It takes time to build a house. It often takes developers five or six years just to receive planning permission and it can take even longer to complete a large development.
Modern Methods of Construction (MMC), also known as precision manufactured housing or off-site manufacturing, prepares components – from wall panels to bathroom pods to whole flats – remotely, and then fits them together on site. Compared to traditional bricks and mortar, MMC improve the speed, scale and quality of housing delivery, with schemes often completed in about two-thirds of the time. But to date the transition to these methods has been slow. The sector is still in its infancy and several barriers stand in the way of widespread adoption.
Last week the Housing, Communities and Local Government Committee published a report arguing that the government must embrace Modern Methods of Construction if it is going to meet its target of 300,000 new homes a year by the mid-2020s.
We’ve previously argued that the sector could be a part of the solution to London’s housing crisis but, as the Committee argues, a step change is required. How can we get there?
Industry culture and a lack of design standardisation
The sector will only begin to reap the benefits of scale and lower costs when the different players start working together better to create long-term certainty of supply and demand for MMC products. Relationship building is key; but MMC developers are inclined to safeguard their emerging proprietary systems. As the industry matures, some formats are likely to become more widely adopted, but the current variety of product designs makes off-site construction riskier and more expensive than it needs be.
Both central and local government could help to advance take-up by addressing the current lack of design standardisation. One solution would be to create a common design framework as an open source tool for residential developers and manufacturers. Some positive steps have been made: the Mayor of London recently announced a new app which allows developers to quickly assess the potential for building precision-manufactured homes on a specific site. It uses this information to recommend existing products which comply with planning policies.
The Committee’s report takes this one step further, recommending that government develop a digital database that records the design, processes and materials used in the construction of buildings.
London’s construction sector also faces a growing skills crisis. The construction workforce is ageing, and worryingly the number of apprenticeship starts in construction, planning and the built environment has been declining – so future job vacancies could be tough to fill. London also has a high proportion of EU construction workers: 33 per cent, compared to 10 per cent in the rest of the UK, which will be a cause for concern if we introduce tighter immigration rules post-Brexit.
The transition to off-site construction and manufacturing could help to alleviate this crisis, but also presents challenges. Some jobs would move from building sites to factories, which might be located in areas of lower labour market stress than London and could offer jobs for a more diverse workforce. And the jobs that stay on site would call for different skills than traditional construction. The Mayor could use his powers and skills budget to help existing construction workers develop the skills needed to adapt, but as the Committee’s report argues the government has a role to play too. The next Housing Minister should ensure that more young people are encouraged into the sector through skills programmes and apprenticeships.
Lack of confidence
The novelty of modern construction methods, and resulting uncertainty about buildings’ lifespan and repair needs, means that warranties, insurance, development finance and mortgages can be tricky to secure. Research suggests that 80 per cent of MMC companies in London find it very difficult to secure funding from high street banks. Interviews for our research also indicated that although a few larger lenders are engaged, most are deterred by the diverse and innovative nature of the MMC pipeline. And this lack of trust from conventional lenders is matched by a lingering suspicion of ‘prefabs’ among house buyers. To get this approach to construction off the ground, we think the public sector and industry need to work together to build confidence, both among lenders and the general public – something the Committee supports too.
Planning system hinders the transition
There’s also a perception that the planning system hinders MMC schemes. While the Committee acknowledged that although the localised planning system causes challenges for all homebuilders, it isn’t an insurmountable barrier to those using modern techniques.
Planning policy in the UK presumes that new developments should broadly fit within its surroundings. In London – a city known for its bright red London brick houses – this can lead to planners favouring brick buildings that ‘fit in’. To overcome this, councils could include a general statement in local plan policy to support construction innovation; at a minimum, as the Committee suggests, they should be neutral on construction methods used.
Planning policies on local employment can also present problems, where construction employment is off-site rather than local – despite the benefits of quicker and lower-impact construction. The balance between both should be considered, especially when these schemes can create new employment opportunities in other parts of the country – something the Committee’s report also acknowledged.
Modern Methods of Construction have the potential to be part of the solution to London’s housing challenges but need a boost in order to break through. Local councils, City Hall and central government should work with the innovators to build more homes, better and faster.