Mark Powell, Author at Red Brick

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.

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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.

For more than 30 years we’ve witnessed a depletion of social and genuinely affordable housing stock, which has impacted all ages in every community in every part of the UK.

In England, when considering the shortage of social housing, we are experiencing a perfect storm. There are more than 1.2m households languishing on local authority waiting lists, an increased risk of households slipping into homelessness and a record number of households living in temporary accommodation. In addition, much of the current social housing stock is failing to meet decent homes standards, impacting the health and wellbeing of residents. It’s for that reason, we believe there’s a moral, societal and economic imperative which goes beyond party politics to address the imbalance and inequality in housing provision.

By supporting a revival in social and affordable housing across the UK, we believe it will be possible to restore the social fabric of our communities and promote a safer, healthier, and more inclusive society. For EDAROTH, this is not just about delivering new homes, this is also about trying to help address the housing challenge where it is most needed.

So, you may ask, how did we come to this conclusion, what are we doing about it, and who or what is EDAROTH?

In 2016, global professional services consultancy AtkinsRéalis was challenged by government officials to identify how it could assist with the housing crisis. AtkinsRéalis methodically applied engineering acumen and rigor to understand the challenge, and where it could have an additive impact that would not disrupt the current housing supply pipeline. The firm immediately identified a huge shortfall in social housing compared to those being built for market sale, and the need to address that imbalance.

When considering where to deliver the additional homes needed, it adopted the same additive approach. Under-utilised and brownfield land owned by the public sector was identified as assets with untapped potential. This land is often ignored by traditional developers due to complexity and costly remediation. Linked to existing infrastructure, these sites frequently offer better-than-average access to education, healthcare, employment and economic centres. By utilising years of experience and expertise in land remediation, AtkinsRéalis recognised this as fertile ground for housing development.

Assessing the how, brought with it innovative thinking to deliver homes with minimum impact on existing construction supply chains. By adopting an industrialised approach utilizing modern methods of construction (MMC) as a preferred approach, AtkinsRéalis identified the how! This addressed some of the potential supply chain challenges and brought with it the opportunity to deliver high quality homes quicker, safer and at a reduced cost when compared like for like to traditional methods.

After four years of development AtkinsRéalis launched EDAROTH in January 2020, established with the purpose of exclusively assisting the public sector to generate social and economic value, while at the same time reducing their housing waiting lists.

But we didn’t stop there. The challenge that housing associations and local authorities are facing to maintain existing housing stock has been well reported. As EDAROTH we recognised that more needed to be done to slow the decline of existing social housing. By using digital operations and maintenance capability to provide predictive maintenance we can reduce the potential costs associated with traditional asset monitoring and repair. The ambition is to deliver improved outcomes for households, and communities, while reducing the cost burden of local authorities and housing associations.

So, who are we? EDAROTH represents both our brand name and our purpose. We believe that ‘everybody deserves a roof over their head’ and that everyone should have a place that they are proud to call home that is safe, secure and truly affordable. But, as you can hopefully see, this purpose is driven by a clearly identified need and understanding as to how and where we can responsibly have the greatest impact.

What we need:

We welcome the Government’s pledge to deliver 1.5m homes over the next parliamentary term and vastly increase the delivery of new social and affordable homes. We wholly support the planning passport to fast-track brownfield developments, the utilisation of ‘grey belt’ land and creation of new towns to deliver the homes that are needed, where they are most needed.

To achieve the Government’s ambition, we believe that systemwide transformation is needed that takes an additive approach and avoids disrupting the existing market. While we agree that there’s opportunities to increase the level of 106 agreements with national housebuilders, we firmly believe this will not be enough to make up for the huge shortfall in social housing. Instead, government must also look towards SMEs and MMC housing developers who have the capacity to deliver the additional homes that are needed.

We believe the Government needs to reclassify social housing as infrastructure to stimulate investment. This transfers decision making into HM Treasury’s portfolio for evaluation in relation to the broader economy. This changes the risk profile to ‘Government backed’, which will attract funding at a lower rate. In conjunction with the delivery of MMC homes which can be smoother and quicker with additional cost certainty, it reduces the risk further which in turn reduce the cost of finance.

Housing policy is often subject to change and short termism. Providers of social and affordable housing confronted by inadequate funding and financial obstacles, including high interest rates, inflation, decarbonisation, and deteriorating conditions in existing housing stock. We endorse the G15’s proposal to establish a ‘Housing Commission’ as an expert body responsible for establishing housing goals and ensuring that the government fulfils its commitments.

Historical housing data proves that housebuilding in England and Wales only approached or exceeded 300,000 homes per year during periods with significant levels of local authority housebuilding. If we are to meet the demand to deliver social and affordable housing, local authorities and the wider public sector must be supported and incentivised to deliver the homes that are needed.

More must be done to tackle the temporary accommodation crisis. Analysis conducted by the Local Government Association in October 2023, indicated that the number of households in temporary accommodation had increased to its highest level since 1998, resulting in a crippling financial burden of at least £1.74 billion for councils. By utilising MMC to provide new social housing, we believe we will be able to provide the homes needed for households to transition into 50% quicker than traditional methods. This will release pressure from local authority budgets, while providing a lasting housing asset.

Restoring mandatory housebuilding targets previously scrapped by the previous Government will be a good step in the right direction. However, there is a very real need to speed up planning. Introducing a presumption in favour of social housing schemes that align with local design standards, not subject to discretionary decision will also deliver greater predictability and dramatically speed up planning permissions by up to six months. By extending that to include high quality, net zero fire-compliant MMC homes, we can drive innovation and deliver the homes of the future that our environment needs.

As an industry, we need to see a big increase in the volume and stability of the housing construction pipeline. A larger and predictable housing construction pipeline will, in turn, drive investment into growing capacity, and further drive efficiencies, while considerably reducing unit costs. Homes England has sought to address this through their strategic partnership grant programme, with all partners expected to deliver a minimum of 25% of new homes using MMC. This is a policy which needs to be fully enforced. The increased certainty will drive greater levels of private sector investment and much needed innovation within the housing sector.

To fully understand and encapsulate the overall lifecycle development value of MMC the current appraisal model should be reformed to consider: financial, economic and social benefits of delivering more affordable housing quicker. This should include the value to society of net zero, social value, environmental performance; and ability to deliver better asset performance with lower maintenance costs across the full lifecycle of a development (cradle to grave). This will encourage innovation within the sector and encourage investment from financial markets through a change in appraisal modelling.

In conclusion

For 30 years, successive governments have failed to grasp the nettle to address the lack of new social housing being built across the UK. The imperative is there, and new thinking is needed from local and central government. To drive that change, we believe there needs to be greater transparency and accountability, with departmental resources dedicated to deliver social housing as a singular task.

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. It will require collaboration, market intervention and accountability to make it a reality.