This is the first in a series of briefings, produced by the Northern Housing Consortium, covering off-site manufacturing and modular housing and the role it might play in addressing the shortage of new homes in the UK.
The briefings will cover the many aspects of off-site construction including the financial case, accreditation, sustainability and energy efficiency. This first briefing will give an overview of off-site construction and take a look at its potential impact on social housing.
While the Government has outlined a number of housing related policies and initiatives aimed at increasing home ownership and addressing the affordability crisis, underlying it all is the severe shortage of new homes. For decades, housing supply has failed to keep pace with increased demand due to a longer life expectancy, immigration and a rise in single occupancy households. It is estimated that an increase of two or three times the current supply is needed to close the gap. Or put another way, around 250,000 new homes each year for the next 20 years and the Government has set an ambitious target of 1 million new homes started by 2020. To achieve this target, the Government is focusing on three key areas: building houses on scale and at speed, SMEs, and innovative technology.
Building new homes at the scale and speed needed to meet the nation’s needs is a challenge for a construction industry hit hard by the recent economic downturn. The sector, which has seen massive consolidation over the last eight years, now has to contend with a significant reduction in skilled labour and a brick shortage. It is clear that tackling the housing shortage is going to require some innovative solutions and off-site manufacture (OSM) could be the key to accelerating the delivery of new homes.
So is off-site manufacture really innovative? Well, no. Pre-fabricated housing has been around for over a century and was used in large numbers in the mid-20th century to quickly replace housing stock destroyed in the Second World War. Since then, it has suffered something of an image problem and developers have tended to stick to more conventional onsite construction for residential developments. Innovation has of course, continued in off-site manufacturing and it has come a long way since the post-war prefabs of the 1950s. New OSM technologies have been used widely for hotels, offices and student accommodation. Modular off-site construction is commonly used abroad and is the standard form of construction in many countries. Now, the depth of the current housing shortage has forced developers in the UK to take a fresh look at off-site manufacturing.
Politicians and the construction industry alike have expounded the virtues of OSM in recent years. Speaking in 2014, Brandon Lewis MP, Minister for Housing & Planning, insisted that not only would off-site construction methods improve the quality of homes, it would deliver them faster and he urged the sector to embrace modern construction methods. According to government figures, the offsite construction sector currently accounts for around 7% of total construction output in the UK and is worth more than £1.5bn to the economy.
If proof were needed that OSM is moving up the agenda, the institutional investment by Legal & General into large-scale off-site manufacture demonstrates its belief that the market is set to grow. Legal & General Homes are poised to open an off-site manufacturing plant using cross-laminated timber (CLT) in Leeds – the first in the UK. With a capacity of 3,000 units every year, it will also be the largest in the world to use CLT.
What OSM technologies are available?
Volumetric units – 3D modules fully assembled in a factory (the term “modular” is used to describe load-bearing units). The units can arrive onsite with electrics, plumbing, kitchens and bathrooms all fitted. They can be decorated and even leave the factory with curtains hanging.
Cross-laminated timber – Used by some manufacturers, CLT has outstanding structural performance, zero deflection when moved to sites and requires no plastering.
Panellised systems – This system involves the on-site assembly of flat panel walls, and cassette floors and roofs. Systems range in complexity from simple timber or light steel frames (open), to more complex factory finished units incorporating insulation, lining, doors, windows and services distribution (closed panels). Panellised systems can be used for refurbishing existing properties using a ‘wrap-around’ process and Accord’s OSM business, LoCal Homes, has used this method in a real feat of engineering to refurbish individual flats as part of a block. This could offer a solution for housing associations in northern regions where the quality of existing stock is often seen as a problem.
Hybrid – A ‘best of both worlds’ approach combining the benefits of modules for highly serviced areas like kitchens and bathrooms with the flexibility associated with panellised construction for other spaces.
CAD/CAM Design & Manufacture
Computer-aided design and computer-aided manufacturing software are used to produce highly accurate and precise structures from wood, steel or concrete. 3D modelling enables a fully completed building to be visualised before its construction. This allows for the complete traceability of components making it easy to identify parts for maintenance schedules.
Such precision means that modular units are able to be almost completely airtight. The window voids on Legal & General CLT modules are predicted be to within 0.1mm accuracy which means there is no need for foam or draft excluders. Working to such tight standards requires extra care at the design stage to ensure a high level of accuracy and close collaboration between project management, architects, site contractors and the off-site manufacturer is crucial.
The use of CAD/CAM has also enabled mass customisation which can be achieved at relatively low volumes, giving developers a greater degree of flexibility to meet specific needs.
Speed – The obvious and perhaps most significant benefit to OSM is the shorter build time. The clean, controlled factory environment allows for a much faster build without the inevitable stoppages for bad weather. It also allows for site preparations and foundation work to be carried out simultaneously. From the point at which plans are submitted to the factory, a volumetric build can be ready occupation in around four months and it can take as little as 48 hours site time to be put in place.
Predictability – With a high percentage of the build in a controlled factory environment, overall build costs are largely stable and predictable.
Cost – The factory setting results in consistent build quality and better quality control with fewer defects. Other cost savings can be made through reduced preliminaries and value engineering.
Quality – Volumetric production in particular offers significant benefits by transferring specialist trades for highly serviced areas such as bathrooms, in factory conditions. The repetitive processes within the factory ensure every component is manufactured to the same exacting standards and quality control is built in as part of the process, leading to consistent, high quality finished products.
Labour – A reduced on-site labour requirement lessens the effect of labour and skills shortages in the construction industry.
