Four major housing associations are establishing in-house construction divisions to build out their developments, sidestepping contractors and targeting higher quality and cost savings, Construction News reported.
London social housing giant L&Q has established Quadrant Construction, which will deliver a large part of the association’s 10,000 unit pipeline, worth roughly £120 m a year.
Orbit Housing Group has set up Orbit Build which will initially deliver the company’s outright sale-led projects. Orbit Build has already started on site with a 323-unit scheme in Bedford.
The new subsidiaries join A2Dominion’s construction unit A2Dominion New Homes and Riverside’s housing company Prospect, which bought four Lowry Homes developments when the company went into administration last year.
Collectively the four associations develop thousands of new homes a year and Construction News says that move will take a significant amount of work away from contractors.
Willmott Dixon managing director for housing John Campion said the company would “keep a close eye” on the move.
“L&Q and others are obviously key clients for contractors like ourselves and if they decide to do something like this then we need to sit up and take notice,” he said.
L&Q’s director of direct procurement Stuart Miller, head of Quadrant told the paper that raising quality standards was the key reason behind the move, as standards delivered by contractors were variable.
But A2Dominion, which delivered it’s first in-house project in 2008, said that it was targeting and achieving cost savings. John Allen, commercial director for the south east, said: ‘We have achieved about a 20% saving on build cost per square metre. So a good progressive [housing] provider would be daft not to think along these lines.”
At PricewaterhouseCoopers, head of housing Richard Parker said the lack of section 106 funds open to registered providers meant that HA’s deciding to go it alone was a “rational” move and said it would be “significant for medium-sized housebuilders”.
“It’s something the private sector suppliers need to respond to because it is going to change the role and relationship with the bigger housing associations,” he said.
Meanwhile, Building reported that David Cameron’s policy tsar, Oliver Letwin, is leading a major strategy review on the promotion of new housing. The review, which has not been announced publicly, goes under the name of the Letwin Commission, and falls under the auspices of the Department for Communities and Local Government.
It is understood the review will go back to policy basics, and in particular examine how to ensure more development land becomes available.
