Taming the housing market
Offsite manufacturing techniques are gaining favour as a means to deliver far more homes at a pace and a price that doesn’t sacrifice quality – but can they bring a feral housing market to heel?
By Mark Cantrell
From Housing magazine
BE careful what you wish for. The Housing Minister Brandon Lewis has demonstrated great enthusiasm for innovative construction techniques to increase the scale and speed of housing delivery, but if too many take him at his word it might make him rather unpopular among volume housebuilders.
Then we have the estate agents, house sellers, property speculators, private landlords, and so on; anyone with a vested interest in the high prices a scarcity of housing promotes. There might even be a few disgruntled housing association chiefs too, left aghast at the denuding of a commercial income stream they claim is necessary to subsidise their social purpose. Oops. There go the profits. Bad Brandon.
Okay, so this is a slightly tongue-in-cheek take on the dawn of a new age of prefabrication, but it can’t detract from the very real capacity that offsite manufacturing techniques have when it comes to disrupting established markets – even one as dysfunctional as the UK’s housing market.
In part, that’s kind of the point. The shortfall in the supply of new homes, coupled with a – sadly deliberate – residualisation of the stock of genuinely affordable social homes these past decades has boosted the price of housing, whether for sale or for rent, steadily upwards.
The results are the eye-watering costs and the well-documented housing crisis. While misery and a precarious existence have unfolded for millions of people, it’s an inescapable fact that a few have been laughing all the way to the (bailed out) banks; even there, though, there’s beginning to emerge an awareness that these ‘good times’ can’t go on forever and that matters need placing back on a more sustainable business footing sooner rather than later.
That’s where offsite manufacturing techniques come in. There is widespread agreement that to tackle the housing crisis, and rein in prices, more homes need to be built, but construction – especially at scale – takes time. There are a host of other factors too; from quality of build and design, through energy efficiency and the zero carbon agenda, to’ future proofing’ homes to ensure they are fit for a lifetime and more, that’s led to an increased interest in factory methods.
“Getting quality, affordable new homes out of the ground more quickly is a key priority for Government and in particular the social housing sector, and that can be a difficult balance to strike,” said Alex Goodfellow, group managing director of Stewart Milne Timber Systems. “Items such as timber systems and bathroom pods can be manufactured offsite, which means more efficient builds with lower ongoing costs. This would allow affordable housing providers to develop futureproof, sustainable housing stock quickly and cost-effectively.
“Homes which are intrinsically energy efficient – because they’ve been built with efficiency in mind – result in fewer repair bills and lower energy costs. Offsite construction also means the build process is a great deal quicker, so getting tenants in and rent payments established happens faster. Energy efficient homes are also unlikely to need expensive retrofits or alterations as they age, which is a significant benefit for affordable housing providers.”
While nobody is suggesting that offsite manufacturing methods are the Holy Grail, or indeed a silver bullet, they are nevertheless winning favour as an important means of tackling the housing crisis. The factory method is said to provide the quality assurances of being made in a controlled environment; the prefabricated components means that build time on site is vastly reduced, thereby accelerating delivery; and as the ‘production line’ gets rolling, the high volume of output means that costs can be further diminished, much the same as any other manufacturing process.
Little wonder it is gaining favourable consideration; indeed that a housing minister has taken to talking it up. “We need to build more homes in this country, and new housing should be efficient and built quickly to a high quality, using brownfield land wherever possible. Innovative approaches such as offsite construction are one way to achieve this,” said Lewis. “They are widely used on the Continent, but only playa limited role in British house building. We need to catch up, and I would encourage all councils and developers to consider the cutting-edge techniques I’ve seen being used in Walsall, where fantastic new homes are being built in record time on brownfield land for local people.”
That was said during a visit to see the Accord Group build two family-sized homes in a day last year; a way for the organisation to mark the third anniversary of its LoCaL Homes factory, as well as demonstrate the advantages of offsite manufacturing techniques.
