Darkest before the dawn: Is it time for a modular comeback?

As the UK struggles to keep up with its affordable housing objectives, modular housebuilding is once again being talked about as a potential longer-term solution to the crisis. But after a spate of closures and criticisms, can modular still deliver on its potential? 

With soaring property prices and a shortage of affordable housing, the queue for social homes has reached record lengths, forcing families to endure years-long waits. Currently, more than one million households across the UK are waiting for a social home, while the average house now costs 10 times more to buy than the average salary. 

Meanwhile, a Centre for Cities report has found that, compared with the average European country, the UK has a backlog of 4.3 million homes missing from its national housing market, which should by now have been built to meet its existing demand. Even if the government hits its target of building 300,000 homes a year, the report states the housing deficit would take at least half a century to fill. 

Before the pandemic, one solution being touted to alleviate the pressure on market demands was modular housing. After a succession of private investors injected funds into key modular projects across the country, an additional £30 million investment by Homes England into Ilke Homes in 2019 cemented the country’s commitment to the modular industry. 

The government's focus on addressing the housing crisis and its commitment to innovative construction methods encouraged more investor confidence, and it seemed like there was no stopping modular going mega. So, what happened? 

Modular mayhem 

At the time, modular was being hailed as the housing industry’s poster boy for solving many of the country’s supply and demand issues. It also seemed to tick all the boxes in terms of carbon emissions, energy efficiency, construction time and economic growth. 

In theory, we should by now at least be gaining ground and catching up with the rest of our western European counterparts when it comes to meeting modern, sustainable housing targets. But we’re not. The UK is currently lagging other similarly classified countries in areas such as supply, efficiency, comfort and affordability. 

Unfortunately, the modular housing sector in the UK has faced several challenges, including a lack of skilled workers and inflationary pressures, which have contributed to perceptions of its initial failure.

Despite the challenges, was it premature of stakeholders to condemn the viability of modular construction in its early stages? The sector may have been overoptimistic in the ability for modular to deliver on its potential so quickly, and perhaps this was in part due to the urgency needed to find fast, easy solutions to an overwhelming set of problems.

Many modular ventures that have gone bust in recent months have failed to fully understand the complexity of communicating and implementing such an ambitious vision for the industry, with little prior knowledge or experience to learn from. 

However, there are some who have survived the storm, and have not only realised their vison, but are now starting to reap the rewards – and with huge benefits for their communities. 

Bucking the trend

United Welsh Group is an award-winning, not-for-profit organisation providing homes and related services in South Wales. It also has a modular development programme, worth around £55 million each year. Over the next five years, the organisation aims to provide 1,300 more homes with its social enterprise, Celtic Offsite, many of which will be built at its new timber-frame factory. 

Things are going well. But how has it managed to continue operating successfully under such increasingly unpredictable market conditions, while other modular builders have struggled to keep going? 

“At United Welsh, as with many other housing associations,” group chief executive Richard Mann explains, “we had a history of delivering innovation projects which sought to prove that we could build more energy-efficient homes to a higher standard than traditional construction. 

“However, they were often too expensive and ‘too innovative’...we recognised that we needed to drive the change and establish our own facility.”

United Welsh Group's Celtic Offsite modular factory in Caerphilly (Cr: United Welsh)

Richard and his team were supported by Neil Robins and Jane Nelson in developing their business plan; both have a wealth of experience in MMC (modern methods of construction) and, more specifically, timber-frame construction. Material was another key component in the initiative’s success, with the development team opting for timber frame, as they believe, in Wales, it is a more sustainable product with the potential to create an indigenous supply. 

“One of the key reasons for the demise of several full modular manufacturers over the last few years has been down to development delays and sustainability,” says Richard. “Our business plan is predicated on the principle of ‘start small and grow’. 

“The investment reflected a model that could deliver the development programme of United Welsh and in itself be financially sustainable.”

Richard Mann  |  group chief executive, United Welsh

One of the key reasons for the demise of several full modular manufacturers has been development delays and sustainability – our business plan is predicated on the principle of ‘start small and grow’

In addition, he says, they needed to reflect the risk of the planning system in Wales and the inherent delays that often occur. “We have been supported by a very ‘risk aware’ board, the Welsh government, and a number of partner housing associations in Wales that have taken the small leap of faith in placing orders with us.” 

