In this article, Dr Suzanne Peters, Professor Jonatan Pinkse, and Professor Graham Winch reveal the issues that are hindering new housing construction in the UK, and explore how targeted efforts to better support Modern Methods of Construction – particularly “volumetric” modular homes – can help the nation reach both its housing targets and net zero ambitions, and deliver productivity growth.

• Government targets of 300,000 new homes annually are far out of reach for traditional builders and the limited pool of skilled labour that is critical for their methods.
• New homes standards – particularly with respect to sustainability – are higher than ever before, with the expectation that homes built in 2025 and onwards will be ‘zero carbon ready’.
• Factory-produced homes promise quality, speed, and scale, but the firms delivering this approach – typically new entrants – struggle to realise a viable business model.

“Modern Methods of Construction” (MMC) is a term widely used in the construction industry in the UK to capture more advanced methods of construction, in contrast to traditional methods. There are seven categories, with the most advanced being Category 1: 3D factory-manufactured modular homes, which was the focus of the research project. These “volumetric” modular units can almost wholly replace traditional methods of construction for the house structure by assembling it in a factory environment with more standardisation, less waste, and minimising the need for skilled trades that are already in short supply. Factory-built homes are also widely believed to offer greater energy efficiency and higher quality standards and are particularly well-suited to delivering more sustainable homes. However, widespread adoption of this method has not been evidenced and firms delivering Category 1 forms of MMC continue to struggle, despite significant investment.

Sustainability in modern methods of construction

In terms of net zero targets, there are two main components to consider in new housing construction:

• Embodied carbon which includes material sourcing, fabrication, transportation, and installation through to demolition, dismantling and disposal at the end of a structure’s purposeful life.
• Operational carbon which includes the emissions together from day-to-day energy consumption while in use.

It is widely understood that embodied carbon is the greatest challenge in new housing construction with net zero ambitions out of reach for the foreseeable future. Net zero operational carbon is already an achievable target for some builders, but hurdles remain. New homes in the UK are currently required to have CO₂ emissions that are at least 30% lower than standards from 2022. Furthermore, by 2025, there is an expectation moving forward for homes to meet the Future Homes Standard, which stipulates that newly built homes will be ‘zero carbon ready’ to produce no operational CO₂ (assuming decarbonised supply) and with 75% to 80% lower emissions than those built to current standards.

Early input from industry stakeholders suggests there is consensus in the industry that MMC is the best way to deliver net zero solutions and they are particularly applicable to affordable housing. The main opportunities lie with Category 1 (volumetric off-site construction); Category 2 (flat panel off-site construction) and Category 5 (pre-assembled modular elements such as bathrooms). For some time, many in the industry have advocated Category 1 as achieving the most impressive gains, but the difficulties of inserting volumetric units into the construction of the rest of the house have encouraged a turn to “hybrid” MMC combining Category 2 and Category 5.

Challenges to modern methods of construction

Recent research conducted by The University of Manchester has identified primary issues which are limiting the use of MMC that have been particularly problematic for volumetric firms entering the market to help deliver the unmet housing demand.

Labour market requires new skills – To deliver at pace and meet quality standards, both offsite and onsite aspects of MMC require skills and understanding that differ from traditional methods – with offsite work requiring more factory-specific skills and onsite skilled labour requiring more precise methods than required by traditional construction. Until both aspects are properly skilled, the deployment of MCC will be marred by delays and quality issues.

Land use approvals are a massive challenge for the industry regardless of the construction method – Seeking regulatory approvals from local authorities is consistently the most unpredictable and time-intensive part of the building process and this is especially challenging for MMC. Issues naturally result from under-staffed departments for planning and land-use regulators, and the highly political nature of regulations and approvals means that the process is often burdened by constant change, uncertainty, and delays.

The industry is not sufficiently incentivised to change – The construction industry is notoriously slow to change, risk averse, and extremely cautious of trying new methods and materials that may challenge delivery of their product partly due to the very long life-cycles (minimum 60 years) of the product they deliver and traditional perceptions of a “home” amongst purchasers. As a result, change is typically driven by external forces. In housing, government regulations are the main driving force for change rather than demands from the social housing client or homeowner, as they are indifferent to the process innovations that are the main impetus behind homes delivered by MMC.

What can government do?

Government is uniquely positioned to advance the industry by applying three levers that can simultaneously address these challenges.

Drive demand creation for MMC – Government can go further to incentivise builders to use MMC through beneficial taxation schemes and grants, land access, regulation, and mandates that encourage greater adoption of these methods. In addition, as a significant owner of housing and construction projects, government bodies can drive change as a major client in the sector.

Deliver an MMC-oriented skills agenda – Bringing MMC to a site requires specialised skills to ensure projects are successfully completed. More skilled and semi-skilled labour and construction management teams need to better understand and deliver on the unique requirements of MMC, including more precise tolerances to incorporate MMC into the completed house.

Ensure efficient and pragmatic government approvals – It is critical that the current systems for regional planning and land-use approvals are transformed to simplify the process and speed up decision making. The current system is onerous, inflexible, and unpredictable for all players and is particularly challenging for MMC-driven projects. Months to years of delays in planning and approvals result in excessive delays for construction projects that could otherwise be delivered in a matter of weeks.