modern methods of construction Archives

Why the construction sector needs social housing

With 169,000 children growing up in temporary accommodation – the highest number since records began – the case for the government’s manifesto commitment to ‘deliver the biggest increase in social and affordable housebuilding in a generation’ is overwhelming. This situation damages children’s health and development, and it is costing councils across England £7.7 million every day. It is a national scandal whose social and financial costs are well-understood.

But social housing does more than provide an alternative to poor-quality homes. It is also the foundation of a successful housebuilding system. Building social homes at scale – including during market downturns – can underpin the government’s response to the crisis in construction skills and innovation. Far from being in conflict, social housing and market housing can support each other.

The inherent limitations of the UK’s development model

In a housebuilding system which relies excessively on speculative market housing, developers compete against each other to pay the most for land. Having taken on a large upfront risk through high land costs, developers then need to recoup their investment, building as slowly as necessary to maintain prices. But when sales prices soften, even moderately, market housing starts plummet. Developers are not incentivised to start new schemes if they will have to sell homes for less than they assumed when buying land.

To make matters worse, in tandem with increasing dependence on this speculative model of market supply, the UK’s social housing supply model has become pro-cyclical. Post-war social housing developments were close to 100% social housing. Most costs were covered by grant, and land was assembled at low cost outside the speculative market. This model was insulated from market cycles, allowing the supply of social homes to continue during downturns in private housebuilding. In other words, social housing supply at this time was counter-cyclical.

From the 1980s, the dominant supply model for social housing flipped: grant rates were cut, borrowing costs rose, social landlords had to start competing with private developers in the land market. As a result, an expanded range of ‘affordable housing’ tenures (with costs pegged to market prices) has become increasingly dependent on cross-subsidy from the profits of building market housing. Far from smoothing out the boom and bust cycle of speculative private housebuilding, this model of building social housing intensifies those peaks and troughs. This doesn’t just affect how many homes are built. It shapes how the construction sector itself operates.

Supporting the UK’s construction sector

Ratcheting down: Private housing completions in England since 1946

Over repeated cycles of the housing market, the total output of speculative development is ratcheting downward. As housing starts plummet, so too does the demand for skills and materials. Many construction workers simply leave the sector, often permanently. It is no coincidence that construction workers are more likely to be self-employed than workers in any other sector. Today, more people are leaving the construction sector than joining it, and productivity has remained stubbornly flat for decades. Why would housebuilders maintain a large permanent workforce, or invest in the skills of that workforce, when they know they will need to retrench supply as the market turns?

Because firms cannot predict demand, materials prices have become more volatile. Official statistics show sharp swings in construction output and brick deliveries, worsening shortages and price spikes in an import-dependent system. As the construction industry has adapted to manage the risks of cyclical demand, construction capacity has atrophied.

The long-heralded shift to modern methods of construction (MMC) has also stalled. The speculative, stop-start nature of the industry makes the expense and risks of investment in innovation unattractive. Investors are reluctant to commit to factories which will be moth-balled at the first signs of the next housing market slowdown.

From stop-start to build, baby, build

A more balanced system would combine market housing with a counter-cyclical social housing programme, alongside new market models based on stable demand such as Build to Rent.

When governments fund and enable social housing at scale, it can be built as fast as need demands and construction capacity allows. As the Farmer Review of the UK Construction Labour Model found in 2016, a major programme of social housing would support predictability of demand for labour, skills and materials, resulting in a less risky operating environment for housebuilders, developers and planners. The booms and busts of cyclical market supply are smoothed out by counter-cyclical social supply, so capacity can be maintained and increased despite housing market cycles.

In countries such as Japan and Sweden, innovations and new technologies have thrived on this certainty, creating new opportunities to expand development capacity. It is no coincidence that the last time that modern methods of construction made a major contribution to overall housing supply in the UK was during the post-war social housing boom.

Of course, the benefits of a more sustainable skills base and of innovation in construction today would be felt far beyond the developments which first enabled them. If social housing schemes keep construction workers in the sector during market downturns, those experienced workers will be available to the private sector when the market recovers. If social housing schemes provide enough stable demand to keep MMC providers in business, market housing will be able to benefit from their services, too. While construction capacity is often seen as a constraint on building more social housing, the reverse is also true. A stable pipeline of social housing would expand capacity, supporting more jobs, stronger skills, and greater innovation across the sector.

The government’s new Social and Affordable Homes Programme 2026-36 represents the most significant policy shift back towards a counter-cyclical social housing supply model in decades. A future blog will explore how this could work in practice, and what further changes are needed.

Would you like to write for Red Brick? Email rose.grayston@gmail.com to pitch your piece (c.600-900 words)

Let’s Improve Planning, Let’s Abolish It!

I’m the managing director of Positive Homes. Since 2016 we’ve developed five little sites – the last of which won ‘Development of the Year’ at the 2021 Offsite Awards. Everything we’ve done is one version or another of ‘modern methods of construction’ (MMC), and highly energy efficient.

So Red Brick said, how about 1,200 words on what it’s like to be a (new-ish) small housing developer. Well, blimey. Where to start?

