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Landlords muscle in on contractors' home territory

Some of the country’s largest housing associations are establishing in-house construction divisions to take over the building of thousands of homes.

London social housing giant L&Q has established Quadrant Construction - as revealed by cnplus.co.uk last week - and Orbit Housing Group has confirmed it too is moving into construction.

Orbit Build will initially deliver the company’s outright sale-led developments and has already started on site with a 323-unit scheme in Bedford.

Quadrant Construction will deliver a large part of the association’s 10,000 unit pipeline, worth roughly £120 million a year.

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 the 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, who will lead Quadrant Construction, told CN quality considerations were a key reason behind the move as industry standards were variable.

Mr Campion said it was a positive challenge for the industry, adding: “If organisations are telling contractors they are concerned about efficiency, then conversations need to be had and we will react to that.”

One contractor agreed there had “been some quality issues” but said it was easy to blame the contractor when the situation was usually more complicated.

But A2Dominion commercial executive director for the South-east John Allan, who has overseen the group’s construction arm since its first project in 2008, said the move had proved effective.

He said: “We have achieved about a 20 per cent saving on build cost per square metre. So a good progressive provider would be daft not to be thinking along these lines.”

Mr Miller expects Quadrant to turn over around £50m a year.

Following the Lowry Homes buyout, Riverside subsidiary Prospect will build 457 houses over the next four years.

Chartered Institute of Housing director of policy and practice Richard Capie said larger developing housing associations might follow suit, but it would be the exception rather than the rule.

But PwC head of housing Richard Parker said the lack of section 106 funds open to registered providers meant it was “rational” 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.

Other analysts agreed. Savills director of housing investment consultancy Ingrid Reynolds said: “I think the changes to the funding regimes are really going to polarise the way associations deal with development and some may decide to set up in-house capabilities, particularly where they are doing housing for outright sale.”

Quadrant Construction’s first project is set to be the Silwood regeneration scheme (pictured).

 

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