For decades, modular housing has been the sector’s equivalent of nuclear fusion: the imagined fount of limitless supply has always been just over the horizon… but never quite within reach.
However, Boris Johnson’s government appears to have hollered the edict: it’s time to ‘get modular done’.
A note of scepticism. In one of my first stories as a trade journalist, I breathlessly broke the story that a large Japanese company was poised to ship thousands of modular housing units to our shores and this would transform UK housebuilding.
Three and a half decades later, brickies are still slapping on mortar in the vast majority of homes built in this country. Despite the fervour of government, modern methods of construction (MMC) still look more expensive, at least in the absence of economies of scale; the plethora of competing systems (broadly split between panellised or true 3D modular) is preventing those economies of scale being achieved; and the speed of construction has been far from convincing. Mortgage lenders have been a bit sniffy, too.
The biggest housebuilders are still resisting to varying degrees. But a confluence of recent events – mostly politically driven – suggests momentum may be building. Ironically, given my decades-old experience, a Japanese housing giant is again looking at these shores. In May, Sekisui House announced a £90m tie-up with innovative northern developer Urban Splash to expand production at its Alfreton factory.
Sekisui, which delivered 46,000 homes last year, is investing £22m in newly formed Urban Splash House Holdings and bringing its huge experience to the table, while Homes England is investing £30m in debt and equity. New town houses are being assembled in Manchester and the initial aim is for production to rise to around 2,000 a year in the next five years.
In a further sign of Homes England’s new-found interventionism, the government’s delivery agency loaned £30m in November for the expansion of Ilke Homes’ production facilities. MMC was specifically supported in the Conservatives’ otherwise thin manifesto. To add further political muscle, offsite evangelist Mark Farmer was this month appointed as chivvier-in-chief to the industry.
Although the handful of the most committed manufacturers have still only delivered a few thousand homes between them, there appears to be a marked change in attitudes. I have chatted to a few of them and three key trends suggest things are getting serious:
• Some serious money is being invested in the sector. This includes Goldman Sachs investing £75m in Top Hat and Ikea-Skanska JV BoKlok planning a £25m expansion of its Swedish manufacturing base to seed UK expansion (cue ‘flat-pack’ headlines).
• Heavy involvement by Homes England. This goes beyond financial support. I’m told the former Housing Corporation will attempt to provide MMC producers with land opportunities, introductions and technical support.
• An increased knowledge base. Sekisui and BoKlok have been fine-tuning techniques for years. I’m told the latter requires half the manufacturing ‘man hours’ of most other UK peers. Other early adopters have presumably learned from initial mistakes.
My sense is that the government will turn its attention from haranguing the biggest housebuilders and concentrate on more growth-orientated ‘disruptors’. Site workforces are a big nut to crack. The more successful early adopters will probably be those with both manufacturing and development skills.
Among the better-known developers, Countryside and Berkeley are investing in offsite production, which suits their relatively complex urban regeneration models. A more considered and integrated approach is probably safer than, as it were, a ‘big bang’.
Housebuilding may be closer to reaching its supposed Holy Grail than the nuclear industry. My very basic understanding of what has been holding back fusion since the 1940s is that it requires more energy going in than can be economically harnessed coming out – something of an analogy with modular housing until now.
But at least the property industry may finally have cracked it (large-scale housebuilding, not the atom – that’s fission…).
Alastair Stewart is an equities analyst and consultant