How do you solve a problem like the UK’s housing crisis? Blackstock Consulting sat down with a host of industry experts to discuss exactly that.
Modular housing has the potential to play a crucial role in delivering the homes needed to meet the government’s ambitious 300,000 homes a year target.
Speeding up delivery will be essential to meeting these targets, and given that offsite manufacturing, on average, delivers homes twice as fast as traditional construction, many in the sector believe it will have a major role to play in tackling the housing crisis.
But if modular is going to deliver on its promise and secure the necessary investment and gain public trust, educating investors, policy-makers, local authorities and consumers will be crucial.
Tackling the negative connotations attached to prefabs which continue to tarnish modular’s reputation will be a crucial first step, both from both an investor and consumer perspective. A unified message from the sector will be fundamental to achieving this.
“We need a feedback programme to build demand for the modular product, and I think that in itself will generate capacity and give businesses the confidence to build new factories across the country,” says Val Bagnall, managing director of Apex Airspace, a modular housing provider.
Consumer confidence in modular homes will be based on its build and design quality, according to Michela Hancock, managing director of construction and development at property developer, investor and manager Greystar UK.
“People don’t necessarily know, nor do they care if their home is a modular product. What they do care about is the quality of the product and if it’s sustainable and well-run,” she said.
Dave Sheridan, executive chairman of off-site manufacturer ilke Homes, believes this flexibility does not negatively impact design quality.
“Modular doesn’t just have to be for the entry-point house, it can be designed to be aesthetically pleasing. You can dress a modular product to be extremely attractive.”
However, more support will need to be seen at the local level according to Andrew Prickett, UK Head of Residential at Faithful+Gould and Tony Dicarlo, Developer and Investor at innerspace Homes if modular is to achieve its full potential.
The last housing minister Kit Malthouse and housing secretary James Brokenshire both backed offsite construction during their tenures. Indeed Malthouse said of the 750 home deal between ilke Homes and Places for People that it showed the UK blazing “a trail in the modern methods of construction that are transforming home building.”
However, convincing local authorities to embrace modern methods of construction is proving more difficult.
“At the central government level, offfsite and modular is hugely supported – they are really backing it, but that’s not filtering down to local government and definitely not the planning system where it is not even in the National Planning Policy Framework” Tony DiCarlo, founder of modular house builder Innerspace says.
Andrew Prickett, director, UK head of residential at project and programme management consultancy Faithful and Gould, suggests that access to land and scaling up pilot schemes would be a step towards accelerating the widespread adoption of modular and offsite.
“Let’s back SMEs, new thinkers and innovation and let’s scale up. Instead of smaller pilot schemes, we should think more ambitiously and consider 200 to 300 homes developments,” he says.
“We could have a pre-assumption that new council houses are built using this technology unless there is a watertight business case for not doing it,” he adds.
In her first speech as Housing Minister at RESI 2019, Esther McVey made it clear that encouraging home-ownership was a clear priority. But how will first time buyers be helped onto the housing ladder now that Help to Buy is being scrapped?
The harsh reality is that is not a one size fits all solution to the problem.
“Help to Buy was born out of the post-recession world and has since gone from being a safety net to a jetpack for profits at some of Britain’s biggest housebuilders. Rescuing firms was the number one aim of the scheme with little thought being given to when the market eventually stabilises,” says Adam Challis, head of living research and strategy at JLL.
Vanessa Hale, director of research at BNP Paribas Real Estate and chair of Urban Land Institute (ULI), agrees with Challis, but praises some companies who are actively seeking to diversify.
“HTB certainly has a political slant that we’re going to have a hard time getting away from, but housebuilders, such as Telford, who have been moving towards increasing their proportion of build-to-rent homes, are looking towards solutions.”
Telford Homes, which recently entered two build-to-rent partnerships with asset manager M&G Real Estate and Invesco, accelerated its shift towards the build-to-rent sector last year, accounting for 70 per cent of the company’s development pipeline.
During the discussion, panel experts shared the consensus that there isn’t going to be a ‘one size fits all’ solution to life after HTB.
“A one size fits all approach will fail. What the market needs going forward is a range of products such as build-to-rent and shared ownership”, says Challis.
Mergers, modernisation and a focus on expanding shared ownership are helping housing associations take centre stage in fighting Britain’s housing crisis. There is a huge opportunity for joint ventures and collaboration with the private sector. Yet according to two leading G15 members and the head of the sector’s trade body, there is still a huge shortfall in grant funding needed to provide adequate quantities of social housing.
Tackling this will require more funding, strategic partnerships, and a cohesive, long-term investment strategy from the government.
According to the National Housing Federation (NHF) , housing associations are receiving roughly just a tenth of the grant funding needed, with the government spending just £1.27bn on affordable housing, making housing one of the smallest government budgets.
“What we need is a long term investment package from the Government. We were asking for £12.8 billion a year. It’s a lot of money, but it means we could deliver 145,000 affordable homes each year which we know we need over the next decade,” says Kate Henderson, CEO of the NHF.
“Our research shows we need around 90,000 social rented homes each year. Last year we built 6,000. We are an incredibly wealthy nation but some people’s housing needs simply won’t be met by the market alone,” she adds.
Alan Strickland, director of external affairs and resident involvement at Optivo, agrees that more government support will be crucial.
“The government needs to continue investing in social rent, and it’s absolutely critical that people can continue to have a home they can afford. Fundamentally, both on affordable homes for rent and for sale, housing associations totally stand ready to help, to invest, to build and to work with communities.”
Shared ownership is one crucial tool that housing associations can promote to boost home-ownership. Fundamentally, this method means that even with increasing property prices, people on an average salary will have a chance to be able to afford a home.
“We have a big development pipeline with shared ownership and we’ve been doing it since the 80s. It’s a hugely resilient product, it is the most affordable way that people can get onto the housing ladder.If you’ve got a £500,000 property, then £125,000 is the equity share that you can buy. All in all, you’ve got people who are on about £35,000, and they can afford to buy there. So it is affordable – it’s the only way a lot of people can live in London”, Geeta Nanda, chief executive of Metropolitan Thames Valley, explains.
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