United Welsh remains in line with its business plan and has become profitable, with a moderate margin this year. “What is really important, though, is that we are developing a positive reputation, both in terms of quality and timely delivery,” says Richard. 

Another key element of United Welsh’s success is the relationships it has developed with key contractors demonstrating reduced construction times and savings. There are now several supply chains specifying United Welsh in competitive tender arrangements, and they’ve seen measurable success, with some of the profits made by the factory reinvested into existing homes to improve their energy efficiency. 

United Welsh is clearly, then, playing a leading role in the state of modular housing in the present. But what will the industry look like in the future? 

“We are now working with over 20 partners in standardising layouts across Wales,” Richard says. “This means that each home can look different but will enable us to reduce production cost. 

“Similar to the way car manufacturers develop their top models, by building the ‘chassis the same’, we’re giving the options of alternative external facades and customisable internal finishes.”

Caerphilly's new Wingfield development was built using structures manufactured in Celtic Offsite's nearby factory (Cr: United Welsh)

Their ambition here is to develop the homes in eight weeks from delivery of the frame to handover to the client. 

“The current factory has the capacity to manufacture up to 500 homes a year,” Richard says. “However, we are already in early discussion to develop a net zero facility with the capacity to increase this to over 1,000 homes a year. 

“This would play a significant part in meeting the Welsh government’s ongoing objective to increase the supply of quality, affordable, energy-efficient homes in Wales.” 

• Moving to modular in Wales is a no-brainer – so how do we make it happen? 

Housing for all 

Another success story is Cambridge City Council’s mini modular homes for rough sleepers. The initiative was born following the council’s collaboration with homeless charity Jimmy’s Cambridge, Allia, and New Meaning Foundation, a social enterprise that builds microhomes for homeless people.  

The self-contained homes were erected in 2019 and consist of a small kitchen, bathroom and front porch, which can be ‘rapidly assembled like giant Lego’. Each of the six units cost £36,000, which is roughly the equivalent of how much the public spends on one person sleeping rough for a year in the UK. 

A Cambridge research team has been working with Jimmy’s Cambridge to investigate the effectiveness of the enterprise on long rough sleepers. The study found that, combined with ‘wrap-around support’, the factory-built units have helped to restore the health, relationships and finances of their residents.

The first tenants of the scheme were tracked over a 12-month period, as well the staff from Jimmy’s Cambridge, who were providing services to the group such as addiction counselling and cookery classes.

Daniel Paterson  |  director of government affairs, Make UK Modular

The fundamental takeaway is that modular will grow in the coming years, and this will have an increasingly positive impact on the wider construction sector and help Britain's housing challenges

Encouragingly, the research found the pilot project reduced drug and alcohol misuse, while dramatically boosting physical and mental health. This then led to improved financial management, new and increased work or training, and renewed relationships with family members. 

Several residents had also made plans to move on to social housing once their 18-month modular home tenancy ended, while others planned to stay in the modular homes longer term. 

The outlook

Other parts of the UK can also look forward to some good news on the modular housebuilding front. A recent report by Make UK Modular and KOPE predicts the sector will have the capacity to deliver 20,000 low carbon, energy-efficient modular homes across England by 2025. These homes would be 55 per cent cheaper to heat than the average British ‘bricks and mortar’ family house and be built at twice the speed. 

The report puts past failures down to housebuilding being slow to innovate but says that, for the first time, we are seeing a ‘modular housing revolution’. 

“Across the modular sector, we have seen the development of technology and processes that can now be deployed on construction projects across the country,” explains Daniel Paterson, director of government affairs at Make UK Modular. 

“As a consequence, although the past year has been a rough one, the modular businesses coming out the other end are in a better place to deliver construction projects in greener, faster and better ways.” 

There is always the risk of repeating past mistakes and new challenges cropping up that require fast solutions. However, with so much potential for modular on the horizon to address many of the current and future housing challenges, Daniel believes the market would be wise to keep abreast of the changing winds. 

“The fundamental takeaway is that modular will grow in the coming years,” he says, “and this will have an increasingly positive impact on the wider construction sector and help Britain's housing challenges – while also overcoming the growing skills and productivity gap across the whole of the construction industry.”

Main image: Shutterstock AI