Brexit, Texas and the UK: A Discussion About Homebuilding

Monday, June 27th, 2016 and is filed under Construction

Anyone who even remotely follows current events knows about the United Kingdom’s June 23 historic vote to leave the European Union. Even as world markets are in turmoil, one question arises. Namely, what will Brexit’s impact be on homebuilding? Another question: Should Texas home builders even care?

The answer to the latter question is yes. Texas homebuilders should keep abreast of the UK homebuilder’s market, and not just because of any potential global economic fallout (as important as that is). Also important is that issues impacting homebuilders across the pond aren’t too different from what Texas homebuilders face.

The Bad News: Scarce Labor and Migrant Workers

We’ve mentioned in previous blogs that labor scarcity is a huge issue in the U.S. and Texas housing markets. In Texas, the major factor behind supply scarcity is demand. But in the UK, much of the industry is based on migrant workers from Europe. A post-Brexit England with less-porous border could mean more difficulty in in recruiting migrant workers.

In a recent “Property Wire News” article, Brian Berry, chief executive of the Federation of Master Builders, noted that the UK government must ensure that EU workers are able to easily enter the UK, post-Brexit.  He also pointed out that more time and investment should be directed toward construction apprenticeships geared toward training British citizens.

Texas homebuilders also rely on immigrant labor to build houses. The border between Mexico and the U.S. is not as porous as that between the United Kingdom and the rest of Europe, however. Texas homebuilders following the letter of the law (i.e., NOT using illegal immigrant labor) are required to file paperwork and obtain temporary visas so workers can cross the border easily. Still, if U.S. populists get their way about immigration, this could lead to more difficulties with access to immigrant housebuilding labor, especially in Texas.

The Good News: Less Red Tape

Speaking of paperwork, homebuilders in Texas struggle with state and municipal regulations, impact fees and other issues – something else we’ve pointed out in previous blogs. But imagine having to move through all of that red tape, then add edicts from, say Canada and Mexico. This is a good representation of what the typical British homebuilder faces.

For example, the EU Habitats Directive has, for years, had “an unnecessary impact on house building,” noted John Elliott, managing director of Millwood Designer Homes in the UK’s Tonbridge, Kent. One directive is protection of great crested newts or slow worms on a site. In Northern Europe, these are rare creatures, and given special protection. But Elliott pointed out that they’re plentiful in southeast England. As such, catching the creatures and locating them elsewhere delays construction, and adds expense.

Another piece of EU red tape Elliott will be glad to see gone is the EU Mortgage Credit Directive, stating that homebuilders can’t directly lend money to buyers, unless said homebuilders are registered financial advisors. According to Elliott, homebuilders lending money to buyers “has been a traditional way . . . to help buyers overcome mortgage down valuations . . . and keep the market moving.”

Homebuilders in Texas operate somewhat differently; rather than lending money directly to buyers, they team up with financial experts and institutions for that purpose. But another thing the Texas and UK homebuilding sectors have in common, is that they’re an important part of a healthy economy.

“One of the UK’s biggest assets is our home-grown housing market,” Elliott said, “And this will now be much better out of EU regulation.”