There are two ways to build a house – brick by brick or in manufactured modules. With modules we could create more affordable homes and support UK manufacturing.
The theory for manufactured homes is straightforward. Cars today are more complicated than houses, yet cars can be made for a few thousand pounds. At scale, houses could be manufactured at this cost too.
The manufacturing of affordable housing will require new investors to be prepared to make initial losses and to have the courage to face the storm from current stakeholders. There is a cluster of expertise around Hull which has specialised in manufacturing static caravans, now threatened with the recent addition of VAT. While home extensions costs include VAT, new homes are zero rated. The manufacturing firms around Hull in particular could be well placed to disrupt and sell into this new market.
The transportation costs and delivery costs would be higher than for cars, and these logistics favour UK manufacturers with shorter supply chains over importers. Delivery by road is limited to loads which are under three metres wide, so modular assembly on arrival is standard. The modules are placed on compatible foundations with service connections. Some sellers may integrate the foundation making within their service; others may outsource the groundworks to specialists.
The benefits of offsite manufacturing include good design, ultra-high energy efficiency and a culture of zero defects. Air-tight final assembly and good insulation are key to the long term performance of houses similar to the Passivhaus standard, with a ten year warranty as for traditionally built homes.
Software could ensure that design choices comply with local planning requirements, both in terms of the foundations (distance between properties, setting back, orientation, height, street overlooking) and in terms of finishes (brick type, slate and ceramic tiles, rendered walls, sash windows in conservation areas). Architectural practices could design bespoke exteriors. Vertical integration can include the decorations and curtains, as well as design options for the exterior shape and finishes.
There could be open-source standards for compatible foundations, with templates for small bungalows, large bungalows, end terraces, mid terraces, semi-detached and others. Most UK houses are not detached, so a process would be followed for the second half of two semi-detached houses to be matched to compatible buyers.
A public body with land and with an interest in affordable housing could provide new homes at a low cost to people, with covenants to prevent future super profits being extracted by others. A social landlord or an owner-occupier could probably buy a new house in this way for under £50,000 including the land rights.
So, what is wrong with the theory? Offsite manufacturing could be a disruptive technology which changes the market fundamentals. We say housing is being treated ‘as a commodity’ when we wish to caution against a policy or a practice which ignores the social dimension of housing. Yet an item ‘becoming a commodity’ also means that its high price and exclusiveness has ended, and it can now be made in high volumes for a low unit price and profit margin.
A classic reason for a disruptive technology not being able to change the market is that the barriers to entry are too high. The ownership of land is one example, where large companies hold on to land banks to protect their market position by drip-feeding new houses to maintain scarcity. The lack of information known to buyers, especially first time buyers, also provides rich pickings for the dominant players.
But it isn’t just the private housebuilding firms that have extracted super profit from new buyers. Public bodies have also looked to new homes as an income stream, whether from section 106 payments, from new public buildings within the development, or for compulsory highway improvements. The utility companies have extracted their share too. And political parties have extracted value, especially with compulsory discounts such as the right to buy.
Which begs the question, how many young adults today would risk becoming an owner occupier so soon after the 2008 property crash, rather than renting? The number of people renting in the private sector is still growing fast, and expected to soon exceed the number of people renting in social housing. The pressure to protect standards by better regulation will continue to grow, as is already seen with the ‘sheds with beds’ issue of unregulated development.
Many young adults already see housing as a commodity to the extent that they do not trust it to be an investment in the way their parents did. In retirement the value of your house is reduced by the local authority looking to recover social care costs. The value can also be reduced by central government in terms of reduced eligibility to welfare benefits when compared with renting. Being able to sell your home in retirement to gain a lump sum is less of an option now. Your home may be your castle, but every stone can have someone else’s name on it. Lower cost housebuilding will enable affordable rents and affordable purchases.
First published: 08 May 2012