Sign of the times? Modular construction in 2018

A sign of the times?

Modular construction in 2018

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A sign of the times?

Modular construction in 2018 It has now been less than 12 months since the 2017 Autumn Statement and there is little doubt that the interest, commitment and investment in off-site construction has intensified. The stage was set by The Housing & Finance Institute who opened 2018 by urging the government to focus on modern construction methods to drive up the number of new builds and boost productivity to meet the target of the delivery of 300,000 homes a year.

Sara McKay Solicitor sara.mckay@laytons.com +44 (0)1483 407 000

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A sign of the times? | Modular construction in 2018

Modular construction is a method of building in ‘module’ sections from an off-site facility.

The prefabricated parts are transported to and constructed on site and the finished product is referred to as ‘prefab’ or, more recently, modular housing.

There is a mature and established sector providing modular

The UK previously looked to modular housing to help to

housing for self-builders, particularly in Scotland, but the

tackle the housing shortage in the 1940s. The ensuing

problem is scaling up production to help fill the shortfall

legislation, the Housing (Temporary Accommodation) Act

in housing supply. Although not a new construction

1944, resulted in the erection of prefabricated housing across

method, modular housing is increasingly being discussed

the country, particularly in areas which had suffered intense

and considered as a possible solution to the UK’s housing

bombing during the Second World War. The provision

shortage. The notable uptake in this form of construction

of prefab homes was considered to be the quickest and

from major stakeholders in both the public and private

most cost efficient answer to both the housing crisis and

development sector suggests that, in order to meet their

the shortage of skilled labour. It is therefore reasonable to

commercial objectives and increase delivery, modular

say that, just as the concept of modular construction is not

construction is the way forward. Parallels to Henry Ford’s

novel, neither are the reasons why housebuilders and the

production line are being drawn and modular is fast

government are looking for solutions to diversify to off-site

becoming the buzz word and hailed as the solution to the

construction.

housing shortage.

It is the same key issues of the shortage of housing, the requirement for speed of delivery and the shortage of skills which are the driving forces pushing modular construction back into the limelight some 70 plus years later.

There are broadly six main issues which are often cited when discussing the merits and apprehensions surrounding modular construction:

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A sign of the times? | Modular construction in 2018

Quality Control

Skilled Labour

As the modules are constructed remotely (and possibly by a

The decline of skilled workers in (and anticipated to enter) the

third party organisation), the skilled labour based on-site is

construction industry is, at least in the short term, expected

unable to monitor the finished product before transportation

to continue and therefore presents itself as a major issue.

of the modules to the construction site. Due to the distinct

The Farmer Report estimated in October 2016 that, within

skills set at the different stages of the construction process,

a decade the UK could lose 25% of its construction labour

any alteration or amendment to the module parts will not be

due to retirement. This concern is heightened further by

possible on site.

the uncertainty of Brexit, a report published by Arcadis (who in 2017 entered into a collaboration agreement with off-

On the other hand, quality control procedures may be more

site construction specialist Caledonian) estimated that the

easily put in place where the point of the construction is

construction industry may lose up to 214,000 workers by 2020

confined to one place, the factory. With this in mind, if the

should there be a ‘hard Brexit’.

whole of the supply chain/ construction process is under the control of one organisation, it may be that a higher quality of

The pressure for a specific construction skills set is reduced

finished units may be more readily deliverable.

by the use of modular construction on the basis that the manufacturing process broadens the pool of potential recruits

Logistics

to fill the range of positions throughout the different stages of the production process through to the point of final site construction.

The safe delivery of the modules presents its own risk whether the transportation is limited to roads or includes international shipping. There are practical issues to consider such as access to the construction sites and, once on site, the placement of the machinery required to assemble the units.

Finance Historically, banks have been more reluctant to provide security to purchasers of homes built using modular methods

Scale and Size

of construction. Concern stems from the historically less resilient quality of a prefabricated home. Assurances through reputable construction guarantees may help to change this

One of the general perceptions which discourages potential

trend as the sophistication of modular construction continues

entrants to the market is that, to make off-site construction

to improve.

financially attractive, there needs to be volume of units, it is economies of scale which make modular construction cost efficient. The size of the key players in the market, such as those referred to below, suggests that smaller developers may

Fixed Capital Costs

not be in a position to reap the benefit of the cost saving and

The house building industry traditionally does not tie up large

speed of delivery from off-site construction.

amounts of capital in factories and fixed plant. The unhappy experience of Wilson Connolly at the turn of the century is often cited as evidence for the financial downside of investing in off-site production capacity.

