“There is a fascinating double shift happening in the UK housing market which is about to change the face of the sector immeasurably,” predicts Sarah Daly.
“It is the coming of age of offsite construction and the diversification of the social housing sector into building for social rent, sale and market rent. It is evident that pre-manufactured housing is rapidly scaling-up and being delivered by Registered Social Landlords (RSLs) and joint ventures, to meet the challenge of building more sustainable homes affordably. This will disrupt the market and potentially solve the housing crisis far more effectively than the current ‘volume’ house builders.”
Meeting the needs of tomorrow whilst delivering at speed in a housing crisis, creates some huge challenges. The emerging offsite homes are in the main, finely-tuned, precision-manufactured houses, owing more to the car industry, in terms of their production, than traditional brick and block construction. That perhaps explains why the house building sector has been so reluctant to adopt modern methods of construction (MMC). Clearly senior management teams of national housebuilders have come through the ranks of construction and associated professions, where the progression from drawing board, via the IT revolution, has been relatively linear. How buildings have been designed has been subject to radical change; but essentially construction itself has remained much the same for centuries.
So is OSM construction a silver bullet?
Well in many ways, yes. Or at least it could be. The Government has stated a commitment to MMC in the Housing White Paper and Homes England have come out strongly in favour, intimating a 'presumption in favour' to match the non-residential offsite announced in the Autumn Statement 2017.
Offsite is being strongly encouraged to drive up new build standards, as well as delivering the vital volume. It should also be noted that in a post-Brexit world, where so many construction workers are EU citizens, we are already feeling the skills pinch and a radical change in delivery methods will be required to meet targets. There were already deep concerns with the ageing population of UK site workers and very poor uptake of construction apprenticeships. With a shortage of skills, costs will rise and this will make housing even more difficult to deliver affordably. Off-site construction therefore has to be one of the answers.
It also makes sense to deliver quality and quantity via scaled-up manufacturing so that traditional trades can be refocused on the enormous task of retrofitting 25million existing homes between now and 2050.
It isn’t a one-size fits all approach
There are many approaches to OSM with some offering a partially modular solution where high-performance, pre-fabricated fully-clad units are delivered to site for first fix and the rest of the process is similar to traditional build. However, state-of-the-art factories are now producing volumetric systems where each home is delivered fully-fitted, including all finishing, as ‘plug and play’ buildings that simply need to be connected to the services once installed on-site.
There is an urban myth that offsite is more expensive than traditional construction, yet taking out land, site costs and fees, recent developments have shown that units can be completed for around 15% less than traditional based on a fully volumetric, Passivhaus system, compared to current Building Regs on a traditionally built version.
Eco Modular Living claims it can provide housing for 25% less than traditional construction and 50% faster with units delivered in as little as six weeks from order. They even offer the option to lease houses which can be bought-back after 10-15 years or removed for refurbishment and delivery to another site, if local need has changed.
I spoke to Chris Bowen, Development Director of Liverpool Mutual Homes (LMH) who completed his first 33 modular units at Naylorsfield Drive, Belle Vale, with a scheme delivered by Bowsall Homes.
“There are different costs so it’s not always directly comparable; but our board accepted the project as it gave a number of advantages and could be delivered as a full D&B turnkey scheme.”
Chris went on to explain that “achieving the right price will kick-start modular housing in a big way and if suppliers manufacture homes for £65,000 or less then it really works. At those prices it also means that slightly more challenging sites can be developed as it gives providers more scope to get sites ‘development ready’
Naylorsfield Drive installation and completion. Watch the time-lapse video of the site construction here:
Lean and green
From a sustainability viewpoint Naylorsfield Drive was very successful. LMH had been trying to achieve around 20% of their 300 units per year at equivalent of Code 4 for sustainable homes; but they found this hard to achieve cost-wise, and were mostly riding back to Code 3 equivalent. However they achieved a really good SAP rating of 83 – which means that this house, if it performs as-built, should be virtually future-proofed to 2050 standards (current recommendation is SAP 86). It has the potential to reach 95, a high A rating, with the addition of renewables. This is outstanding and almost impossible to achieve with traditional construction at the same price.
This development, like all sites, wasn’t without its issues and they suffered delays due to flooding and difficulties getting services connected. Bizarrely, utility companies will only bring services in once the houses are in-situ, but it took 3-4 months to get them connected. The LMH team has learned many lessons from this exercise, but also lobbied DCLG to ensure that potentially fast delivery is not affected by intransigent processes from the utilities in future.
A room with a view
From an aesthetic viewpoint, you would not know these were not traditionally-constructed properties. The planners were satisfied they would sit comfortably in the context; yet they have a fresh, modern appeal. There is no reason why all offsite homes cannot be constructed to be super-modern or in the local vernacular. The tenants seem very satisfied and LMH undertook post-occupancy evaluation which verified their homes are performing as expected.
Safe as houses
Site waste is radically-reduced and the health and safety implications are also incomparable to traditional build as there are so few workers on-site at the same time.
The new kids on the block
Although not without their difficulties, the first large-scale disruptor to enter the market was Legal & General with L&G Homes, from their site in Sherburn, Leeds where they are aiming at 3000 units per year with more regional factories to follow as part of a pension-backed initiative to challenge the poorly-performing housing market.
Swan Housing is so convinced that this is the way forward that they have built an offsite factory in a joint venture with Basildon Borough Council and the Homes and Communities Agency to serve the £100m regeneration of Craylands Estate. The new facility will create at least 500 homes and 40 jobs and will be branded NU Homes.
Places for People and UrbanSplash have taken the modular concept on a stage. They are delivering 34 modular homes at their regeneration site in Smith’s Dock, North Shields, where they are allowing the new occupiers to define the layout of their home including which areas are open plan or enclosed and the position of bedrooms and living areas. This really shows that computer-designed and delivered housing has the ability to meet the needs of the occupants with design that can be more easily flexed and changed by individual unit, than with conventional construction.
