A new report from the Housing & Finance Institute is warning that sluggish connections to water and sewerage infrastructure are slowing up the rate of housebuilding in the UK - and is calling for Ofwat and Ofgem to be merged to drive up delivery standards and better performance.

In industry discussions it is water, electricity, gas, broadband and roads which are the areas most often cited as holding back accelerated housebuilding, according to the HFI. In particular, there is evidence that a continuing failure of performance of some water companies is delaying housing growth.

The report from the Housing & Finance Institute (HFI) ‘How to Build More Homes, Faster’ says the government should regulate to ensure the water companies make faster connections to support more housebuilding.

There is "mounting evidence" that the performance of some utilities companies is having an adverse effect on housebuilding, highlighting continuing water company failures to meet their performance targets, according to the HFI.

The report has also found that despite Ofgem reporting greater customer satisfaction in 2015, developers still had problems with connections to the electricity network.

Every water company in England failed sewerage targets for housebuilding as an average in 2015

In the first period of performance reporting covering the first three quarters of 2015, every water company in England failed its sewerage targets for housebuilding as an average over the published period. Welsh Water Dŵr Cymru was the only company which fully met its performance target overall for sewerage connections.

The sewerage position is compounded by the performance of water connections, particularly in the South East, according to the report.

Affinity Water is flagged up as the company which has failed its performance targets most dramatically - in the first quarter it failed to meet its performance target by nearly 60%, while its average performance over the first three quarters of 2015 saw it fail by nearly 40%.

“Significantly poor performances” were recorded in quarters of 2015 for Thames Water, Southern Water and South Staffordshire, all of which saw 20-25% failure rates in at least one quarter of 2015, the report says.

Dee Valley, which operates in Wales and Cheshire was the only company to achieve its water connection performance target.

“Voluntary targets are generous to the water industry”

Commenting on the water sector performance targets for new connections, the report says:

“ From a housebuilding perspective, the voluntary targets agreed by the water industry are generous to the water industry. A water company can take up to between six months and a year to connect a property and still meet their regulatory target. This is despite the fact that the water company will benefit from the revenues of the new connections for many years.”

“This failure of the water industry to support the national needs for housebuilding is serious and may need more direct intervention.”

The report concludes that the first three quarters of reporting by water companies have confirmed some worrying outturns for housing  and the failures are slowing down housing delivery, saying that the ”poor experience” of the water industry seems to impact on larger and smaller builders alike.

Direct intervention by the regulator and Secretary of State needed to force improved performance

The report is calling for direct intervention by the regulator and by the Secretary of State to force improved performance and improve the timely provision of utilities required to meet housing growth via Utility Direction Powers.

It also says Infrastructure Dependencies Mapping should be introduced at a local and area level where Councils and and Local Enterprise Partnerships work together to understand the requirements for utilities within an area. Infrastructure Dependencies Mapping is the starting point for driving better utilities performance, according to the HFI.

Where council leaders find that particular utilities companies are holding back housing delivery they could then apply to the Secretary of State to start a process to meet with the utility and the council/operating area representatives and consider Utility Direction Powers.

The proposed Utility Direction Powers would allow the Secretary of State for Communities to serve a direction order, including costs, where utilities are causing a detrimental impact on housing, growth and community wellbeing.

Strong case for single water and electricity regulator

On statutory powers, the report says there is a case for providing the same legal framework for water as there already exists for electricity.

The report draws attention to Ofwat’s explanation of the more specific statutory powers held by electricity regulator, Ofgem compared to its own:

“The electricity sector has prescriptive statutory regulations and licence conditions setting out the minimum service levels for companies’ developer services, with enforceable penalty payments where these are failed. In contrast, the Water Industry Act 1991 provides prescribed statutory timescales for only a small number of the developer services water companies provide.”

The HFI says that “given that there are so few utilities providers for water and electricity, there is a strong case for a single utility regulator to drive more collaborative and planned local utilities provision and higher standards across all regulated entities.”

The report is also calling for the introduction of intervention powersand suggests there is a case for additional reserve powers to be held by the Secretary of State for Communities (DCLG) whereby a utility company can be required to bring forward utilities to a site within a specified time period and to make costs allocations orders against utilities providers who are failing to meet targets to support housebuilding.

Commenting on the report’s finding, Natalie Elphicke Chief Executive of HFI,  said:

 “To get homes built faster we need better performance from utilities companies who are currently failing to deliver on the homes the country needs. There is mounting evidence that a continuing failure of performance of water companies is delaying housing growth."

“Given that there are so few utilities providers for water and electricity, there is a powerful case for a single utility regulator to drive more collaborative and planned local utilities provision and higher standards across all regulated entities.”

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