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Contractors in the community
Construction News; 30 May 2002

Millions of pounds in council housing refurbishment work is available over the next decade across the Midlands and northern England. But, as Mark Smulian reports, the only contractors likely to enjoy a share of it are those that are as concerned with communities as they are with buildings

The Transfer of council housing to private housing associations has been going on for 10 years. But only now has it reached the major English cities, opening up a raft of opportunities for contractors.

But the new housing associations are discovering that the construction industry skill shortages pose the biggest threat to their ability to deliver better homes for their tenants. And although skill shortages have been less of an issue in the Midlands and North than in the South, several associations are now taking steps to train enough workers to deliver 10 years' worth of refurbishments.

There are massive incentives to get the job done right. When tenants vote to transfer to a private sector landlord they are offered a specific improvement programme, say 250 million over 10 years. But the schemes entail some risk. If funds buy less work than expected because of spiralling labour costs, the association risks breaking its commitment to its tenants and landing in trouble with its regulator, the Housing Corporation.

Also, most new housing associations borrow money for their improvement programmes in stages against the value of their homes. If the homes are not rising in value fast enough because the improvement programme is delayed through skill shortages, they cannot borrow the next slice of money.

This risks plunging the entire work programme into a vicious circle of rising costs and falling output.

Mike Brown is director of property investment at Whitefriars Housing Group, which last year took over nearly 20,000 homes from Coventry council. In a bid to plug the skills shortage it has formed a training agency with contractors Wates and Lovell and will spend 250 million in its first five years.

He says: 'We wanted to be sure we had the people to deliver the programme. There is a lot of activity in the West Midlands, which meant there was a danger of an inflationary spiral in construction wages.

'Secondly, but equally important, was that we wanted to provide training and do everything we could to help local people into work. If we can train an unemployed tenant and get them into a job, it is a double gain.'

Whitefriars has joined the Ambition: Construction programme, a government scheme to place the longterm unemployed in industry jobs. This enables it to pay wage subsidies to contractors to employ local people who may not, at least initially, be 100 per cent productive.

Steve Trusler, social housing director at Wates, says the size of Whitefriars' spending programme 'could have pulled the market apart'.

'We could see that Whitefriars would get less for its money because rates would go sky-high, ' he adds.

Whitefriars' training policy sat happily alongside Wates' wish to have a substantially directly employed workforce, so that it would have the stability needed for a long-term programme.

'We decided to take them into the company and grow our own skill base over five years, ' says Mr Trusler.

The training agency looks at the construction programme and its skill gaps, and identifies applicants from job centre registers or school leavers. So far, the numbers involved are fairly modest, about 20 trainees, but it is in its early days and will pick up pace rapidly.

Eventually, the whole supply chain should be involved. Local kitchen manufacture Bonaffaire, for example, is already training installers.

The Lovell half of the operation is sending trainees to the firm's craft academy, says people development manager Trevor Robinson: 'Lovell will act as a mentor, supporter and motivator to people from the city's disadvantaged areas who join its training programme.'

Sunderland Housing Group, which took over Sunderland council's 35,000 homes last year, will spend 500 million over 10 years on home modernisations.

The bulk of its building work is done by the council's direct labour organisation, which it absorbed.

Malcolm Palmer, deputy director of design, says: Skill shortages are not as bad up here, but there is a problem with specialists like electricians, wall tilers and floor layers, so we are training our own people.'

New housing associations that are preparing to take over from councils are planning carefully to avoid having their programmes derailed by skill shortages. One of the most ambitious projects is at Knowsley and St Helens councils, which are transferring their homes to Knowsley Housing Trust and Helena Housing respectively, and at Liverpool council, which has made several small scale transfers.

They are running a training consortium with some of the largest associations in the region: Riverside, CDS, Maritime, Arena and Liverpool Housing Trust. Much of this region has high unemployment, and reaching out to people in deprived areas with opportunities for construction training will be a key part of the work.

Knowlsey's director of housing, John McHale, says: 'There will be a huge training programme, and we need the consortium to provide people over five to 10 years.'

The consortium will also act a bulk buying service for materials and subcontract work, deploying its massive buying power to drive hard bargains with suppliers. From the savings, 1 per cent will support training work.

The large housing associations formed from stock transfers increasingly see themselves as focal points of their communities, rather than just owners of bricks and mortar. They see themselves providing not just decent homes, but a good environment, training and employment, and tackling poverty and antisocial behaviour on estates.

Mr Brown says: 'If contractors are involved in social housing then community regeneration is of equal importance to physical regeneration. If contractors want market leading positions they have got to understand this concept and work with landlords like us.'

Contractors must offer more than a pledge to good training. They must show evidence of a willingness to get involved in the communities they are helping to rebuild. Contracts will increasingly go to contractors that are capable of lateral thinking and can help with as many aspects of community regeneration as possible.