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CONSTRUCTION 2021: A YEAR IN REVIEW

Simon Rowland, Partner and Head of Construction and Engineering and Michelle Essen, Managing Associate, at law firm Womble Bond Dickinson, take a look at the events of 2021 and the potential challenges and opportunities that the sector could be presented with in 2022. There is no doubt that 2021 has

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What Did The Property Market Teach Us In 2016?

Last year wasn’t the best year for the property market. With the housing crisis a very real problem now, the Government are trying to save money where they can so that they can spend it on building affordable housing for first-time buyers. The aim is to stop the never-ending spiral

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The Housing Crisis – Are “Garden Villages” A Solution?

Britain is currently experiencing an incredibly concerning housing crisis, resulting in too many people being forced into temporary housing or worse: having to sleep on the streets. This also does not excuse or in any way distract from the fact that a vast number of housing accommodation itself is in disgraceful

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BDC 318 : Jul 2024

housing crisis

CONSTRUCTION 2021: A YEAR IN REVIEW

Simon Rowland, Partner and Head of Construction and Engineering and Michelle Essen, Managing Associate, at law firm Womble Bond Dickinson, take a look at the events of 2021 and the potential challenges and opportunities that the sector could be presented with in 2022. There is no doubt that 2021 has been a tough year for the construction industry. Global disruption from the pandemic, Brexit and environmental disasters have left their mark on the sector. In the latest ONS figures, construction outputs fell for the third month in a row. Figures for July and August slumped back to their lowest point since February, hitting 58.7 on the UK index – a sharp reduction from the 24 years high of 66.3 in June. With the sector at an apparent impasse and sustainability increasingly high on the global agenda, Modern Methods of Construction (MMC) look more and more likely to be a key part in addressing the struggles faced by the construction industry. In the face of such a dramatic drop in productivity, industry heavyweights are putting their stakes on MMC. For example, volume housebuilder Barratt has reported that 25 per cent of the 12,243 homes built by the end of its most recent financial year used MMC. As 2021 draws to a close, it’s time to consider new construction solutions for a new world. Brexit and supply chain issues In January 2020, we saw the UK finally leave the European Union almost four years after the Brexit referendum. While the UK-EU Trade and Co-operation Agreement has protected trades from any further tariffs, additional red tape and border checks have inevitably slowed down the movement of construction supplies. Given that 80 per cent of timber used in the UK is imported, wildfires and insect damage in supplier countries such as Canada and Sweden have also had a detrimental impact on stock. The shortage of materials has resulted in a price hike that cannot be underestimated. The Timber Price Index hit 92.13 in May 21 Trade Federation (TTF) reported that timber prices surged by 50 per cent between January and May 2021. Add to that, the October 2021 data from the Department for Business, Energy & Industrial Strategy (BEIS) showed that structural steel costs were 72.6 per cent higher than the year previous, and in November we saw steel prices increase for the seventh time in 2021. With these and other shortages across the board, it’s a perfect storm for disruption in an industry built on tight margins. While MMC is not the silver bullet to addressing the materials crisis and certainly not a short-term solution for everyone, MMC’s added benefits of less waste and less weather damage could clearly help the industry. Housing crisis The UK housing crisis is reaching fever pitch, with house prices rising faster than every other economic metric. The government itself has said that “a significant proportion of homes must be built using modern methods of construction (MMC) if we are to meet the target to deliver 300,000 homes annually”. Areas such as the South East of England in particular are in desperate need of housing, but lack the local skilled workforces required to carry out onsite construction. MMC presents an opportunity to tackle the housing crisis in key areas of the country, while at the same time supporting local communities in different areas of the country through investment in MMC manufacturing sites, thus aiding the “levelling up” agenda. Skills shortage In June 2021, the ONS reported that the number of EU workers seeking jobs in the UK has dropped by 17 per cent. But unlike the supply issues, the UK’s skills shortage began long before the UK’s departure from the EU. In 2018, the ONS reported that construction had fallen out of the list of top 10 jobs for people aged 22-29. MMC has the potential to create tens of thousands of jobs for UK workers – it is estimated that if 75,000 modular homes are constructed per year it could create 50,000 new jobs. The challenge, however, lies in attracting new talent to the industry and keeping workers engaged. The solution to this may be to appeal to a younger, increasingly environmentally conscious workforce, who wants to make a positive contribution to society in a sustainable industry. MMC offers a route to greener buildings, and this could make the sector more attractive to younger workers. Move to sustainability 2021 has been the year of sustainability. As we strive for a green recovery, electric vehicles, plant-based industries, renewable energy technologies and more have been at the forefront of both government and industry objectives for the future. Momentum has grown throughout the year, gathering pace in the lead up to COP26. This represents a major global shift towards reducing CO2 emissions to protect the planet. As we embark on a decade of climate action, MMC has an opportunity to fill a gap in the housing market for homes that contribute to Net Zero targets. MMC enables geographical fluidity which then contributes to a reduction of on-site pollution levels and material waste. It bolsters the argument for focusing on a method of building with a lower environmental impact. Looking ahead to 2022 Michelle Essen, Managing Associate, PDL, Construction and Engineering, Womble Bond Dickinson What can we expect for the construction industry in 2022? 2022 for the construction industry is likely to bring the continued development of many of the themes mentioned above. MMC will remain high on the agenda, with continued investment and learnings by the industry. There will be further discussions around how to incentivise increased use of MMC, part of which will be driven also by the need to standardise MMC so it is more easily and more widely adoptable. Materials and labour and skills shortages are here to stay for the immediate future. It will take time for the dust to settle on materials shortages, for the industry to work out how to increase efficiencies and reduce waste, and to find new or alternative supply chains

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What Did The Property Market Teach Us In 2016?

