Briefing: What are the future prospects for the modular homes industry?

The modular homes industry is likely to accelerate and planning policy is starting to acknowledge its role, writes Isobel McGeever.

Modern methods of construction: Benefits modular homes are starting to be acknowledged in planning policy

Q What is the current volume of the modular homes industry output and how significant is this in the overall housebuilding market?

A An estimated 15,000 modular homes are built every year in the UK – less than eight per cent of total homebuilding in the UK in 2018. But the shortage of construction workers is expected to affect the delivery of homes provided through traditional methods. It is therefore increasingly likely that modular, off-site and factory-made homes will soon take up a much larger share of the market.

Q What potential is there for the industry to provide more homes and quicker production lines?

There are very few operational factories producing modular housing, so there is scope for more to open and increase the output of modular homes. Once there is an increased level of competition in the sector, the manufacturing companies will likely start to deliver higher volumes of modular homes, which will in turn help to drive down the associated costs. Cost-saving benefits could then be passed on to consumers, potentially making it cheaper to purchase a modular-built property.

Furthermore, wider changes are occurring in the housing market that are helping to boost the industry. For example, developers of built-to-rent schemes tend to favour the use of modern construction methods because speed of delivery is important to allow developments to be occupied sooner and generate income earlier.

Q What are the main impediments to the sector’s growth?

A The main limiting factor that has the potential to significantly slow down growth in the sector is the very limited number of operational factories and supply lines for the construction of modules. Investment will be needed to ensure that there is a sufficient supply line in place for the industry to grow and deliver development at real scale.

Equally as important to its growth is shaking off the perception problem related largely to post-war prefabs. This will require the use of modular construction to complete developments, for people to move into them and experience them first-hand. Equally, buildings will need to show that they can last long enough to prove they can remain high-quality and age well.

For modular homes to be suitable in differing contexts, design quality and parameters will need to be considered in detail to ensure that schemes are comparable in design to traditionally built developments.

Q How has policy sought to promote modular construction?

A The benefits modular construction can bring are starting to be acknowledged in planning policy. The draft New London Plan says that modular homes have the ability to improve sustainability of developments. The draft plan suggests that the housebuilding industry needs to diversify to allow sufficient homes to be delivered each year, and that this can be done through innovative approaches such as modular construction.

It is likely that policymakers will need to let the market lead on the growth of modular construction rather than prescribing in planning policy that developers must utilise it in developments. The current higher cost of modular construction methods compared to traditional methods is likely presenting a barrier to many developers. If planning policies begin insisting on its use, it could be seen as an obstacle to housing delivery rather than a benefit.

Q How can planning be used to encourage modular housing?

Planning authorities for whom fast delivery of housing is important, such as those in danger of performing poorly against the housing delivery test, may find modular housing an attractive option. Such authorities could incentivise modular homes by offering fast-track options for schemes that promise to use off-site construction methods. This would be attractive to developers, and offer the prospect of schemes that were faster than average through planning and construction. Additionally, planning authorities could help educate stakeholders about the benefits and challenges presented by modular construction. This would ensure greater understanding of the technology.

Isobel McGeever is senior planner at consultancy Iceni Projects