Is there still appetite for modular construction?
With the modular construction revolution being slow to take off, do people still believe in the method? We brought together a group of experts, in association with H+H, to find out. Photography by Belinda Lawley
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During a speech in September 2020 addressing the Chartered Institute of Housing, then-housing secretary Robert Jenrick urged councils and housing associations to build “not just more homes, but more beautiful, more sustainable, better-quality homes in all parts of the country… delivered more quickly, harnessing the latest technology and innovation”.
It was an ambitious wishlist but achievable, Mr Jenrick claimed, because his Conservative government was working to make “modern methods of construction [MMC] central to the delivery of the new Affordable Homes Programme”.
Four years later, MMC – the collective term for building techniques that are designed to offer higher speed, lower cost and better quality compared with traditionally built homes – is still waiting for lift-off. A survey by the National Housing Federation found that just 16% of new homes started by social landlords in 2022-23 used MMC.
So what is holding this sector back? And what difference can MMC really make in confronting the two big challenges facing housing today: increasing the number of new homes built, while ensuring they still meet the energy efficiency requirements of the new Future Homes Standard due to come into force next year?
In October, Inside Housing gathered experts to explore these issues during a roundtable discussion held in association with aircrete block manufacturer H+H.
Post-failure optimism
The past few years have seen the failure of several high-profile MMC manufacturers. Legal & General ceased all production at its modular homes factory in May last year. The following month, manufacturer Ilke Homes entered administration, just a few days before it was due to start work with Platform Housing Group on what would have been the UK’s biggest MMC development.
“I still believe in MMC,” says Elizabeth Froude, group chief executive of Platform. “For me, it’s about consistency of quality. It’s about speed of delivery. And I think that it still has a very strong place.”
That optimism is shared by Dr Suzanne Peters, a research fellow at The Productivity Institute and co-author of a paper on the issues holding up MMC, published earlier this year. “It has been tough watching this industry and everything it’s been going through, but I’m full-on in my optimism,” she says.
“When an industry is going through a significant amount of change, it can be incredibly difficult… but if we want housing to be more productive and more sustainable, then it has to change. It has to modernise. So, for me, the question isn’t, ‘Is [the answer] MMC?’ It has to be. The question is, ‘How are we going to do it?’”
The failure of Ilke Homes and other modular manufacturers has made investors wary. It is a “chicken and egg” scenario, as Ms Froude describes. “How do we find a way to bridge that pain gap of current cost differentiators [with traditional building methods], until they hit the volumes where the prices will become the same?” she asks.
Government intervention could be the answer, says James Bradbury, director of development operations at Stonewater. “My instinct is we need to have a government injection [of funding] to make this work,” he says. “Because of what happened to Legal & General, Ilke and others, I think any big investors are unlikely to go, ‘That seems like a good idea.’ So I think we do need some sort of government incentive.”
That appetite for risk is the main barrier to progress according to Katie Saunders, a partner at legal firm Trowers & Hamlins. The perception of elevated risk is a sticking point for investors today, she adds, even for schemes where the factory-assembled homes in question have already been built. “This shouldn’t be a risky issue, but there is still concern there.”
Ms Saunders agrees that government support could calm investors’ nerves. “I think investment into the grant would be good,” she says. “Maybe the government should support the public sector directly, so you [developing housing associations] can justify the additional cost and support your supply chains.”
The planning system is cited by the panel as another barrier, as well as a factor in the recent failures among MMC firms. Ali Bennett is executive director of homes at Raven Housing Trust and chair of Building Better, a group of housing associations and local authorities that work together to promote MMC. She says: “I used to say we work together to aggregate demand and procure at scale, but we’ve found that just isn’t possible in the housing association sector.
“We were all working under the assumption that we’d get planning approval in 13 weeks. The reality is it’s taking 13 months, if not more. That is untenable when you’re trying to keep manufacturers engaged.”
Ms Bennett warns that housing associations are bearing a huge amount of that additional cost, because funding is not forthcoming at the planning stage. “Schemes that should be going through straightforwardly just aren’t,” she states.
In one scheme, planning delays meant the fully built modules had to be kept in storage waiting to be brought onto site. “There are challenges that come with that,” Ms Bennett says.
“Any factory is expensive to keep running,” says John Churchett, director of building solutions at H+H. “What is really crucial, and really hard to get, is a forecast for demand because then you can gear factories up to make more or less, depending on what that demand will be.”
What is MMC?
MMC is the collective term describing modern, semi-automated building methods that are designed to be faster, cheaper and more effective than traditional construction techniques. There are seven categories of MMC, which include everything from factory-built structures and panel systems that can be assembled on site, to the use of innovative new materials, and on-site building processes that speed up completion times and improve the quality of new homes.
