End of day adjournment debate on National House Building Council - Oct 16

Steve Double (St Austell and Newquay) (Con) 

High on the list of priorities for many people in our country is the desire to own their own home. Indeed, a recent British social attitudes survey found that 86% of those asked said that they wanted to buy their own home. The UK has a long heritage of home ownership, which sets us up as different and distinct from many of our European neighbours. As the saying goes, an Englishman’s home is his castle. I am sure that that is also true of the Scottish, the Welsh, the Irish and, indeed, the Cornish. It is in our culture that we value highly that little bit of the country that we own and call home.

There is no doubt that our country faces a huge challenge with the housing market. Demand, for all sorts of reasons, outstrips supply. The Government are right to encourage new house building—those houses need to be in the right places, through plan-led development, and they need the infrastructure and services to support them. There is no doubt, however, that we need to increase the supply of housing in our nation. I welcome the new extension of the Help to Buy scheme that will help first-time buyers to get on the property ladder and achieve the dream of owning their own home with only a 5% deposit. However, if we are to achieve the aim of building hundreds of thousands of houses that people will purchase and thus participate in our capitalist democracy, we need to ensure that they can be confident that those homes will be of a good quality in both design and construction.

While the majority of new homeowners are satisfied with the build quality, minor issues aside, figures from the Home Builders Federation and the National House Building Council show that a staggering 27% of buyers said that their homes had more problems than they were expecting. One national house builder recently saw its share value plummet by 10% on the news that it has set aside a staggering £7 million to resolve what have been described as “customer service problems”. With contracts signed, deadlines agreed, and maybe a chain involved, buyers have little or no option but to move into their new home, despite it sometimes not being finished to their satisfaction.

Often new homebuyers discover faults and poor workmanship that go way beyond reasonable, and even understandable, snagging. Some faults and problems are very serious indeed. So just when buyers are at their most vulnerable, too many discover serious building defects. No doubt when faults emerge, they look to the 10-year warranty almost universally offered on new homes. Several companies offer such products, but the market is dominated by the NHBC, which has roughly 80% of the market. In essence, for the first two years the builder is responsible for remedial works. If there is a dispute, then the warranty company will act as adjudicator, or if the builder is no longer trading, the warranty company steps in. After two years, the warranty company takes responsibility for the remaining eight years. The 10-year warranty is presented as a benefit and reassurance to the new homeowner.

John Howell (Henley) (Con) 

My hon. Friend is talking about quite serious snagging problems, and slightly worse. Would he, like me, put more emphasis on getting those who produce neighbourhood plans to spend more time on making sure that the design is right rather than waiting for the buildings to be built and then people finding the snagging?

Steve Double 

I agree that we need to put more attention into the design of the housing that we are building rather than just building to the usual design standards.

The experience of many is that when they take out the 10-year warranty, the insurers routinely resort to delay and obfuscation, denying and hindering legitimate claims for truly shocking examples of poor workmanship and defects or offering cost-cutting remedial works that fall short of producing a satisfactory solution.

Jo Churchill (Bury St Edmunds) (Con) 

Does my hon. Friend agree that the problem with many of the big house builders, such as the one he alluded to that set aside a large contingency fund for these issues, partly stems from the fact that they have no workforce of their own, particularly no site managers and the like? Interestingly, that company said recently that it would not support the levy continuing for the Construction Industry Training Board, which is having to be subsidised by architects and small builders, and not by the large house builders that we should arguably be holding more to account?

Steve Double 

I am grateful for my hon. Friend’s intervention; she makes a very good point. At the heart of this problem is the quality control on building sites. Too often, subcontractors are used and there is not the level of management oversight of the quality of their workmanship that there has been in the past and that we need to see today.

I have been seeking to assist a couple in my constituency who had obvious and serious problems with their new-build house. They first discovered the serious defects with their newly built property eight weeks after taking possession. Four years later, they are still fighting their case. They purchased their brand new house for £395,000. The most recent estimate of the cost of rectifying all the faults and defects comes to £325,000. That is truly shocking, and it is surely a sign of the complete failure of the inspection regime. The level of defect is such that somebody must have known about the problems before completion.

Scott Mann (North Cornwall) (Con) 

My hon. Friend is making a powerful point. Is he aware of an organisation in my constituency called Casa Snaggers? It is an independent snagging company based in Launceston. Does he think that it might help to resolve issues of the sort faced by the couple in St Austell?

Steve Double 

I thank my hon. Friend and Cornish neighbour for that intervention. I have heard of that company, and getting an independent inspection of a new property before signing the completion papers is one way to address the issue.

