The construction industry is a substantial and diverse sector. Beyond creating physical assets, the industry fundamentally shapes how we experience and interact with our environment. Construction encompasses not only the building of homes, but it also includes hospitals, schools, offices, shops, and critical infrastructure such as roads, rail, and utilities – all of which help to underpin the broader economy.
However, the adoption of innovation has been historically uneven across the sector. While construction in the energy sector is advancing new technologies, and a second high-speed rail line is anticipated from the transport sector, in contrast, the housing sector remains slow to implement new approaches. Instead, it persists with a model for housebuilding that consistently fails to keep pace with demand. The result is constrained supply, driving up house prices and rents. Meanwhile the supply of social and affordable homes has consistently fallen short for decades, despite the efforts of successive governments, creating an acute shortage that is deeply felt.
Over the last decade we’ve witnessed the stuttering rebirth of modern methods of construction in the UK. This has been particularly challenging for those companies who adopted a modular approach which has been delivered successfully in other countries such as Japan, Germany, and Sweden.
In hindsight experts now recognise that modular house construction, known as category 1 according to the government’s MMC framework, was unlikely to deliver the volumes needed at scale due to a lack of accessibility across UK infrastructure. Category 1 homes are factory built, preconstructed rooms which are transported to site and assembled as homes or large structures. Market failures which include companies such as Ilke Homes, Legal & General Modular and Urban Splash Modular have cast a shadow over the industry and attempts to modernise how we deliver new homes. However, failure is a necessary and integral part of the innovation process, a reality we must recognise across all industries and learn from to develop the right outcomes.
This has led the market to adapt and move to utilising category 2 and 5 of the MMC framework which incorporates a panelised system, now recognised as fully deliverable across UK infrastructure. The case strengthens when you consider the additional benefits of reaching net-zero and ability to anticipate the Future Homes Standard, which is due to come into effect in 2025.
The housing industry’s challenge is no longer a lack of innovation, but rather the resistance to change that impedes its adoption. This is despite a widely held belief that without the adoption of new approaches, we will fail to meet government’s stretching housing targets.
Driven by existing market conditions, leading housebuilders and developers have long adhered to a tried and tested approach which has successfully aligned with their business model. In addition, fragmentation across the construction industry which incorporates multiple tiers of contractors, each with their own supply chain, prevents effective capturing and sharing of knowledge. This limits the dissemination of innovative solutions. Whilst these are inevitable consequences of the housing market, as the government implements new housing standards and regulations, the industry must eventually embrace new approaches that will help them keep pace, protect profits and deliver against future homes standards.
As the government grapples with balancing supply-side and demand-side measures, Homes England and the Greater London Authority continue to be the most significant sources of development support through capital grants. However, in many cases limited grant funding and rising construction costs have significantly undermined the viability of social and affordable housing development opportunities. This is particularly challenging for innovative new approaches that incorporate modern methods of construction due to perceived risk and lack of widespread industry adoption. This has resulted in a significant absence of viable opportunities, which will demand intervention to bring about change.
To encourage the adoption of innovative construction methods, we must re-evaluate the current approach to development appraisals. These are the financial evaluations used to assess the viability and profitability of a proposed residential development project, and are at present do not take into account the need for net-zero homes or of incoming quality standards.
This is particularly crucial in a sector that prioritises up-front costs, often deterring the adoption of new techniques and approaches despite their ability to meet net zero, dramatically improve performance of the asset and deliver lifecycle cost savings. Including a presumption in favour of net-zero homes that align with local planning and meet future homes standards, will speed up the delivery of high-quality homes, reduce risk and improve cost certainty.
This brings me to a salient point when considering a ten-year strategy for innovation. We need a system-wide approach that integrates innovative approaches into the development process. This should include new lifecycle appraisal modals, supportive finance and proactive development strategies that bring additive capacity to delivering new homes at pace.
With the support of our parent company AtkinsRéalis, we have fully embraced the principle of additive delivery that avoids disrupting existing housing supply. By leveraging a precision-engineered industrialised approach to development that utilises offsite manufacturing, we are able deliver net-zero, future-ready homes with a reduced impact onsite quicker and cleaner than traditional methods.
I am pleased to see that the current government acknowledges the need for change, placing housebuilding at the centre of its growth strategy. To achieve its 1.5 million homes target, the Government must support the adoption of innovative solutions that can address the imbalance between supply and demand of new social and affordable homes. This is evidenced by more than 1.2 million households on the housing waiting lists and 123,100 households living in temporary accommodation. Business as usual will not address the problem. At EDAROTH, we believe in ‘housing as a verb’ and something we do to provide safe, secure, and truly affordable homes where people want to live, work, and prosper. We stand ready to deliver against that belief. However, we cannot do that alone. It will require collaboration, market intervention, accountability, and a willingness to embrace change to make it a reality.