The Labour government has pledged to overhaul the planning system as part of its goal to build 1.5 million new homes by the end of the parliament. This rapid reform could present a rare chance to clear some of the blockages holding back MMC. That would involve some very bold choices, but the panel has many suggestions.
“Take the members [councillors] out of decision-making,” says Terry Fuller, non-executive director at Graven Hill Developments and Building Better. “Does it meet policy? Is it well designed? Then there should be no need to put it in front of a committee.”
“At the outline [planning] stage, bring everyone in,” says Helen Moore, group director at Orbit Homes. “That’s when you consult. But once you have your outline, it has to go to the professionals to look at it. Is it policy-compliant? Does it meet local housing need? That would speed things up dramatically.”
Ms Moore suggests that local authorities could allow developers to pay for an independent planning expert to deal with complex applications.
Planning clarity needed
Either way, as Dr Peters points out, the housing sector is desperate for some clarity around planning to allow them to get on with their jobs.
Ms Froude wants to see a more radical shake-up. “Planning should be a professional function that works the same way in every local authority,” she insists. “Whenever this new planning framework arrives, it has to be applied homogeneously to every single local authority so that we know what we’re dealing with when we walk through the door.”
There is no doubt that MMC can improve quality, says Matthew Chamberlain, a director at architectural practice Ayre Chamberlain Gaunt. “We’ve seen that.”
Many of the issues that have affected MMC are not unique to it, he adds. Rather, they are buffeting the entire construction sector. “Capacity and skills, planning, the pandemic, Brexit – all these macro issues have accelerated the pressures on the system,” he says. “We’re looking at these issues in separate silos when, in fact, the whole industry requires support.”
The skills shortage in housebuilding, in particular, is hampering the growth of MMC. While modern housing manufacturing may not rely on traditional skills such as bricklaying, its success still depends on a limited workforce with expert training across the supply chain.
“The factory-built environment is great, but it all still comes down to skills and people,” says Ms Moore. “If you get it wrong, it’s far harder to unravel [than traditionally built homes]. So you have to get the skills right in the factories and the people on site also need to fully understand that product.”
Tony Woods, technical manager at Procurement for Housing, a national procurement consortium, says the skills crisis is like a tsunami. “In the social housing sector, we’re on the beach not realising a big problem is coming, while private house builders are already heading for the mountains. They have all been investing in offsite [manufacturing] and they have been hoovering up some of the capacity in the market already,” he explains.
Could technology help to overcome some of these challenges? “When you look at the industry, the skills shortage is massive, planning is massive,” says Dr Peters. “There is issue upon issue… the skills shortage is only going to get worse. It’s about finding ways to do things differently. Where can you automate?”
A big part of the challenge facing MMC is that the benefits it promises – speed of delivery and high-quality housing – have not yet become visible, argues Jake Snell, head of partnerships and innovation at Abri. As a developing housing association, Abri is committed to MMC and sees it as essential to meeting its development plans and sustainability targets. But a lack of data showing that MMC works is hampering the housing sector as a whole.
“[We know] the cost, the speed, the quality are very good, but the actual data to back that up is not there,” says Mr Snell. “What we are missing is that data on our records and achievements.”
He adds: “If your supply chain doesn’t keep up with the speed of an MMC solution, for example, then its benefits won’t be realised. We need to record and share data on what works… and agree a set of metrics that we can use to say these are the actual downfalls in a given project. Is it a lack of skilled labour, for example? We could start to pinpoint where the actual failures are.”
“We need to be optimistic, and we are in for some more pain,” says Mr Chamberlain. The Building Safety Act’s changes to the planning, design and construction phases for new development will add more bureaucracy and apply extra pressure to construction projects, he says. “But we need to embrace it,” he insists. “Let’s rip the plaster off and then we can move forwards.”
Participants
Martin Hilditch (chair)
Editor, Inside Housing
Ali Bennett
Executive director of homes, Raven Housing Trust
James Bradbury
Director of development operations, Stonewater
Matthew Chamberlain
Director of strategy, Ayre Chamberlain Gaunt
John Churchett
Director of building solutions, H+H
Elizabeth Froude
Group chief executive, Platform Housing Group
Terry Fuller
Non-executive director, Graven Hill Developments and Building Better
Helen Moore
Group director, Orbit Homes
Dr Suzanne Peters
Research fellow, The Productivity Institute
Katie Saunders
Partner, Trowers & Hamlins
Jake Snell
Head of partnerships and innovation, Abri
Tony Woods
Technical manager, Procurement for Housing
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