Jo Churchill 

Surely the fundamental point is that when someone spends nearly £400,000 on a product, they expect, under their consumer rights, that product to be fit for purpose—a house should stand under its own construction and be there for the duration. We should be asking for that, rather than relying on a third-party snagging company.

Steve Double 

My hon. Friend makes a good point. I was alluding to the fact that in the current system, getting an independent view of the property is worthwhile. Long term, I do not think that that is the answer. We need to get to the point where a house purchaser can be confident in the quality of the housing that they are buying.

I return to the situation of the couple I have been assisting in my constituency. It transpires that similar defects have emerged on several other houses on the development, adding to the couple’s anxiety and consternation. They said to me that far from being helped by the 10-year warranty company provider, they felt thwarted at every turn. They were sent around in circles and left for months on end with unhelpful responses or, indeed, no response at all. They said that far from working with them to resolve the matter, the warranty company appeared to be in cahoots with the developer. I believe that that is at the heart of the issue that I want to address. The perception is that NHBC has a too cosy relationship with the building companies, and lines are blurred as to precisely who they work for. That cannot be acceptable.

My own interaction with NHBC has been very unsatisfactory. I first became involved in the case before I was elected in 2015, and I have spent almost three years trying to assist progress, to very little avail—that is, until recently. It is notable that since notice of this debate was published, I have had direct and constructive contact from NHBC’s chief executive, Steve Wood. He phoned me just last week and admitted that my constituents had been let down by the system. He said that he was determined not only to resolve their case, but to ensure that NHBC improved its service. Having spoken to Steve Wood, who has only been in post for three months, I am more hopeful that things may change for the better. However, although that response is welcome, an MP should not have to secure a debate in this House before the NHBC takes some action. New homeowners should be confident of getting the service they are entitled to without the intervention of their Member of Parliament.

Although I accept that many customers of NHBC will be satisfied with the service they have received, it is clear that far too many are being let down. Therefore, I believe that we need a review of the new homes warranty market. My constituents spoke to me of being thwarted and foiled at every turn, and that has proved to be a startlingly accurate description of the experience of other new homeowners across the country, as has recently been reported in the press.

One issue that has come to light is that NHBC has close ties with some developers, and that it operates a washout system of premium refunds. Once policies have expired, NHBC pays back to the builders a proportion of the fees paid for the policies—reportedly amounting to tens of millions of pounds—as a reward for, or in recognition of, a low or no-claims record. Between them, they have a vested, incestuous interest that is in conflict with the benefit and welfare of the very people they purport to act for—the homeowners. There is a clear blurring of lines about whom the warranty company actually represents. The builder pays the premium, and if no claims are made, it gets a rebate. No wonder builders do all they can at times to avoid agreeing to a claim.

Jo Churchill 

Is my hon. Friend aware of whether any statistics on this are collected by the Department so that it can understand which builders are particularly poor and allow planners or other people to get involved at an earlier point?

Steve Double 

I am aware of what has been reported in the press, but I am sure that those data should be available, given the way in which the NHBC operates. That could certainly be followed up.

There appears to be a closed shop or old boys’ network, with the industry looking after itself, rather than the consumer. By contrast, recent legislation has strengthened consumer rights further, so that faulty goods can be rejected and a full refund obtained, but not so with housing. Homes are specifically excluded from the Sale and Supply of Goods Act 1994. The homeowner has far more consumer rights and protection for a new kettle in their kitchen than they do for the new building that houses it. For the vast majority of people, buying a new home will be the biggest purchase they ever make, and surely we should provide more adequate protection for them. On the thankfully very rare occasions when the builder has completely failed to construct a property fit for habitation, house purchasers should not have to resort to the courts to establish their rights. Sadly, that is too often the case in the current set-up.

Building houses is high on the Government’s agenda, and with plans for 1 million homes to be constructed, now is the time to ensure they are built well, are fit for purpose and consistently fulfil the reasonable expectations of those who buy them. When something goes wrong, there should also be a system in place to protect the purchaser. A recent report by the all-party group for excellence in the built environment made a number of recommendations. I urge the Minister to read the report and to consider its recommendations. As well as calling for a review of the warranty market, the all-party group also called for the introduction of an independent housing ombudsman.

Jo Churchill 

I chair the all-party group, which for reasons of clarity, I thought I should declare.

Steve Double 

I am very grateful to my hon. Friend for that clarification. I was not aware who the new chair was, and I am delighted to hear that it is my hon. Friend.