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A sign of the times? | Modular construction in 2018

Notable players in modular construction Both the public and private sector have made significant

Manchester City Council commented earlier this year

financial long term commitments to modular construction.

that the Council is working with a company whose ethos

Some of which have made the headlines are:

is to help solve the UK’s housing crisis using modular technology.

• In May this year, what is being billed as Europe’s tallest modular tower was unveiled in Wandsworth, London.

• Bromley Council announced in January this year that

The Pocket Living development is an impressive 27

it will be using modular housing for homeless families

storey tower of factory-made units built in Bedfordshire

currently in temporary accommodation. The Council

by Vision Modular Systems.

also hopes that the speed of delivery may be a solution to the anticipated increase in cases which may arise

• L&G invested in a modular factory in Leeds in 2017 to

from the Homelessness Reduction Act 2017.

build 4,000 prefab homes per year. Earlier this year, The Berkley Group announced its intention to invest in its

Councils are being faced with a continuing rise in the need to

own off site modular factory in Kent and aims to deliver

provide emergency accommodation. 16 London Boroughs

an initial 1,000 homes a year from it.

have announced that they are to set up a modular housing company as an alternative provision to B&Bs. This is a

• The first modular homes to be built by a housing

practical and deliverable solution to the staggering 54,660

association (Midland Heart) were four units (dispelling

households in temporary emergency accommodation as at

the contention that volume is needed for deliverability),

the end of September 2017. Lewisham Council has said that it

3 bedroom houses in Coventry in June 2017

will save £140,000 a year by providing 24 homes in a modular

manufactured offsite at a factory in Nuneaton. The

block on the grounds of a former leisure centre by not having

construction of the development took just 6 weeks.

to pay to house families in low quality B&B accommodation.

• Housing association Swan is regularly quoted as being

The Greater London Authority seem to also be on board with

a major player in the market and began delivery of

Sadiq Khan, in his capacity as the London Mayor, investing

modular homes from its factory in Essex at the end of

£25m into Pocket Living to build 1,059 new homes, a third

2017.

of which are expected to be built off-site. Plans for 153 affordable modular homes in what will be one of the tallest

• City Councils are showing a particular interest in making modular work as an alternative to traditional construction methods. Since 2015 Manchester City Council has been considering how off-site construction may be adapted as a solution to the housing pressures faced by the Council. Joanne Roney, chief executive,

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schemes of its kind were approved in February this year.

A sign of the times? | Modular construction in 2018

Conclusion Perhaps 2018 will be a turning point towards a tangible commitment from both developers and policy makers to embracing off-site construction. Whether this will, as in the 1940s, be a short term fix or signify a permanent change to an industry wishing to embrace technology and adapt to the availability of resources remains to be seen.

One final point often mentioned is the requirements of the end user: a home owner’s preference for bespoke designs, variety and an assortment of homes in a development. This criticism has long been made of our volume house builders and their standard house types (repeated in the recently published Independent Review of Build Out Rates by Sir Oliver Letwin). However, just as car ownership soared in the 1920s, this was not in tandem with an increase in selection and style of cars available. Therefore, whilst the modular construction industry in England is still in its infancy, concessions may need to be made on the requirement for a tailor-made home.

In the meantime however, companies currently supplying self-builders claim to be able to give individual flexibility and car manufactures too offer such a degree of flexibility in specifications that BMW now advertise their second generation Cooper with the slogan ‘no two Minis are the same’. Most homeowners will personalise their living space over time; perhaps the first hurdle to tackle is the problem of sufficient affordable products being available to acquire in the first place!

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A sign of the times? | Modular construction in 2018

Real Estate | Planning & Environment We provide planning services for a variety of clients – developers, landowners and other parties involved in the planning process. We also provide advice and services for ancillary matters, including highways issues and the registration of commons and village greens.

Our Team Neil Bucknell

Sara Hampson

Partner neil.bucknell@laytons.com +44 (0)1483 407 016

Partner sara.hampson@laytons.com +44 (0)1483 407 014

Paula Ghosh

Sara McKay

Solicitor paula.ghosh@laytons.com +44 (0)1483 407 046

Solicitor sara.mckay@laytons.com +44 (0)1483 407 000

Sue Irons Consultant sue.irons@laytons.com +44 (0)1483 407 011

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