Can government make the most of the possibilities? (Prospect's housing report is kindly sponsored by RICS, Sovereign Housing, Atkins and the Building Societies Association)by Michelle Hannah / December 16, 2019 / Leave a comment
There is a growing interest in the use of modular construction methods. Makers of these modular homes, which come in pre-manufactured parts almost like a kit, will tell you that enquiries are at a high. But even so, it can take a long time to translate these enquiries into orders. This can be a heavy drain on company resource.
The promotion of a modular product is often associated with the advantages of better quality, delivered faster and more cost effectively—so why is there a long-drawn-out period between the initial enquiry to the moment an order is placed? There are many reasons. The industry is growing increasingly familiar with modular methods—but it takes time.
It should be acknowledged that modular construction is not the only solution to the housing crisis. But it does promote a design approach, one that’s focussed on greater efficiency and which reaps the benefits of new and innovative systems. This is not to say that architectural quality is necessarily sacrificed. Adopting this approach can be beneficial to any form of building work.
Modular construction is a sector in its infancy and has a good deal of growth potential. But though people are now more familiar with the idea of modular homes and buildings, there is still a lack of real evidence on the long-term performance of the resulting assets. That makes the market nervous. The capital cost can be more expensive than traditional brick and blockwork, but the way modular is built is supposed to return a better value eventually. Even so, there just isn’t enough data at present to back this up.
The May government supported modular housing and this helped to quell some of the market’s nervousness. To answer the question of whether government is taking the right approach in exploiting the possibilities, we first need to understand what those possibilities are.
There is no standard accepted number that gives the total capacity in the modular manufacturing sector, so the supply potential isn’t known. There are some estimates that put capacity at around 10,000 homes per year, but anecdotal statistics show that only 1,000 modular homes were delivered in 2018. If these statistics are correct, then we need more investment in modular businesses to fill up the order books. But this will only happen with increased confidence in the product.
This new government can help to increase confidence in the sector by increasing investment—whether directly or indirectly. The last government set up a working group to address concerns within the insurance and warranties market. It is hoped that the good work will continue, as it could well help to alleviate some of the nervousness about product performance.
In addition, the modular manufacturer ilke Homes has secured a £30m investment from Homes England to boost its production capacity, news that follows the £90m deal between Homes England, the developer Urban Splash and Sekisui House earlier this year. This kind of investment supports a previous ministerial announcement that the government wanted to create a “construction corridor” across the north of England, to generate 80,000 jobs in off-site manufacturing.
Although there is evidence of political support for modular housing, there is a wider issue which also needs to be addressed in the industry. If we continue with business as usual, adopting the same procurement processes and behaviour, the modular sector will not grow quickly enough to deliver thousands more homes.
There is a growing number of private and public sector developers who are focused on changing the way they buy services. They are moving away from transactional-type relationships to partnerships. This includes arrangements where the client invests in the manufacturer, such as the deal between the Housing Association, Places for People and ilke Homes.
Unfortunately the shift from project-by-project procurement is not a common one. There needs to be a behavioural change from both government and developers when it comes to question of value for money. Lowest price does not necessarily represent value for money—therefore the industry has to focus on the long-term rather than the short-term. It’s not a simple challenge in a politically sensitive sector that’s prone to all sorts of external pressures. But it’s a challenge that must be faced nonetheless.