For decades, Britain has failed to build anywhere near enough homes to meet its growing population, with consequences ranging from unaffordability of housing and social immobility, to the increasing inefficiency of our cities.

Bill Hughes

Addressing Britain’s housing supply crisis is, therefore, one of the single most important priorities facing the UK today and one that ran across all political manifestos in the recent election. Indeed, all three major parties promised to ensure that between 200,000 and 300,000 homes a year would be built over this government term, should they be elected. But how practical is this given current methods of construction?

One of the key obstacles in providing this level of housing is the capacity of the industry, given the ebbs and flows of a cyclical housebuilding industry that likes to switch the tap on and off to match demand. There are also emerging constraints in terms of material and labour costs. It is here that I turn my attention to the promising attributes of modular construction as a major plausible solution to the housing predicament.

Off-site industrialisation of housing delivery, without loss of quality or energy efficiency characteristics, is certainly a compelling prospect. Driven to explore alternative options by the shortages in traditional skills and substantial price increases in labour and materials, there are already some very interesting and innovative examples of off-site construction being used by the likes of Berkeley Homes. Its scheme in the heart of Bath city centre, for example, which is being implemented by Elements Europe, demonstrates that, contrary to popular belief, architectural design does not need to be compromised in any way. You also only need to tune in to an episode of Kevin McCloud’s popular Channel 4 series, Grand Designs, to see that off-site construction methods are often capable of delivering some of the UK’s most spectacular dream homes.

Exceptional quality levels

Exceptional standards of repeatable quality can be achieved through these new methods. There is also the obvious sustainability angle, with significant reductions in waste levels. Capable of employing more energy-efficient technology, modular manufacturers are known for reusing and recycling materials that on-site construction processes might send straight to landfill. The construction methods also generate comparatively little transport pollution, tending to use materials bought in greater bulk and requiring workers to stay at a single, central location rather than moving from job site to job site.

With big implications for the wider economy, modular factories allow construction companies to create employment in areas where it is needed the most and the right skills are on offer, providing long-term, stable jobs. No longer do workers need to commute miles across the country from new job to new job.

Of course, we cannot forget about the famous English weather. We may just have witnessed a record heatwave for July, but more often than not the British rain is the construction industry’s curse, proving the source of lengthy delays and false starts. Modular construction is quicker to complete and provides a strong sense of reliability. Predictability at all stages of the production process is especially valuable.

But what are the financial implications of this new form of construction and are they stacking up in a cost-comparable evaluation? This is still something that needs to be assessed on a project by project basis. The Build Offsite Property Assurance Scheme (BOPAS) is a sea-change initiative to ensure standards and investability, but we are still first or second generation in techniques, so it’s the future possibilities that are really attractive.

As in all areas, innovation is the key to unlocking improvements in productivity, quality and longer-term value. The process has only just begun and has an exciting journey ahead. The volume potential this can deliver is exponential and the implications are huge, particularly for non-cyclical housing stock, such as that for the build-to-rent market, students and ‘last-time’ buyers.

If this government is to make real inroads into addressing the housing supply-side crisis, there is no doubt that off-site construction will have an increasing and important role to play. Modern methods of construction should, in the future, cater for the base load of housing construction for acyclical stock; traditional methods should continue to play their part within the industry where capacity responds to the cycle. There are big changes needed. Watch this space.

Bill Hughes is head of real assets at Legal & General Investment Management