Although a small industry, one harried by risk and uncertainty, modular housing is taking up a growing slice of the UK’s housebuilding market. In this article, we explain what modular housing is, how it is being used, and why its full potential is yet to be realised
What is modular housing?
Modular, or volumetric, housing refers to housing that has been constructed either partially or wholly in a factory.
Typically, the construction of a modular home involves manufacturing a series of three-dimensional ‘modules’ that are delivered to site and then assembled into a complete product.
This process differs from panellised housing, which involves assembling a series of factory-made panels – such as a single wall – like an Ikea flatpack. Both panellised and modular are classed as modern methods of construction (MMC), of which there are seven official types.
What are the benefits?
Modular housebuilding has existed in one form or another for many decades. However, recent technological advancements and changes in perception have made it a more attractive proposition for developers and dwellers alike.
Compared with traditional homes, modular homes are typically less carbon intensive; more energy efficient; and, in stark contrast to the prefabs of old, of a higher quality. Due to their quicker completion time, they are also less disruptive to local communities.
Studies have shown that the expansion of the modular housing industry could help create thousands of jobs and boost the UK economy.
In addition, it has been suggested that modular housing could help the UK to meet its goal of delivering 300,000 new homes every year – though, the government has hinted that it may scrap this target.
Modular homes are even being used to tackle homelessness, with companies such as The Hill Group rolling out its factory-built SoloHaus pods for this very purpose.
What are the challenges?
Although the UK has largely shaken off its prefab hangover, it still has some ways to go if it is to deliver modular housing on a scale comparable to countries such as Sweden and Japan.
Currently, somewhere between 5,000 and 15,000 modular homes are produced annually in the UK, a small portion of the wider total of new-build completions, which in recent years has ranged between 150,000 and 200,000.
There is also the question of skills and training, as building a modular housing development requires a different skillset to traditional construction methods. This all takes time, and with the wider construction industry already dealing with a workforce deficit – caused in part by post-Brexit immigration changes – it could be some while before the UK’s modular housing sector is able to operate at max capacity.
Modular housing can also be a risky endeavour, with many operating in the space struggling to turn a profit. In 2022 alone, there have been a number of high-profile busts, including House by Urban Splash and Mid Group.
For homeowners, getting a mortgage for a modular home may prove more difficult than for a brick-and-mortar property. This is because, even though modern modular homes are typically constructed with high-quality, durable materials, they are still seen as non-standard properties, meaning some lenders aren’t willing to consider them.
The seven types of MMC
Category 1: Pre-Manufacturing – 3D primary structural systems
Category 2: Pre-Manufacturing – 2D primary structural systems
Category 3: Pre-Manufacturing – non-systemised structural components
Category 4: Pre-Manufacturing – additive Manufacturing
Category 5: Pre-Manufacturing – non-structural assemblies and sub-assemblies
Category 6: Traditional building product-led site labour reduction/productivity improvements
Category 7: Site process-led labour reduction/productivity improvements
The future
While modular is a relatively small industry, one that has a number of challenges to overcome, the future is looking bright. According to Savills, the UK is likely to be the strongest growth market in Europe for homes built using MMC, of which modular homes would make up a good portion.
Proponents of modular housing have grown both in numbers and voracity, too, such as Mark Farmer, the government’s ‘MMC Champion’. In 2016, Farmer co-authored a report titled ‘Modernise or Die’, in which he put forward modular construction and MMC more widely as a potential panacea to the issues plaguing the sector.
Large players such as L&Q and Goldman-Sachs-backed TopHat appear to share this view, investing millions into their own modular factories. Some of these endeavours have yet to turn a profit, but are projecting growing revenues over the coming years.
The UK government is behind it, too, with Homes England backing many modular housing projects and even stipulating that at least 25% of homes delivered through its Affordable Homes Programme need to be built using MMC.
Clearly, modular housing is still a risky game. But there are plenty who believe it could become the biggest game in town.
Main image: Dutch modular housing allocated for students, starters, refugees, and immigrants. Credit: ingehogenbijl/Shutterstock
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