I believe the introduction of an independent ombudsman would be an important move, and I ask the Minister to consider it. By its very existence, an independent ombudsman would bring urgently needed fresh focus to the industry. As ever, it is far easier and cheaper to get it right first time. The prospect of an independent body adjudicating will in itself produce a new impetus to achieve a better outcome more often.

I look forward to the Minister’s response. May I finish by inviting him to visit my constituency in Cornwall so that I can show him some of the problems that my constituents face and he can see them for himself? His visit would be welcomed by exasperated homeowners and provide convincing further evidence of the need to bring fresh order to the industry.

The Minister for Housing and Planning (Alok Sharma) 

I congratulate my hon. Friend the Member for St Austell and Newquay (Steve Double) on securing this debate on consumer protection for new home buyers and the National House Building Council. We have had some powerful interventions from colleagues, and I am extremely pleased that my hon. Friend has been working so hard to assist his constituents. It is good to know that the NHBC has now responded, and I wish him well in taking forward that individual case.

On house building in general, earlier this year we published our housing White Paper, which highlights the need to fix our broken housing market and sets out how we will tackle this. Of course, just building more new homes is not good enough. We expect all house builders to deliver good quality housing on time and to treat new house buyers fairly. My hon. Friend talked about homes being in the right place—I absolutely agree—and the important role that local people play in neighbourhood plans and deciding where development goes in an area.

As my hon. Friend pointed out, delivering good quality homes does not always happen in the sector. He referred to the Home Builders Federation survey, so perhaps I can elaborate and share some further statistics from it. The latest HBF survey concludes that 98% of new homeowners report problems to the builder. Of course, some will be snagging issues, but although some problems may be hard to prevent initially, 38% of buyers had more problems than they expected. A staggering 25% of buyers reported more than 16 problems. The latest survey shows that 84% of new homebuyers would recommend their builder to a friend. That figure has fallen steadily from 90% in the past four years. It means that 16% of new homebuyers do not think that they have a quality product. In any other market, that would spell the end of the most poorly performing companies. That has rarely been the case in the house building sector.

Customer satisfaction is important to many home builders, but others need to make it a priority. My hon. Friend the Member for Bury St Edmunds (Jo Churchill) made a pertinent point when she talked about the vertical fragmentation of the industry. As I have said to some of the major house builders, perhaps the industry needs to think more about employing people directly so that they have much more control of the quality of what is built, as well looking at modern methods of construction.

After all, a home is not just one of the largest financial purchases, but one of the largest emotional commitments that people make. People bring up their families there, and it has treasured memories for many.

Alongside the actions the Government are taking, it is clear that home builders need to step up and make quality and design a priority. That includes ensuring that, where something goes wrong, house builders and warranty providers fulfil their obligations to put things right.

There are existing mechanisms for redress, such as the consumer code for home builders and the independent resolution service, but they can be complex, and, as my hon. Friend the Member for St Austell and Newquay said, they do not always provide full coverage. As he also noted, most new builds are covered by a warranty provider such as the NHBC 10-year Buildmark warranty. However, as he said, the cover offered by warranty providers varies and does not always match consumer expectations.

The all-party parliamentary group for excellence in the built environment produced a report called “More homes, fewer complaints”. It made a series of recommendations to improve quality and redress. I have read the report and it is a very good piece of work, and we are seriously considering the points that have been raised.

I have been encouraged by the fact that the industry will respond formally to the APPG’s report. The HBF has set up a working group and it will take forward action to provide better information to customers, simplify the legal process and create a clearer and simpler process for signing off new homes as complete. As some Members will know, the new working group has commissioned an independent report on consumer redress for new homebuyers, which is due to be published in the coming weeks. We expect that the report will demonstrate that there are gaps in the current redress arrangements and perhaps suggest some remedies. I will review the independent report, with a view to ensuring that improved redress arrangements are introduced to provide greater protection to consumers on a broad range of issues, with a greater degree of independence from the industry. I have heard the calls for a new homes ombudsman, which have been repeated a number of times in the House over the past few weeks, and I can tell hon. Members that I am considering that option very seriously indeed.

My hon. Friend the Member for St Austell and Newquay also talked about design, as did other colleagues, and he is absolutely right: we need to improve the design quality of new build homes. The Government recognise that good design is an integral part of ensuring that we are building homes that people want to live in. We have put in place a robust framework that promotes and supports high-quality design. We want to create places, buildings and spaces that work well for everyone.