Reduced waste – Off-site manufacture means that there is very little on-site waste to dispose of and it is far easier to re-use or recycle much of the waste generated within the factory. Premier Modular (part of Waco) for example, operates a Company Environmental Management System to recycle or re-use 90-95% of their waste materials. Composite panel cut-offs are broken down and reused, timber is wood chipped and plasterboard is processed to produce fertilizer or even cat litter.
Health & Safety – Health & Safety is much easier to control in a factory environment and with fewer people on-site, the risk of accidents is significantly reduced.
Theft – There is less need for easily removable materials to be kept onsite, therefore reducing the risk of theft.
Less disruption – Off-site manufacture drastically reduces vehicle movements, dust and noise on-site, meaning less disruption for local residents.
Energy efficiency – Off–site manufacture is significantly more efficient to build and is demonstrably more airtight, reducing energy bills for residents – usually built to Code of Sustainability 4, 5 or 6.
Flexibility – Volumetric modules are supported by the four exterior walls, allowing the internal space to be easily adapted in order to meet changing requirements.
How will this impact social housing?
As well as the pressure on housing associations to deliver more affordable new homes, the 1% rent reduction has increased the need for new and efficient ways of working. One significant barrier to OSM has been the capital cost premium associated with the build. Estimates vary between 5-20% depending on scale and complexity of the development and in a sector concerned with upfront costs, this can represent a significant hurdle.
However, OSM manufacturers argue that this additional upfront cost is nullified by the reduced lead times and early revenue streams from rental income and further reduced by low lifetime repair and maintenance costs. For rental properties therefore, where the association has a long term interest in the property, the Total Cost of Ownership (TCO) is reduced and justifies the OSM premium. It is also anticipated that in a growing market, costs will come down as economies of scale are achieved. This will be particularly important in parts of the north of England, where property values are lower.
This is not holding the north back though. A group of housing associations have joined forces to form the Modular Allianz. The group are collaborating with Salford University with the objective of establishing whether modular or off-site manufacturing can work for the social housing sector. They want to develop a blueprint that can be replicated, improving quality, speed of delivery and lowering costs through economies of scale. Working collaboratively has thrown up many challenges in agreeing standard designs and specifications but between them they have put together a pipeline of 500 new homes and work is due to start on their first 160 homes in July this year. The Modular Allianz will continue to evaluate the value of OSM to the social housing sector and have attracted interest from housing associations across the north wishing to sign up to the project.
According to a survey conducted by Inside Housing published in March 2015, over the three years to 2018, 56.8% of 22,544 homes planned by 17 of the UK’s largest housing associations will be constructed using offsite methods, including timber frame and modular construction.
Case Study – New Charter: Boundary Close, Mossley
New Charter set out to improve an existing site by replacing old post-war prefabs with new modular construction homes as a pilot scheme. It put together a team involving the developer, Bowsall; principle contractor, Globe; architect, JDA; employers agent, Poole Dick; manufacturer, Factory Homes and New Charter as the client.
- March 2013 – Existing tenants were rehoused and New Charter took possession of the site
- Off-site construction of the units allowed for site preparation to take place simultaneously. Volumetric units were finished with half render/half brick slip.
- November 2013 – site completed & tenants moved back into Boundary Close
- Cost: £97k per unit (£25k per unit HCA funding)
- Too many people involved. A principle contractor and single point of contact would have been easier to manage;
- Involve the manufacturer early in the planning stage;
- A design responsibility matrix should be included between architect and manufacturer;
- Monitoring and evaluation co-ordinators should be moved to one camp of responsibility;
- Get it absolutely right in planning – there can be no fine-tuning onsite.
- New Charter say their tenants are extremely happy with their new homes;
- Build quality was so high that there was very little need for touch-ups or fixing minor faults;
- Tenants have noticed a significant reduction in their energy bills;
- The homes have full accreditation and guarantees and will last as long as any timber built house;
- Even with delays onsite (largely due to building control and service installations) the development was completed significantly quicker than a traditional onsite project.
Into the future?
Growing demand, a reduced skills base and the need for increased quality and efficiency have created a challenge that cannot be met without changing the way we see the construction of our built environment. Off-site manufacturing is recognised as part of the solution and the market for it, in all its forms, is growing. But the industry is still fragmented and therefore the critical mass for OSM has not yet been achieved. This may be about to change. Institutional investors such as Legal & General Homes have judged the market conditions to be right for a dramatic growth in OSM.
Traditional on-site construction is slower and more dependent on factors outside of our control and OSM offers a greater degree of control and predictability. With more emphasis on the use of brownfield sites, which are often cramped, difficult to operate in and disturb local residents and businesses, OSM reduces the on-site traffic, noise, dust and inconvenience.
OSM has the potential to supply more houses, quickly and offer more diversity in the market. Close working partnerships between the design team and the manufacturer can deliver a better quality, cost effective, energy efficient and sustainable home with lower lifetime maintenance costs.
A question remains as to whether OSM will benefit developers in the north as well as the south. OSM in the current market commands a capital cost premium which is easier to absorb when property values and rental incomes are higher. In some parts of the north, it is likely that OSM will not be financially viable until economies of scale bring the unit cost down.
The challenge for off-site manufacturers is to overcome old stereotypes and prejudices. They need to convince the market that the technology has moved on. After all, we are all happy to accept technological advances in other sectors, such as the motor industry, and we all accept that our cars are built in clean, dry, automated factories with quality inspections at every step of process. We probably wouldn’t want our cars built out in the rain, so why our houses?
The NHC would like to hear more about your experiences with off-site manufacturing. If you have a case study for us include in future briefings or are considering a pilot scheme, we would like to hear from you. We are also setting up an OSM network for members keen to know more. If you are interested in joining or would like to share your experiences with us please email Policy Services Manager, Justine McGrady on Justine.firstname.lastname@example.org