Intro
GREENER, BETTER, FASTER: A new ground-breaking report by Make UK Modular, in partnership with KOPE, that underlines the power of modular construction in solving the housing crisis in the UK.
We have seen the factory output of volumetric modular homes more than doubled in the last five years, despite the Covid-19 pandemic, and in 2022 over 3,300 new homes, equivalent to 1 in every 60 in the UK, will be built this way.
This impressive scaling up is long overdue and calls on the government to do more to support the initiative. With changes to public policy, the modular sector has the capacity to deliver up to 20,000 low carbon, energy efficient homes across England by 2025, putting a significant dent in the housing crisis. Furthermore, homes would cost 55% less to heat than the average British ‘bricks and mortar’ homes and be built at twice the speed.
The report Greener, Better, Faster: Modular’s Role in Solving the Housing Crisis was put together by trade body Make Modular UK, whose membership covers 70% of the Category 1 volumetric house builders, including Ilke Homes, L&G Modular Homes, Top Hat, Laing O’Rourke, Vision Modular Systems and Stelling Properties. At KOPE, we were delighted to support this report and contribute to the research in this meaningful sector.
Historic shortages
The government has set a target to build 300,000 homes a year by 2025 to tackle the housing crisis, but factors including decades of undersupply and rising costs that continue to price out many first-time buyers, mean it “will almost certainly fail” to meet it, as the report states.
Even in the public sector, Homes England missed its 2021–22 affordable homes delivery target by 21.5% and its overall completions target by 15%, which is largely insufficient to tackle the problem at hand.
Make UK Modular highlights the struggle of the housebuilding industry to raise supply because traditional construction faces several structural constraints. The “chronic and worsening shortage of skilled construction labour is a major constraint on its capacity to deliver”, states the report.
Over half (55%) of construction workers are aged over 40 and the sector will lose over 500,000 workers (around 25% of the workforce) in the next 10–15 years through retirement alone.
Furthermore, the labour-intensive nature of on-site work in traditional building interferes the speed of construction, with a single home taking roughly six to nine months to build and fit out on site.
Progress on these labour and productivity issues has been hampered by a lack of innovation and investment in research and development. According to the report, construction invested just 6% the amount services sector invested in R&D in 2020, and half the amount invested by the lowest-spending manufacturing sub-sector.
In addition to challenges around raising housing supply, we have ambitious targets for net zero in the UK. The government has mandated a 98–100% reduction in emissions associated with heat and buildings by 2050, plus interim reductions, which relies on building homes with high energy performance.
However, just 2% of new homes are in the highest Energy Performance Certificate band A and will therefore need to be retrofitted over the coming years to increase performance. “It is expensive and technically challenging for traditional builders to build drastically more efficient homes,” states the report, which “may further push up prices, constrain supply and increase issues over labour supply.”
Step change
How can we build the case for modular off-site construction as a potential solution to the housing crisis? Make UK Modular members already have capacity in place to deliver more than 20,000 new modular homes per annum by 2025, a 10% uplift on current house building levels, potentially closing 20% of the gap between current output and the government’s 300,000 target.
There are several factors here in favour of modular construction. A modular home can be built in the factory in less than 2 weeks with a savings of up to 95% over traditional build where the superstructure takes 6 to 9 months. “Homes can be manufactured while groundworks are finished, further shortening the overall build time…by as much as 50% compared with traditional construction”. This is a good start to dramatically cutting down build times and delivering completed homes to the market.
Turning to UK net zero targets, Make UK Modular confirms its members are already delivering thousands of homes in the top EPC A energy performance band and could switch to producing solely this type of home in just 2 to 3 months through an efficient assembly line process. It costs “just a few thousand pounds extra to upgrade a modular home from EPC B to EPC A, and just a 10% uplift in build costs,” the report states.
Some homes go even further, for example Ilke Homes has delivered ‘Zero Bills’ homes so energy efficient they cost nothing to heat and power.
Embodied carbon is also gaining recognition as an important measure of building sustainability. A 2022 academic study of two modular residential high-rise developments in Croydon found they contained 40 to 45% less embodied carbon than an equivalent traditional build and the report notes that savings are even greater for low rise buildings.
Labour and levelling-up
Digging further into the benefits of modular, the report reveals a 40% improvement in productivity, in terms of labour hours worked per m2 built, than traditional brick and block/timber-framed on-site building, thanks to efficiency gains on the factory assembly line.
Manufacturing efficiencies are largely the result of an estimated £200m spent on R&D by Category 1 manufacturers over the last 5 years, which is equivalent to between 10 and 30% of all R&D spending by all construction companies over the same period.
Construction’s ageing and shrinking workforce is less of a concern if you consider that some 50 to 60% of the workforce of Make UK Modular members are in manufacturing jobs on assembly lines. According to the report, this reduces reliance on traditional construction skills and the need to cannibalise the existing construction labour force.
Modular can also serve the levelling up agenda. The ability to base a factory and create jobs where they are needed (in low-growth areas) and build houses and ship them to be installed in high growth areas “is the essence of levelling up – spreading growth around the UK and providing opportunities for low-growth regions”.
Finally, the report reveals that a more mature modular market is delivering quality homes that are durable, accredited, and adaptable, with award-winning designs capable of being sold on the open market at full price.
Supporting innovation
The government has already taken measures to tackle the housing crisis, by introducing new legislation that speeds up planning applications and cuts red tape, but Make UK Modular, KOPE, and so many others invested in MMC, believe more should be done to unlock the many benefits of modular. There are several recommendations to five key areas for public policy needed to propel market transformation, “none of which would require any additional spending”.
Sustainability - Bring forward requirements for all new homes to perform at EPC; adjust stamp duty rates based on energy efficiency and net-zero performance; require all homes to provide accurate data on energy bills; and Introduce a carbon trading scheme for new-build housing.
‘Scale’ to create a secure pipeline for modular - Dedicate at least 40% of the Affordable Housing Programme to MMC, of which at least half should be Category 1 modular. It should also switch Value for Money assessments from focusing on upfront costs to considering value across the whole life of a house.
Planning - Implement a fast-track planning route for all net zero housing schemes, prioritised for accelerated planning permission, whilst also guaranteeing modular homes parity with traditional build in all local plans.
Land - a minimum percentile of the government’s land bank should be allocated to advanced modular housing and/or EPC A rated or low-carbon housing, or alternatively give priority, or discounts, to land used for low-carbon housing.
Levelling up - 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 associated employment and housing delivery benefits. This would mirror an approach already adopted in the automotive and renewables industries.
