Modular Building Conversations Growing Amid Housing Crisis

by Chelsea Bailey

The UK Government has recently taken measures to attempt to solve the housing crisis by introducing new legislation that speeds up planning applications and cuts red tape. MakeUK’s new report states the case for modular construction taking centre stage.

Modular construction looks set to play an important role in the UK housing sector as it aims to meet the demand for new homes across the country, with the production of entire homes in factories as 3D modules having matured rapidly in the last five years.

In 2022, one in every 60 new homes in the UK will be built entirely in a factory, equating to over 3,300 new homes, providing somewhere to live for an estimated 8,000 people. Capacity is in place to deliver in excess of 20,000 new modular homes per annum by 2025. This would grow England’s housing supply by 10% and cut the output gap on current housing targets by 20%.

Five key policies to grow modular

MakeUK in the ‘Greener, Better, Faster: Modular’s Role in Solving the Housing Crisis’ encapsulates how Britain’s housing crisis has been a generation in the making: “The housebuilding industry has been unable to ramp up supply. In no other sector has the marketplace failed so dramatically to meet such high demand.”

As such, the government are likely to fail to meet its target of building 300,000 homes a year by 2025. Additionally, Homes England missed its 2021-22 affordable homes delivery target by 21.5 per cent and its overall completions target by 15%.

From this, it is clear to see that barriers are still there, and the government must work to remove these to unlock the full benefits of modular. The report presents five key policy changes that would require no additional spending by the government but would help to grow modular - Sustainability, Scale, Planning, Land, and Levelling up.

Sustainability is crucial to growing modular, and it must be enhanced through the introduction of a more robust commitment to and targets for net zero.

To grow modular, the government must:

• Bring forward requirements for all new homes to perform at EPC A

• Adjust stamp duty rates based on energy efficiency and net zero performance

• Require all for sale and to let homes to provide accurate data on energy bills

• Introduce a carbon trading scheme for new build housing

Modular does have the potential to grow, but there are many barriers in place that must be tackled. The report articulated this by explaining: “It is a new industry, and it needs to grow to generate economies of scale that allow it to drive up competition and standards across the industry. We want the government to support modular manufacturers’ pipeline security to this end.”

To do this, the report has recommended that the government should dedicate at least 40% of the Affordable Housing Programme (AHP) to MMC, and at least 50% of this share to modular.

How is modular housing key to levelling up?

A focus on planning is needed in order for modular to grow. Currently, modular must navigate a planning system designed for traditional builders; this can be slow and add significant delays for modular manufacturers, reducing the time-saving that it can bring to the sector. Providing a fast-track planning route for all net zero housing schemes should be prioritised for accelerated planning permission.

In addition to supporting modular through the Affordable Housing Programme and planning, the UK Government can provide the security that modular needs by helping it gain a steady supply of land. The report explained it would like to see:

• Government to require a minimum percentile of its land bank to be allocated to advanced modular housing (Category 1) and/or EPC A rated or low-carbon housing, or give priority or discounts to land used for low-carbon housing

• This percentile should be subject to a ratchet mechanism increasing year on year

• Government frameworks should mirror this ratchet with increased weighting towards modular housing in their scoring criteria

Seeing the development of more housing is crucial to levelling up, and this will help to create opportunities for everyone across the UK. Modular building will play a key part in creating these opportunities.

The UK Government must create a modular capacity strategy working with combined authorities, freeports, transport hubs, and other government agencies to ensure new factories are optimally located to maximise the associated employment and housing delivery benefits.

This would also provide an opportunity to rebalance the distribution of economic benefits associated with construction in the country. According to the Office for National Statistics, approximately three in ten construction firms and employees are concentrated around London and the South East of England.

In theory, there is no need for factories producing the houses to be located in the same region as the end site. This has the potential to be a key step towards reducing regional inequalities in the line with the government’s levelling up agenda.