Last year wasn’t the best year for the property market. With the housing crisis a very real problem now, the Government are trying to save money where they can so that they can spend it on building affordable housing for first-time buyers. The aim is to stop the never-ending spiral of renters who can’t save up enough money for an initial deposit, due to paying inflated rental prices. So, just what did we learn from the state of the property market in 2016? Let’s take a look: There aren’t enough homes Something that rang clear throughout 2016 was that the Government need to build around 300,000 homes each year in England to keep up with the growing population. This has been recognised and acted on but chancellor Philip Hammond still only has plans for 140,000 homes by 2020-21. The plan is to build these affordable homes on brownfield sites and sell them to 23-40 year olds for 20% below their actual worth to give them a much-needed step up onto the property ladder. Landlords are going to lose out Despite the massive shortage in affordable housing, landlords providing accommodation to people with no alternative are no longer going to receive any relief when it comes to tax. With new Stamp Duty laws adding an extra 3% onto second homes and a 20% tax on the overall income of rent, 2016 saw many buy-to-let landlords leave the market. Sales were down 64% on buy-to-let properties by November and landlords that aren’t selling up have resigned to the fact that they might have to hike their prices up to stay profitable in 2017. The property bubble might have popped House prices got a bit out of hand in 2016 but instead of continuing to rise at an alarming rate, by the end of the year they had steadily started to flat line out. According to Nationwide, they have predicted that growth in house prices will more than halve in 2017 to 2% from 4.5% in 2016. Whether this remains the same throughout the rest of 2017 is not clear yet but it’s a good sign for first-time buyers trying to get on the housing ladder. It’s the age of renters Despite landlords losing out, more people are learning that they can earn extra income from renting out spare rooms to lodgers. Websites such as Airbnb and Spareroom.com mean that individuals can find rooms in sought after locations for as little as £400/month or £20/night as long as they don’t mind living with the home owners. It’s usually far cheaper than a hotel or an actual rental property so a huge benefit to the lodger while giving homeowners some extra pocket money.

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The Housing Crisis – Are “Garden Villages” A Solution?

Britain is currently experiencing an incredibly concerning housing crisis, resulting in too many people being forced into temporary housing or worse: having to sleep on the streets. This also does not excuse or in any way distract from the fact that a vast number of housing accommodation itself is in disgraceful disrepair and lacking in the basic health and safety regulations that it might once have been the government’s aim to deliver to every household in the United Kingdom. Now what is the current Tory government doing to try and combat this increasingly worsening problem throughout our land? “Garden villages.” An initiative with a typically middle-class name, this scheme is their intention to build decent housing in the light of 48,000 brand new habitations amounting to a the creation of a grand total of 14 of these “villages.” This seems to be an impressive number at first, but consider for one moment that it does indeed seem a far cry compared to the housing initiatives undertaken by the Labour government after the Second World War. Indeed, one of the crucial differences was that the government back then was concerned to not only build more houses, but also to improve those that were already in existence. The people who benefitted from better living conditions from the Labour initiatives and legislative housing acts of the late 1940s were not just in their thousands: they were in their millions. The “garden villages” scheme sounds suspiciously like an initiative that will enable housing for a lucky few, but will avoid the even greater issue that many Britons supposedly living in functioning homes are in fact living in uninhabitable ones. It seems clear that this suggested solution is just simply not enough. The building and construction industries will need to be prepared to work together to ensure that more houses are built in the future, however with pathetic initiatives like these it seems unlikely that this will happen any time soon.

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Farmers Demand Right to Build but Brownfield Sites More Favorable?

Farmers have pleaded with chiefs for the right to build as they claim they can help to solve the rural housing crisis. Landowners have said they can help solve the crisis and also regenerate countryside communities but the barriers to development need to be lifted. The head of planning at the Country Land and Business Association, Fenella Collins, has noticed that the growing attention to problems relating to the affordability of housing are causing strain in the rural communities. Members of such communities want to work in a countryside that is socially diverse and thriving economically and developing housing is a great way to do this, however, the planning system has brought frustration to landowners and their plans. Over half of all permitted development rights applications to convert farm buildings into dwellings are still being turned away. And whilst calls have been made on the government to intervene and change regulations to offer clearer guidelines for planning bosses. However, it’s becoming seemingly obvious that are exceptions being made for rural sites. Housing development on rural sites is only allowed if its affordable as seen with statistics surrounding Cornwall and Northumberland. The latter has had no sites built since last year, while 300 homes were allowed to be built in Cornwall. There has also been calls for affordable housing to be made exempt from capital gains and inheritance tax in a bit to make it seem financially attractive. Whilst house building did increase last year, it was down by almost a quarter on pre-recession levels with house prices rising 7% from October 2015 and October 2016. Sheep farmer William Ashley has developed housing on rural land by converting two barns into three dwellings and chicken sheds into a further 12 live-in work units. Mr. Ashley has claimed there is a desire to develop but people are being put up against a brick wall and a frustrating one at that as there is a sense of desperation for housing and farms are being prevented from helping. Instead, housing developers such as Strata Homes and the government are building on brownfield sites as this is a lot cheaper than building on green land. There is a strong local interest to build thousands of homes on hundreds of brownfield sites in the coming years. This will be part of a government strategy to help first time young buyers afford a home whereas on a great site, they would massively struggle to afford the housing. Up to thirty areas across England will receive funding from the Start Homes Land Fund which is said to be a project worth £1.2 billion. Not only are brownfield sites more affordable but it also allows housebuilders to be in closer proximity to the urban amenities. However, planning brownfield land cannot solve the housing crisis alone and does come with its own issues. Planning on such land is an extremely lengthy and complex process due to the heritage impact on the land

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