cost houses, 1.7 million people are on the waiting list to find a house, with the average age of a first time buyer in the UK now at 36 years, which in its turn produces difficulties for families to move up the housing ladder.

Looking at the reasons for a lack of buildings, the report shows that the especially the availability of labour is putting a strain on the construction industry in 2015, with the report stating that the workforce is down by 300,000 compared to manpower levels seen in 2008. Funding, which has been the biggest issue between 2008 and 2013, currently appears to be a much lesser issue.

Constraints on production

“Given the scale of the challenge, it is time to move beyond what have often appeared to be piecemeal, uncoordinated and sometimes poorly funded housing policy initiatives. We need to think seriously about how we fully enable, at a national level, the development, investment and construction sectors to work together for mutual benefit to radically solve the housing crisis by doubling its output,” adds Farmer.

The report stresses that the industry should focus its investment on recruiting more people and changing the “accepted construction practices in order to physically deliver more homes with limited labour resources.”  To produce one unit, the industry will have to employ 1.5 full time workers. So in order to reach the set target of 230,000 in 2015, 345,000 workers will be needed, which is an increase of 135,000 people from the 210,000 needed in 2014. This additional amount, however, does not take into account growth elsewhere in the industry and high rates of retirement, as a result of which, the industry will need to recruit 1 million new people by 2020.

Number of employees needed each year

As construction agencies cannot rely on the existing pool of construction labour, they will need to focus on expanding the workforce. According to the researchers, training will play a key role in this effort, either in focussing on existing skills or hiring new trainees. The latter of which might be an issue, as the report shows. Since 2005, the number of new entrants has decreased significantly, dropping from around 47,000 to less than 20,000 in 2013.

Even at the peak level of 2005, the industry will not be able to replace the 700,000 workers that will retire in the next 10 years, let alone meet the 1-million-target.

Number of first-year construction trainees in the UK

The research highlights that labour migration will most likely be one of the best options for the industry.  Although this is a “fraught political issue in the UK,” recruiting labour from outside the country has, for many years, been the most effective short-term fix for the labour shortages in the UK construction sector.

In recent years, many migrants joined the UK construction labour force, from around 109,000 in 2011, which was around 5% of the total amount of construction workers, to 252,000 in 2011 (accounting for 10.6%). This translates to around 12,000 new recruits to the construction industry a year.

Numbers of migrant workers in the UK construction industry

Farmer concludes: “This is now about the need for fresh, radical thinking from both industry and government, which respects the existing house building model but also seeks out viable routes to large-scale, additional delivery. This means connecting long term money to income-led housing investment opportunities spanning multiple economic and political cycles. This in turn starts to create the right investment climate for industrialised production and skills development that will overcome the existing labour constraints affecting traditional, site based delivery.”

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