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Government-Backed Modular Construction: A Misguided Investment?

Despite repeated failings, the UK Government continues to back modular construction efforts with millions of pounds of taxpayers’ money. Jenny Smith-Andrews, Head of Marketing at H+H UK, questions if this support is misplaced.

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Modular, or volumetric, construction is not a new concept, but it is an idealised one. In 1926, architectural pioneer Walter Gropius suggested a future where lower-cost housing would be made possible “by mass-production methods of stock dwellings” manufactured in specialised factories, and then transported and assembled at the construction site. In such a weather-dependent country as the UK, where site labour is often difficult to find, it’s easy to see why the idea is attractive here.

The concept of building houses in factories has received significant Government support, being proposed as a solution to the UK’s housing crisis. In the 2017 housing white paper, ‘Fixing our broken housing market’, the Government made several commitments to modern methods of construction (MMC). This pledge, along with a plan to subsidise modular building in the 2019 Conservative manifesto, has resulted in substantial funding being directed towards MMC solutions, with a particular focus on volumetric.

Despite this Government support, several UK volumetric housing manufacturers collapsed in the last two years, including House by Urban Splash, L&G’s modular arm and Modulous. Another recent casualty, Ilke Homes, had received £60m from Homes England, the Government’s housing and regeneration agency. The lack of success prompted the House of Lords Built Environment Committee to initiate an inquiry titled ‘MMC – what’s gone wrong?’ to investigate the obstacles hindering the increased delivery of MMC homes.

Even with “millions of pounds of public money invested,” the review concluded that “the Government’s approach to MMC is in disarray”. Chair Lord Moylan summarised: “The Government needs to change tack. Simply throwing money at the sector hasn’t worked.”

The inquiry identified numerous reasons for the failures. The central issue, I would suggest, lies in the business model of high-volume housing. Setting up a factory for volumetric housing requires significant capital expenditure for the set up, both in terms of constructing the factory and in recruiting and retaining a workforce.

Repaying this capital requires a consistent pipeline of demand, which the UK’s speculative housing market can’t provide. Volumetric builders construct homes in line with their sales and demand, and flexibility is key. Housing demand is very changeable as the market is influenced by consumer confidence. With interest rates and economic uncertainty in play, demand for new homes can rapidly decelerate, and it isn’t feasible for housebuilders to simply stash completed units to keep production going.

However, the trajectory of volumetric shouldn’t detract from the advantages of MMC overall. As defined in the MMC Definition Framework, a jointly-devised framework by the Government and an industry working group, there are seven MMC categories, and volumetric falls under only one of them. The Built Environment Committee noted considerable success with Category Two solutions, which involve premanufactured components rather than entire units.

The Vertical Wall Panel (VWP) system made by H+H is a prime example of what a successful Category Two MMC solution can look like. The aircrete (autoclaved aerated concrete) panels are innovative in the speed at which they can be used in a build, but they have evolved from tried-and-tested methods.

The inquiry noted that, as well as improving the speed and quality of delivery, prefabricated components provide scaleable solutions to suit the capacities of both smaller regional housebuilders and for the major housebuilders delivering projects on a much larger scale.

Regional housebuilder Karm Homes, who specialises in affordable housing, chose to use VWPs as their Category Two MMC solution when they needed speed, simplicity and excellent thermal performance for the company’s most recent project constructing two chalet bungalows in Dorset. Director Martin Keenes commented on their process: “We use local architects to design our houses. Once they’ve seen VWPs in action, they’re completely converted. We can’t understand why more companies are not using this solution.”

With reduced construction time comes the added benefit of more flexibility for the rest of the build. Follow-on trades can begin work sooner, so even if time-consuming elements, such as stonewall exteriors, are specified, there is less impact on project timescales.

Given these insights, we can see there are viable MMC options with great potential, yet the Government continues to disproportionately put its support behind volumetric.

The question arises: If the Government isn’t stimulating the housing market with initiatives like easing planning permissions, should it really be subsidising and dictating construction methods?

If the responsibility of making these methods work is left to the industry, then the sector should also determine the best ways to implement them. The failures in volumetric construction underscore the need for a more strategic approach that balances innovation with practical market dynamics.

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