1.5m new homes by 2029: Labour target may raise insurance claims

The Labour Government’s ‘Plan for Change’ milestone of building 1.5 million new homes during the current Parliament to deliver the 'biggest growth in affordable housebuilding in a generation' could lead to an increase in insurance claims. This is due to an increase in the use of brownfield sites, building defects and changes to regulation. Housing associations and registered providers must ensure that the developers they commission have adequate insurance cover to protect their developments, and to protect themselves against liability for potential construction related claims.

Brownfield sites

Previously developed industrial and commercial sites labelled ‘brownfield land’ are to be prioritised when releasing land to meet development targets. Brownfield sites require remedial intervention to ensure the land is suitable for future development. The increased use of brownfield land for development by housing associations and registered providers is likely to cause an increase in insurance claims. Brownfield sites are often contaminated by hazardous materials and can have unstable ground conditions, which can result in the degradation of construction materials. This can in turn cause damage to foundations and structural stability. Brownfield sites are also more liable to flooding, as they are often located where watercourses are polluted by existing industrial drainage systems. Such issues may lead to property damage insurance claims.

Shortage of skills

Meeting the target of 1.5 million new homes by 2029 also requires a skilled and efficient construction sector, which is currently facing a significant labour shortage. 5,000 more construction apprenticeship places are being made available per year as a result of the recent £140 million industry investment. Whilst this will enable the growth and upskilling of the construction workforce and facilitate the delivery of housebuilding targets, it also means that lower-skilled workers will be joining the workforce. This has resulted in more frequent building defects and consequent property damage insurance claims. Housing associations and registered providers might consider making enquiries regarding the staffing of all potential developers before commissioning.

Regulation

Amendments to the Defective Premises Act 1972 (DPA) and the Building Safety Act 2022 (BSA) have also increased the number of insurance claims. The DPA imposes a duty of care on those constructing and working on dwellings and allows homeowners to claim compensation for property damage. The BSA now allows all homeowners more than twice the amount of time, from 6 to 15 years, to claim compensation for sub-standard construction work. Housing associations and registered providers must ensure that commissioned developers are required in development documentation they enter to manage their all building safety risks and can evidence clear lines of responsibility during the design, construction and completion of developments.

Insurance

Considering the issues above, housing associations and registered providers must ensure that all commissioned developers have adequate insurance cover to protect their developments, and to protect themselves against liability for potential construction related claims. NHBC Buildmark insurance cover or equivalent should be obtained as standard to cover remediation costs for damage caused by building defects and contaminated land. Contract works insurance should also be obtained to cover the cost of damage caused by flooding. Professional indemnity insurance is crucial in mitigating the risks during the design, construction and completion of developments and should be confirmed to be in place to be available in the event of a claim.