The Housing Whitepaper: how do we incentivise the use of offsite construction?

By Tom Shaw, Director, Ramboll

The recent Housing White Paper highlighted that the housing market in the UK is broken. Since the 1970s, there have been on average 160,000 new homes built each year, when we actually need up to 275,000 annually to keep up with population growth. In London alone, the population grows by 100,000 every year, requiring 50,000 new homes – we are only completing half of this. It is no surprise that the housing market is in the position it is in.

The White Paper highlighted that 60 per cent of UK new homes are built by the country’s 10 largest housebuilding firms. With cheap labour there has been little incentive for large building firms to innovate in their methods of construction. This is shown where productivity across the economy has improved by 41 per cent in the last 25 years as industry gets more efficient, whereas in construction productivity has only improved 11 per cent. As a result the Paper calls for a boost in productivity and innovation by encouraging modern methods of construction. This is welcomed, but it could be argued that the recommendations could have gone further.

The Farmer Review, “Modernise or Die”, published last autumn again highlighted that with construction labour numbers falling and prices rising, offsite construction is the answer. Without it we do not even stand a chance of maintaining status quo with the current resources and labour available; instead both the cost of construction and house prices will continue to rise at a significant rate.

Surely this is reason enough to consider the use of offsite construction? Negative preconceptions of poor quality prefabrication in the 50s and 60s has had a damaging impact, creating concerns over quality, durability and lifespan of buildings, dampness, and fire. As a result, there is nervousness over insurance, mortgages and whether we are able to sell prefabricated homes. Those pricing the schemes without knowledge of offsite construction consider risks, rather than the savings that can be achieved, and often rule out this option early. But this should not be the case – quality is vastly improved and the knowledge and understanding of the benefits of offsite construction needs to be recognised throughout the industry.

The UK housing situation is not unique, so we should look to learn lessons from overseas. If we take Denmark as an example, prefabrication is a mindset. Almost all buildings are designed as pre-cast concrete and will be designed to be prefabricated from the start, in extreme circumstances if the contractors/suppliers are not available then a scheme may be redesigned to be built in insitu concrete – the opposite to the UK.

In much of Scandinavia prefabrication is engrained in the culture and taught in detail even at university. There are national standard guidelines that allow an open supply chain avoiding narrow bespoke products. The reason this is so widespread is because a labour shortage in the 50s and 60s resulted in a shift of the industry towards prefabrication – sound familiar?

In the UK we already have a number of established offsite solutions, including cross-laminated timber (CLT), volumetric pods, precast and hybrid concrete. However, many of those trying to adopt these methods of construction find that suppliers are already at capacity. For these to really become successful, factories need to be built to meet demand, yet in order to make the construction of a factory viable there needs to be a clear and continuous pipeline of work which is not yet there. There are a few making this commitment, mostly where those building the factories are in the driving seat (such as Legal & General setting up a CLT modular factory). The Government needs to provide financial stimulus to incentivise construction of these factories, which will enable supply chains. The Home Builders’ Fund mentioned in the White Paper may go some way towards this. There is also the Buildoffsite Property Assurance Scheme which provides an assurance to lenders funding schemes utilising offsite construction.

Offsite construction can provide some significant benefits to projects – shorter construction programmes, reduced costs, higher and more consistent quality of finishes, reduced headcounts on site with improved health and safety, as well as the benefits of reduced noise for neighbours. Offsite can also be key to unlocking highly constrained sites – taking Merano as an example through the use of precast/hybrid concrete, a 28 storey tower was built on a site the size of two tennis courts bounded by a railway viaduct making use of just-in- time deliveries.

If as an industry we really are committed to meeting the housing demands, we need to embrace offsite construction as part of the solution to solving the crisis. We need more developers and builders to make the bold step of adopting offsite on their schemes, in order to do so we need to design for it from the outset of a project, otherwise the case will never stack up.