Modular construction – a catchphrase or a genuine solution to the housing crisis?

UK DEVELOPMENT SUMMIT: Modular construction is the buzzphrase of the UK housing industry, but does the reality match up to the hype? 

“It is not an easy thing to deliver by any stretch of the imagination,” says Nathan Cornish, director of Urban Splash, the developer behind modular housing brand hoUSe. Speaking at EG’s UK Development Summit in Manchester, he says it took the developer five years to get the first unit out due to all the necessary research and development. “Modular construction is one solution to the housing crisis, not the solution,” he adds.

“The issue is that the supply and scale and volume of modular construction isn’t there,” says Arcadis Manchester city executive Jonathan Moore. The construction industry is ripe for disruption, but the UK is missing the skills needed to roll it out. 

“There are not enough people with the skills to make modular happen,” says Artez managing director Mike Banton, who hopes we can build an industry of young people who understand both the traditional skills of building contractors and the logistical skills required to oversee modular housing installations.

If the UK hesitates, overseas investors will swoop in. Urban Splash’s Cornish says he is aware of Japanese, Chinese and Scandinavian companies who are looking to enter the UK housing market. He says the developer is in the position to roll out modular construction, but the main difficulty is competing with major housebuilders when bidding for sites.

Mat Oakley, head of European commercial research at Savills, says residential development in UK regional cities is more viable now than it has been for the past 2-3 years, which has been reflected by an uptick in number of bids per site.

Commercial property investment has been dominated by overseas investors, with UK institutions largely sitting on their hands. “The Brits are worrying too much,” Oakley says. He believes institutional investors will miss the boat worrying too much about domestic politics as foreign investors profit. 

UK faces looming crisis over loss of EU funding

One of the biggest challenges post-Brexit will be replacing EU grant funding which helps get development off the ground in UK cities.

Vicky Pryce, joint head of the UK government economic service, Centre for Economics and Business Research, says a funding gap will be created by the €7bn of EU funding through the European Regional Development Fund and European Social Fund which had been due to be awarded in England between 2014 and 2020.

Greater Manchester Combined Authority chief executive Eamonn Boylan warns a “crisis is looming” if the government fails to address the funding gap, but promises the combined authority will continue to invest in developments “where the market will not go” through funds like the North West Evergreen Fund.

As an alternative, West Yorkshire Combined Authority managing director Ben Still says the authority has been getting better at working with sovereign wealth funds and overseas investors to leverage development finance for development.

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