Factory builds: An answer to the housing crisis?

Modular housing is gaining momentum and, although still in the early stages, factory-built housing could be game changing - doing for housing what factories once did for motor car production.

There have been regular press announcements around modular housing and local authorities of late. This is not least because Homes England, the government's housing accelerator, has been tasked with helping partners to challenge traditional norms and build better homes faster. 

Homes England has several funds available, including its £290m Estates Regeneration Fund, which offers finance to kick-start and accelerate the regeneration of estates, its £450m Accelerated Construction Programme and £4.5bn Home Building Fund. It has been clear that it supports projects making use of modern methods of construction (MMC). A spokesperson for Homes England said the organisation is committed to working with local authorities with big ambitions to get more homes built. "We encourage local authorities to embrace modern methods of construction to increase the speed of construction of new homes and can offer a range of support, such as our Local Authority Accelerated Construction programme," the spokeswoman said. 

Rob Perrins, Chief Executive of building company Berkeley Group, believesthe construction industry has reached "tipping point" with MMC. "More investment and research is going intoMMC and quality standards have increased dramatically. It’s now a more competitive, innovative sector in its own right and a broad range of MMC components are now in common use on major sites. Developers have real confidence in these products and so do more local authority planners."

It is not just UK builders getting in on the act, Homes England recently announced that Japan's biggest house builder Sekisui House, pioneers of modern methods of construction, will be coming to the UK after taking a 35 per cent equity stake in the modular housing business House by Urban Splash. Sekisui House has invested £22m of new equity, with £30m of equity and debt funding coming from the government’s Home Building Fund administered by Homes England. 

Speaking about his company's move into the UK market, Yoshihiro Nakai, President and Representative Director of Sekisui House, said using modern methods of construction to build high-quality homes with short build times was one of the company's great strengths. 

A loan from Homes England from the Estates Regeneration Fund has recently been awarded to redevelop sites in Basildon. More than 760 new homes are due across two sites, with the majority of these expected to be built off site using modular construction techniques. It is expected that the work will be completed by Autumn 2024. 

Homes England has also awarded £10.6m to Welwyn Hatfield Borough Council for up to 670 new homes across three sites in Welwyn Garden City and Hatfield. The construction is expected to use modern methods, including panellised and hybrid construction. Meanwhile, Nuneaton and Bedworth Council (MBBC) has completed its first modular build of four semi-detached two-bedroom properties having secured £120,000 worth of funding from Homes England. MBBC has recently announced plans to embark on one of the largest modular housing projects in the UK to date - 28 dwellings across four sites (see case study on page x for more information). London Mayor Sadiq Khan has also recently pledged £11m to an initiative which will see up to 200 affordable modular homes for rent across the capital. 

The pressure on the UK's social housing stock is ever increasing with young people increasingly shut out of the market by rising house prices. In addition, the Homelessness Reduction Act is likely to put additional pressure on resources, with councils having to help homeless people find accommodation regardless of whether they are classed as a 'priority need'. Figures released in January 2018 found the number of local authority-owned homes in England decreased by 0.7 per cent to 1.60m by April 2017. At the same time, 1.16m households were on local authority waiting lists.

While the factors are complex and unable to be solved with one solution, Dr Andrew Larner, Chief Executive at iESE, feels factory-built housing could provide part of the answer and is urging local authorities to come together to harness the opportunity modular housing could offer."Factory-built housing could make a real impact on the housing crisis in the UK. But we, as a sector, are going to have to come together and, if we do, we will get more superb quality developments up and down the country using this excellent construction method," he said. 

One big benefit of modular housing is the speed at which a dry and secure home is produced. Another advantage is that a factory-assembled house needs less space on site. With a prefabricated house built in a factory setting, once the foundations have been laid, the structure can be lowered into the site by a crane. This means you can use plots which would not be viable for a traditional build.Another big benefit is that overall build times can be reduced by as much as 50 per cent. 

While there is no doubt that MMC is gathering momentum in the UK, there are some issues in the emerging market - especially for the suppliers who need to make significant initial investment to be involved. David Langford, Group CEO at modular building company Ashby & Croft, which has successfully delivered a pilot modular housing project for Nuneaton & Bedworth Borough Council (NBBC), said companies need to be cautious or risk losing their entire livelihood in a bid to deliver modular housing.

Langford said Ashby & Croft, which has won a tender to deliver further modular housing to NBBC, said councils need to understand that MMC is not directly comparable to traditional builds. "Modular housing is built and delivered differently. It involves more engineering and will be more expensive." He said companies like Ashby & Croft which have been involved in pilots so far have had to see them as a loss leader. To make modular housing a viable business to be involved with, large orders are needed - in the region of hundreds of units per year - investment in expensive machinery is essential, a large storage facility is required to keep parts until they are ready to be moved to site and the factory line has to be set up solely for modular housing. And for this, standard designs are needed. "If a factory is geared up to make Minis, you can't easily then produce a Land Rover," Langford explained. 

To give a factory production line over to modular housing, he said it was essential to know that there was a pipeline of work over a couple of years and that the client is committed. "Not only do you need to invest in machinery, you need enough trained people. There is a massive skills shortage in this emerging market. It is hard to recruit people with the right skills, so as a company you then have to invest in training as well." 

To make modular housing more viable as a business proposition, Langford said his business needs to invest in a machine to bend steel, costing in the region of £1m, as well as specialist software. "We have told NBBC we are open for scalability but have also said you must help us," Langford explained. To this end, NBBC is opening up its framework to other councils who could then also order from Ashby & Croft.

Also desirable, Langford feels, is for government to ensure some of the funds available to promote alternative methods of construction make it through to the suppliers. "We have spoken to government bodies but they have no mechanism for helping us access the investment we need at this time. Then you hear that a Japanese company is entering the UK market, but what about us? We are UK-based, we have financed the research and development for pilot schemes ourselves and taken that risk."

Failing to assist those businesses at the forefront of this emerging market could bring the modular housing market to a standstill before it really starts - a big loss for the UK economy and its housing situation.