Are modular homes the answer to the housing crisis?

In the second instalment of our look into the future of housing in the UK, we look at whether large-scale developments of modular homes are an affordable solution to the current lack of housing.
By Craig Bradshaw 2 years ago
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“There was an interesting news article on the BBC in December, concerning a £2.5bn investment by a Chinese firm to create six UK based factories that will produce 25,000 modular homes a year, for sites around the country.

It is hoped that these ‘off the shelf’ prefabricated properties could play an important role in helping to address the shortage of affordable housing that our nation faces.

Precision engineered and quick and efficient to manufacture and assemble, this type of property does have its benefits but this ‘one size fits all’ approach should, perhaps, be seen as a part of the solution rather than the be all and end all, when it comes to addressing housing need and kick starting local economies.

"Building new properties quickly is one thing – selling them is another."

Private developers are well aware of this and understand that construction rates need to be very carefully linked to sale rates, to enable delivery of developments that are financially viable.

Where the plan is to produce mixed tenure and cross funded schemes - that provide homes for people from differing socioeconomic backgrounds - it is logical that the sales rate for open market and shared ownership properties needs to be very carefully managed. Cash flow and recycling the capital is vital if developers are to optimise available funds.

On a large scale, mixed tenure and cross funded developments that are built at pace, there is the risk of stock property build up and the potential for ghost towns to develop. This would have some very negative outcomes for both the developer and the area.

"Cash flow and recycling the capital is vital if developers are to optimise available funds."

The developer would have its capital tied up in outright sale homes and infrastructure for long periods and return on their investment would be very slow. As a consequence, this money would not be recycled and therefore couldn’t be used to invest in or generate new sites. This would, in effect, cause the intended, rapid delivery of new homes to stagnate and stall - as well as increasing yet more reliance on government grant funding.

An area being saturated with such a large number of similar properties, could also create a negative impact on sales prices, not only squeezing the developer’s margins but equally undermining the values of other homeowner’s properties nearby.

Many of the same pressures and problems apply to Housing Associations. A significant investment of grant funding can enable properties and sites to be developed quickly but the impact of misjudging the occupancy rate that can be sustained, risks clogging capital up and halting the reinvestment required to keep the industry moving. Potentially, if Housing Associations were encouraged to think more like private developers, this may become less of a risk.

"With all of this in mind, the question that we need to ask is: Will these modular homes be suitable in all instances and all parts of the Country?"

The quality of modular homes, already a mainstay in China and other parts of the world, isn’t in doubt. With steel frames, excellent levels of insulation and attractive and innovative design, they offer a housing option that can be achieved at around half of the cost of a traditional build.

In the major urban areas, being able to produce and deliver such properties so quickly is a real bonus and I can see how a move towards this kind of development is proving an exciting and wholly viable proposition.

My concern would be that decision makers become too enamoured with the success of these urban projects and assume, without proper consideration, that the model can be transposed to more rural, provincial and perhaps economically less prosperous areas, to deliver the same results.

Prince Bishops Homes has ambitions to develop on a large scale, mixed tenure schemes across the North East. The expansion of the modular homes sector will have a huge impact on the construction industry and could very well prove to be the development process of choice for the future. We wish to embrace it and work out how we can successfully deliver all of the benefits that modular build can provide, while at the same time mitigating the risks.

To be successful, we must ensure that the housing needs of specific areas and communities are considered thoroughly and on an individual basis, before new large-scale developments begin.”

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