How about small developers built a quarter of new homes in the late 1980s. Now it’s 1 in 12. And SME developers always have higher per unit costs. Even worse: At least 99% of all the new homes built since at least 2008 are obsolete the moment their buyers first step over the threshold. That’s because only 1% of new homes are ‘A’ rated for energy efficiency (including all of ours).And ‘A’ is the least they need to be, to avoid a hefty retrofit bill to make homes ‘net zero’ carbon.

Both of these facts are the inevitable consequence of a dysfunctional planning system, that has created an oligopoly of large companies. Hardly a surprise that 94% of small developers say planning is their biggest problem. Why? Because the system makes something not scarce at all (land) into something beyond valuable, by restricting its supply.

Some more facts: According to Savills, we consistently lose around 26,000 hectares of agricultural land a year. Which sounds like a lot – except we have more than 18 MILLION hectares of farmland, and only 6% of the country is actually built on. So we aren’t running out of land any time in, oh, the next several centuries!

Land use is a choice. But it’s a choice we aren’t allowed to make as a society, because it’s been hived off to a group of anonymous, over-powerful ‘planners’. The public are treated like patronised children, being told what’s good for them. Hardly surprising then, that people act accordingly and kick off when it feels like things are being done to them, not with them. There are people from across the political spectrum fighting to stop new homes. We call them NIMBYs, rather patronisingly. But surely these are just reasonable people not liking the concreting over of the precious countryside?

What a mess. So now for the seemingly counterintuitive leap: The best way to get better results – that benefit the whole community – is to abolish the planning system as we know it. Huh?

We need more affordable homes (of all tenures). We need better built, more energy efficient homes. We need better use of existing buildings. We need a resurgence of smaller developers to bring choice to the market and drive innovation. And we need to protect and enhance the environment.

What prevents that happening? Land use restrictions. By preventing the productive use of something we have in vast abundance, we do nothing other than make our society poorer (house price inflation is a mirage). Instead, we would rather blame the big builders for being ‘too successful’, than acknowledge how the current planning system distorts the market. If land is ‘scarce’ and therefore expensive, there’s obviously less money for environmental improvements/ bigger rooms/ better built homes.

So let’s try a different tack: Let’s abolish planning. (Specifically, the post war planning system, and all its evolutions – yes, including the green belt). But wouldn’t scrapping the planning system produce some sort of mass free for all? Actually no –

because there are numerous essential protections and provisions in place that wouldn’t disappear.

First, you need some guiding principles. So how about the Protocol to the Convention for the Protection of Human Rights and Fundamental Freedoms, Article 1, Protection of Property (humour me)*:

“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.”

Or, in other words if it’s my land, I should have the right to do whatever I want with it – the ‘peaceful enjoyment’ of my property, providing it doesn’t affect my neighbours’ ‘peaceful enjoyment’ of their property.

From that, you can set (the smallest necessary number of) questions which developers need to answer. And if the answers are right, then there’s nothing to stop you getting building. Or is there? Actually there’s rather a lot. We need answers to questions like:

Could the highway network handle the extra traffic?
Can the local electricity supply cope with the extra demand? (Especially with electric cars and heat pumps coming in etc)
Does the land flood? Could this be overcome?
Can the water supply and sewer systems cope?
Will every home be ‘net zero’ carbon?
What about local school places? The local GP? Biodiversity?

But hang on – it can’t just be as simple and easy as that can it? If I can successfully answer everything positively, then I can just build? No site identification in the takes-forever-local-plan? No months and years spent on a subsequent, expensive application process? Yes, it really is that simple, with one condition – that additional question I mentioned:

7. ‘Does the scheme meet the local design code?’

One of former Housing Minister Robert Jenrick’s most interesting reform proposal of 2021 was the idea of local codes, written by residents to recognise what makes their communities great. New housing boss Michael Gove has taken this on by proposing street by street design code referendums.For me, these are a logical extension of neighbourhood plans which, if done right, encourage the voices of the vast majority who don’t get involved in the current system.

Where I live, our village plan process involved a huge number of local people making positive contributions. That included identifying potential sites, along with the type and quality of homes that should be built there. There are now 700 homes under construction, and all the developers embraced the village’s requirements in their designs with minimum fuss.

Is it really so wrong so say we should trust local people to know what’s best for their communities? Most people are capable of weighing up competing priorities to arrive at a sensible, democratic outcome that benefits everyone. Or would we rather continue the ‘who shouts the loudest’ moanathon as the balance to the anonymous planners, who think they know best for your community?

Instead, let’s replace the centralised planning system with….. you and me: Human beings who want the best for their children and their community. Hopelessly optimistic?

Well it happened in Tottenham just recently. The council’s role? To facilitate the development of a design code that local people wanted and needed – and to then get out of the way and let them get on with it. Why wouldn’t you want that where you live too?

(PS: I started writing this when Housing Minister Robert Jenrick was proposing some highly sensible reforms to the planning process. I finished it with Michael Gove fundamentally abandoning the zoning model – while the House of Lords says we need action to support smaller developers and build more homes. And we wonder why nothing ever gets done around here!)

Martin Valentine

Martin is the Managing Director of Positive Homes.

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