22 June 2023

Here’s one way to ease London’s housing crisis

By Lee Wingate

The latest figures show house prices in London may be falling – but with a home in the capital costing more than £685,000 home ownership still remains out of reach for many.

Renting is getting more prohibitive too: according to Zoopla, there are 40% fewer rental properties in London compared with five years ago, while rents in the capital rose 5% in the year to April, the highest since November 2012.

So the pledge by London mayoral hopeful Daniel Korski to explore the potential of modular housing – homes built in factories and then assembled on site – comes at a critical time.

There has been huge shortage of housing supply for a number of years, so building more affordable homes for sale and rent – and building them quicker than at present so that house prices and rents fall – could help keep talent in the city. Modular housing certainly ticks a good number of those boxes.

Modular construction has been around for some time, delivering housing at another time when it was urgently required – after World War II when many were destroyed. They can be installed onsite much quicker than traditional homes, and due to the fact that they are built in factories they’re not subject to delays from poor weather. And crucially, it has been calculated that they emit less carbon than traditionally-constructed homes and are more energy efficient once built, using the likes of solar panels, rainwater systems and recycled materials – another plus point in a cost of living crisis.

But despite this, modular housing has battled an image problem – many people think of modular homes as the ugly, pre-fab housing from the post-war years. But the Passivhaus in Camden, the first net zero house in the UK, with its timber-clad exterior is as far removed as possible from most people’s perception of modular housing. Developments such as Greenford Quay in west London, which will provide over 2,000 apartments, with around three-quarters available to rent, and the 92 affordable home development at Northolt are also in the planning stages. None of these developments look remotely like they were factory-constructed. Such projects can be delivered onsite quickly: construction of the Two Fifty One multi-storey residential tower at Elephant & Castle was cut by 33% to 120 days by removing onsite activities from conventional construction.

Despite such projects, modular still remains the exception. Although very popular in countries like Japan, Germany and Sweden, less than 5% of homes built each year in the UK are modular. Some of this is down to the construction industry not having the skills to deliver modular at scale, and some is down a reluctance to move away from what it knows best. So what needs to happen to encourage more of it?

The next Mayor could help make modular a priority by setting a target that a proportion of new homes delivered over the Mayoral term are built using modular techniques – not dissimilar to what the Singaporean Government has done with great success. In Scandinavia, legislation has helped to drive wider adoption: approximately 45% of all new built homes now utilise a level of modular construction. The Mayor now has control of London’s share of the Adult Education Budget, so through this he or she could establish a training fund to re-skill workers in modern methods of construction.

Meanwhile, some mortgage lenders have been reluctant about lending on modular properties because they’re classed as ‘non-standard construction’. The financial and insurance services industry therefore needs to step up and make modular mortgages mainstream.

London faces a critical point where it needs to increase its housing supply, and fast. Modular could help make a huge difference if measures such as these are realised.

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Lee Wingate is a Director at McBains, a property and construction consultancy.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.