In an era of automation, effectively ‘hand-built’ homes will soon seem as anachronistic as hand-built cars; or something for bespoke homes or small, high-value developments. Ironically, hand-made normally implies a high degree of quality and customisation. However in housing terms, volume house builders can only offer a few options on finishes and flooring so again offsite’s advantage will grow over time as consumers will not settle for standardised, lower-performing buildings at higher cost.
Adapt or die
It is perhaps unsurprising that the ‘first movers’ are from outside the construction sector, as disruption almost always is; yet the early-adopters at scale have been in social housing. Although the social sector is often viewed as quite conservative, when you look at the strides social housing has taken in terms of design, space standards, place-making and now MMC, it really is putting the rest of the housing sector to shame. And with some of the canniest RSLs creating mixed-tenure developments to fund their social objectives, it really does seem that the power in the market will start to shift from traditional, shareholder-focused house builders to RSLs who are socially-driven and genuinely concerned about delivering better homes and communities.
RSLs who manage thousands of properties, know that the wear and tear on homes means that scrimping on quality never pays. As stock properties are a liability if not well-built and properly maintained, RSLs endeavour to specify the most robust fixtures and fittings. In contrast, most house builders are more focused on margin and tend to specify for first impressions in the volume, mass market, rather than longevity. This means that new properties brought forward by social housing developers – whether for sale or market rent, will be more likely to meet the exacting standards applied to social housing.
Space standards are also typically much higher in social housing so that a three bedroom family home will definitely have three good-sized bedrooms; not a double bedroom, a single and a veritable cupboard! Space standards are a critical component of a sustainable home and if volume, modular construction can deliver more for the same or less cost, then people should be given decent spaces that will enhance their lives.
But surely lenders and lawyers won’t like this new-fangled MMC?
MMC is no longer automatically regarded with suspicion by lenders as buildings with an 60 year BOPAS warranty are fully mortgageable; and development capital is also widely available. Lenders are beginning to see that faster and less risky delivery means that developers can reach practical completion more quickly, which reduces risk for everyone.
As a further guarantee to lenders and occupants, it would be pleasing to see universal take-up of BRE’s Home Quality Mark to give greater quality assurance and create a valid pool for on-going post-occupancy evaluation against traditional build. Indeed given the recent Bovis Homes’ scandal, one might ask if there are enough checks and balances on traditional construction.
Another huge benefit of OSM is that it simplifies contracts as D&B arrangements are between the main contractor and the manufacturer. This takes out the risk of all the sub-contractors on a traditional build. If there is a problem, the manufacturer is obliged to resolve it with a one-team approach, rather than multiple trades from different organisations having to be synchronised to resolve their element. This should mean snagging, in the unusual event it would arise (as buildings are quality controlled and signed off on dispatch) should be far less frustrating for the occupant.
These are just some of the reasons why all housing providers/developers should ensure they are entirely au fait with offsite construction. Current supply-chains may be deeply suspicious of MMC because it is unfamiliar to follow a manufacturing, rather than construction process. However these systems and processes are very much tried and tested over decades in many advanced countries and at scale over the past 15 years in the UK, especially for hotels, student accommodation and offices – buildings that are far more structurally-complex than a house. Resistance of the house building industry can only be attributed to a reluctance to adapt as the benefits are impossible to ignore.
Building a new sustainable sector
There are hundreds of small-scale, independent offsite contractors who can offer a local service; and increasingly we will see ‘pop-up’ or 'flying factories' built on-site to deliver for larger schemes rather than transporting units to site.
The most important factor now is for the market to respond as modular factories can only survive on volume. Willerby Homes, a long-established Hull-based family firm making holiday homes, diversified into modular housing and was the provider for LMH’s Naylorsfield Drive development, but it could not achieve critical mass and has retrenched to its core business.
There are several major names poised to launch into the market this year and hopefully the combination of some trusted brands, with the delivery at scale of the players highlighted earlier, will mean that OSM becomes normalised as a quality, sustainable solution to our housing crisis within the next year or two.
Chris Bowen concluded “LMH is keen to do another modular site, although it needs to be the right location and next time, ideally we would like to do around 100 units including market sale. Given the lessons learned and our desire to continue to drive up standards, I think modular is definitely the way forward.”
The reality is that if you take land values and developer profit out of the equation, the UK can build highly sustainable, low cost, high quality homes at speed and undeniably at levels which are affordable by anyone’s standards for open market or rental models.
The reason our housing system is ‘broken’ as admitted in the Housing White Paper, is because we have a disconnect between the right to a roof and the right of landowners and investors to receive vast returns. Persimmon has posted a 23% increase in profits in 2016, following a 34% rise in 2015 due to a ‘healthy market’..... it could be debated long and hard what their definition of ‘healthy’ is in Britain’s bloated and under-performing national housing sector with over 50% of new builds reportedly having major defects.
So with the market hardly noticing, the modular players are on course to deliver roughly 20% of the UK’s housing input over the next few years; and the revolution has barely started.
Sarah Daly is working with MMC suppliers so that we can provide ongoing insight and facilitate further knowledge with social landlords and any other developers wishing to evaluate modular build. It is hoped to to create a cooperative of RSLs who can achieve critical mass by aggregating demand with selected manufacturers working together. The disruption may however be more rapidly driven by the new Build2Rent brands entering the market at speed with institutional investors.
As aforementioned, the current concern in off-site construction is that factories need to keep production at a consistent pace in order to retain the production staff so there needs to be a mass change in procurement so that the offsite housing sector can reach capacity and continue to deliver the multitudinous benefits it can offer.
Sustainable Development Strategist