“The demand for housing across the country remains high, but we are confident that offsite manufacturing offers the solution to increase the building of more homes, efficiently, and to a high quality with less waste,” said Alan Yates, executive director of regeneration at the Accord Group.
LoCaL Homes – it stands for Low Carbon Living – makes use of timber frame panels manufactured in the factory and then assembled on site. The panels are delivered complete with insulation, external cladding, and fitted with windows and doors. You might think of them as a kind of kit home.
In a sense, offsite manufacturing methods seem intrinsically suited to the social sector. It wants lower costs without compromising on quality, it wants volume, and it wants a steady stream of delivery; the kind of rate that might perturb a private market firm looking to keep a careful eye on maintaining buoyant prices.
Government is also pushing the techniques, writing in a requirement that up to a fifth of the 165,000 homes to be delivered through the Homes and Communities Agency’s (HCA) Affordable Homes Programme 2015-18 be achieved via “advanced housing manufacture”.
Given it’s a £23bn programme there’s a lot of money riding on this new wave of prefabrication. As the Government has pointed out, the use of offsite manufacturing techniques to deliver new homes is far more common on the Continent. Britain lags behind, no doubt in part because of shadows cast by perceived failings in an earlier age of prefabrication in the 1960s and 70s, but perhaps also because of a stronger cultural attachment to the more traditional bricks and mortar form of ‘hearth and home’.
Europe also has less of a culture of homeownership, compared to the UK, so perhaps rather less of an attachment to rising house prices – more often than not welcomed here in Blighty with an almost ritualistic fervour that all-too-often appears at odds with rationality. Given that context, the disruptive capacity of manufacturing techniques is doubtless rather less threatening to our continental cousins.
Nobody is talking about crashing the private market by flooding it with so many new homes that prices drop through the floor, of course. Nevertheless, up in the North West, Procure Plus is kind of plotting to subvert the housing market – and bring prices a little closer to Earth.
The organisation plans to establish a factory in the North West to manufacture panels for assembly on-site into homes, but for those doing rather well out of the status quo, there’s a bit of a breathing space yet: the organisation isn’t expecting to begin production for another 18 months or so.
“We’re going to start slowly but surely, satisfying demand that’s unmet,” said Mike Brogan, Procure Plus’s chief executive. “The impact will be at the lower end of the market because we’re not trying to turn the world upside down. We want to disrupt things [but] it’s not like we’re trying to wipe anybody out.”
Procure Plus, as you might have guessed, isn’t focusing on the rental market but on low-cost homeownership. Once it is ready to go live, it intends to work with local authorities, for instance, to deliver houses for sale. Currently, it is working with BRE and others to finalise designs, products and materials, modelling its costs, and considering what it will require in terms of manufacturing facilities.
Once it’s ready to hit the market, the plan is to sell homes at a little bit more than cost; obviously sale prices will also be affected by such things as land costs and so forth, but even so Brogan expects Procure Plus will be able to seriously undercut sale prices– by as much as 30% – and begin to mop up that pent up demand for new homes.
Inevitably, that’s going to have a knock on effect for the wider market. What’s more, the plan is to establish covenants on the properties to ensure that they can only be sold on at a price 30% below market rates. It’s an intriguing effort to stabilise and reduce pricing over time; not only will Procure Plus be selling these homes at a cheaper price, but as more homes are delivered and accumulate in the marketplace, it will exert a downward pressure on overall average market price.
So, can offsite manufacturing really tame the market? Brogan clearly thinks so. “I think our intervention will be very disruptive for this market,” he said. “What we want to do – what we will do – is that we will sell these [homes] at sub-market rates. We’re the only serious player that’s got a strategy that is disruptive enough to fundamentally change the nature of the market.”
This article first appeared in the February/March 2015 print edition of Housing magazine. It was subsequently republished on the Housing Excellence website, 13 March 2015