Offsite: The making of Modular

After years of predictions that modular construction will be the next big thing, Denise Chevin reports on why Swan Housing Group is committing to a factory to build new homes.

The march to offsite construction is picking up pace and right out in the front is Swan Housing Group. The Billericay-based housing association is investing in a factory to provide new homes for the next phases of a major estate regeneration. Impressively, Swan will harness the production process to customise the internal layout to suit the buyer, very much in the same way as car manufacturers build to order for particular models.

The decision to invest in the offsite production facility was borne out of frustration with existing construction methods and a determined belief that there had to be a better way to build. Matters had come to a head after work on the recently completed second phase of the regeneration of the Craylands Estate near Basildon ran late and over budget.

Swan has been partnering with the local council to transform the notorious 1960s estate on the outskirts of the town into Beechwood Village since mid-2000, completing the first tranche of new homes in 2010.

Over a period of more than 20 years existing houses will be demolished and more than 1,000 built in their place, providing homes for shared ownership, social and affordable rent and for sale.

To date 400 have been built on the estate using traditional methods with another 570 planned in the next five years using offsite construction. Around half of these latest homes will be for sale and half for custom build – more bespoke units for buyers – playing to the strengths of a more automated process.

After his experience with the second phase, Geoff Pearce, executive director of regeneration and development, decided to look for an alternative.

“We’re not typical of a housing association in that we have our own in-house construction team to oversee our developments, rather than using a main contractor to carry out the work,” says Pearce. “The second phase was delayed because we struggled with suppliers, plus poor performance and bad weather. The work took longer than expected and cost more than planned. So we started to look at modular.

“First, we looked at the existing suppliers and engaged consultant Potter Raper to a do a study for us. We concluded the existing market was not quite big enough for us to guarantee supply, and it was more expensive.”

Pearce says that costs for offsite compared to traditional construction were being pushed up due to a number of factors: factory overheads in terms of business rates and rents, which do not apply when building on site; higher margins (double those of traditional contractors); and contingency costs to cover the downtime in the factory brought about by delayed orders.

“Because the suppliers weren’t the end-developers, they never had control over the production line. It occurred to us that if we took control of a factory we could reduce some of these costs.”

Swan is renting space at a production facility, essentially a large warehouse, which will be completed in November. The operation forms part of NU Living, Swan’s commercial sales and custom-build arm. The 40-strong group which will eventually form the factory team will assemble around 100 homes a year – though the factory space has the capacity to do three times that many, says Pearce.

Swan has invested £3m in set up costs and has guaranteed the factory £30m worth of orders for the 570 new homes for Beechwood. It has also brought in production specialist Paul Williamson to run the new division.

The modular units will be assembled in Swan’s new factory from cross-laminated timber panels imported from Austria. Architect PTE has designed the housing and Ramboll is the engineer. Each home will be made up of between two and six units depending on the size. “We’re projecting cost savings of around 5% on our development costs,” says Pearce.

As well as building its own homes Swan is keen to interest other housing associations and councils in its offsite product. “We’ve already attracted a lot of interest, but we want to make sure that it all works and we can deliver our own first.”

Swan currently has about 1,000 homes being built on site in Essex and the south east, but the nature of some projects will mean that offsite may not be appropriate.

In terms of the custom-build aspect, Swan’s architects PTE have drawn up a design code from which customers will be able to choose from a menu of external materials – such as bricks, render or tiled cladding – windows, and internal layouts.

Though modular and offsite have been gathering pace, the number of homes built this way is starting from a low base. A survey by Buildoffsite, while not purporting to be definitive, shows MMC gaining traction and probably accounting for between 15-20% of all construction. This is up from 6-7% of the market when it was set up in the early 2000s. So has a tipping point been reached?

“I would say there is more acceptance of offsite but I’m not sure how it stacks up outside London and the south east, where it is still probably cheaper to build traditionally,” says Pearce.

“I think it’s also very difficult for suppliers who aren’t the end developers because of the stop-start nature of house building. Projects get delayed and then the orders don’t come through. That’s why we feel there is much more chance of success with developer and supplier being one and the same.”

Could government help to promote modular? “Yes. For example, it would grow confidence in the sector and capacity if they could link the release of public land to employing modular construction, or if HCA or GLA grant funding could be tied to it. Encouraging local authorities to offer reduced business rates on premises used for offsite manufacturing would also help.”

Some good news could be on the horizon. Speaking at a conference in September housing minister Gavin Barwell said that the Home Building Fund, announced in this year’s budget, will, as well as providing loans to support small and medium-sized developers, also be used in some way to back modular.

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