06 Jul 2016

Could factory-built homes fill the housing gap?

Rising demand and restricted supply have increased house prices. Innovative work-arounds could have profound consequences, says Mike Rigby of MRA Marketing.

Mark Carney, the governor of the Bank of England, has complained that UK housebuilding is half that of his native Canada, despite having twice the population.

Twelve years ago British economist Kate Barker published her review of the crisis in UK housing supply. As is Government’s way, it cherry-picked the recommendations it liked and kicked others down the road. So now we have a more informed debate and a bigger housing crisis.

Each year, new supply is less than 1% of the housing stock and, adding to the shortage, Britain’s population has grown twice as fast as the rest of Europe in the last decade.

The widening gap between demand and supply has a number of consequences. Chronic undersupply of new housing has led to a widespread housing affordability problem, and growing inequality between those who own their own homes and those who can’t afford to. And in the younger generation, between those whose parents own homes in London and southern England and those whose parents do not. That makes it harder for workers to move from one area to another, amplifying the impact of skills shortages.

Governments have worthy aspirations, but they struggle to distinguish between aspiration and action. “We want everyone to have access to a decent home at a price they can afford, in a place where they want to live and work”, they state. But housing policy and planning policy have conflicting aims, and there is no easy fix.

Many small house builders disappeared in the recession, and the NHBC estimates that house builders building up to a 100 properties a year account for less than 15%, while firms building over a 1,000 a year account for over 60% of total build.

Large housebuilders reporting outstanding results have attracted considerable criticism. The Independent asks: Do top UK developers build fewer homes to make bigger profits? They do, of course. Since they burned their fingers in the early 90s recession, they chase profit not volume.

But while government and industry squabble about who’s to blame and how to solve the problem, new players with off-site manufacturing solutions could fill the gap and turn the industry on its head. Energy efficient units that can be built to high standards in the factory don’t need a highly skilled workforce to assemble them on site.

The insurance company L&G is investing an initial £55m to produce homes for rent from a 555,000ft2 factory in North Yorkshire. It will build around 3,000 homes a year and is capable of building everything from terraced homes to high-rise flats. It has budgeted £500m for similar sites around the country. Laing O’Rourke has invested £125m in a factory in Steetley, near Worksop, to make prefabricated modules for houses. IKEA is talking to Hyde Homes and Paramount Homes to bring preassembled Scandinavian-style timber-framed housing to the UK. Hyde Homes has already built a modular housing scheme in south-west London using units made in Poland.

Despite false starts for factory-built homes, this time it could be different. Better thermal performance, quality, site safety, and better cost control are persuasive reasons. But freedom from skills shortages is a clincher.

If off-site manufacturing becomes accepted, it could have profound implications. Refocusing the industry on a limited number of factories rather than building on a far larger number of temporary sites, and changes in design and materials will impact directly and indirectly on the builders and tradesmen who work on them, and the merchants who supply them.

Are you ready for a flat-pack market?

Need to move with your market, define your direction, or grow? Talk to MRA Marketing. Call Tom Rigby, Business Development Manager, on 01453 521621 or email tom@mra-marketing.com


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