Newsbite article

Offsite construction: A new era of large-scale house building?

It is widely acknowledged that the UK has consistently failed to build anywhere near sufficient volumes of homes for many decades, despite numerous initiatives to address this.

The overall level of house building in the UK has declined since 1980, with 152,380 houses built in the financial year ending 2015. This represents a fall of nearly 40% from the 251,820 built in the financial year ending 1980 .
Government and industry are coming under increasing pressure to find solutions, and whilst ‘traditionally constructed’ homes still form the major part of the house building profile, it is unlikely that traditional methods are capable of delivering the volumes needed today.

To succeed in achieving the challenging house building targets set by Government, diversity in the type of housing built is needed. The focus has landed very squarely on the role that modern methods of construction should play in achieving these aspirations.

Specifically, under the umbrella of modern methods of construction (MMC), offsite-construction is seen as having the potential to deliver high quality homes both quickly and cost-effectively.

Whilst the success of offsite-manufactured homes has been seen in other parts of the world, such as Scandinavia and Japan, this has not yet been replicated in volume in the UK. There has been a significant shift in sentiment and recently we’ve seen the strongest signs yet that that change will happen sooner rather than later. Specifically; major players are entering the market which could certainly be a game-changer for the offsite-construction industry in the UK.

•             P7-US1.jpgL&G invested £55m in an offsite- construction factory which will be capable of supplying 3,000 houses a year. It is also believed to have approval to build further off-site plants.

•             Lang O’Rourke offsite-factory - The Government granted Laing O’Rourke £22m to accelerate the use of modular systems in house building. The funds were used as part of a £104m project which involved building a dedicated modular housing assembly factory.

Government officials have already visited the L&G facility and have also been to see Urban Splash's modular house scheme (offsite-construction) in Manchester's New Islington. Recent media coverage suggests that the Government are considering further heavy investment in modular homes and are even considering a fund to support SME’s and developers in delivering volumes.

According to the NHBC foundations recent report the majority of house builders and housing associations are using or have considered at least one MMC approach within their recent build programmes.

However, unless these properties are accepted as suitable security for mortgage purposes then the potential solutions that the government believes that modern methods of construction can deliver cannot be realised.
 
We know that Building Societies as a sector are more liberal than banks regarding modern methods of construction and are (mostly by exception) increasingly accepting properties constructed using non-standard construction methods, but this in no way means that they are universally accepted within building society lending policies.

In recognition of this, the BSA has been exploring the risks and barriers for lenders considering lending against properties built using modern methods of construction and been carrying out work to understand the potential for growth of this sector and the potential of MMC’s to become mainstream.

We certainly believe that to address the shortage of housing in the UK there has to be innovation and diversity in the type of housing built – modern methods of construction certainly has the potential to be a fundamental part of the solution.