London Assembly – Nicky Gavron - Designed Sealed Delivered

30th November, 2017

The London Assembly Planning Committee recently published its milestone report into the contribution of offsite manufactured homes as a part of the solution to London’s housing problems. Nicky Gavron AM provides an overview on the report’s findings and recommendations.

Housing is London’s top priority – and we have a Mayor who is determined to do something about it. London needs at least 50,000 new homes per year to meet its growing needs. Despite recent improvements in housing output, traditional housebuilders and developers are delivering half that.

This underperformance is likely to get worse given the skills challenge; we have an ageing construction workforce and the threat of a hard Brexit would harm London as 27% of the construction workforce comes from the EU. We clearly need some innovative solutions and I set out to explore how far offsite manufactured homes (OSM) could contribute towards closing the gap between supply and need.

The last time we came anywhere near to reaching high housing targets was in the late sixties and seventies, when prefabricated housing contributed significantly to supply. Over 425,000 homes were built in 1968 alone, and much of this was substantially manufactured offsite. The new model of factory manufactured homes is light years away from this era. They are now ‘precision-manufactured’ homes that can offer an increased level of consistency and quality control and additional benefits in terms of speed of delivery, cost, eco-efficiencies and safety on site.

There are many reasons why OSM has failed to take off in England:

  • To date there has not been the volume of demand and continuity of supply to justify the up-front capital investment needed to build the plant to manufacture the product
  • Traditional funding and financing models are not geared to the requirements of OSM where there is a need for greater ‘upfront’ finance and where smaller manufacturers can access credit at the risk levels involved
  • There is very little guidance anywhere that applies specifically to OSM housing, and this may be reinforcing the slow pace of adoption by local authority elected members and technical officers
  • Innovation is a feature of OSM and this has led to a plethora of designs and systems bringing with them issues of intellectual property rights that often challenge the conditions required by manufacturing in volume and is a deterrent to contractors and lenders. Furthermore, the absence of OSM specific design codes and standardisation is holding back the development of the sector
  • London lags behind the rest of the country, lacking collaborative partnerships that can deliver at the scale required. Existing housing partnerships, or indeed organisations such as the G15, that might offer the basis of collaborative partnerships have yet to demonstrate a successful approach in London

The Mayor is best placed to break through the barriers preventing a wider adoption of this approach to housebuilding. He can do this through his role in providing pan-London leadership: supporting the OSM sector through strategic policy direction and potentially, providing land and backed by his significant funding resources. Few other leaders have this scope of power and responsibility. The report's recommendations to the Mayor include:

  • Provide clear and strong leadership in raising the awareness of OSM’s potential
  • Work towards defining and adopting a Manufactured Housing Design Code
  • Look at the potential of using Transport for London (TfL)-owned land and other public land to stimulate the OSM sector
  • Set up a dedicated OSM-specific procurement framework for London and an Independent Advisory Group

Meeting the Challenges
During the review, numerous experts have stressed how OSM can deliver for London – and this has been confirmed by site visits to a number of developments. OSM homes are now a viable alternative for any potential development site, at a range of densities that can adapt to a range of local priorities. It is vital that we ‘sweat’ all available land assets, irrespective of the difficulties presented, to meet London’s housing need. OSM homes with their shallow foundations, lightweight construction and superior acoustic performance lend themselves to constrained sites, such as those with tunnels below or next to railway lines, as well as decking over other sites.

London has many stalled developments sites where OSM can provide temporary uses as well as buildings that can be relocated. OSM enables these sites to be used almost immediately – and can be relocated to other sites when required.
The business model, requiring a quick return on investment, is particularly suited to one of London’s greatest needs – the need for affordable rented homes. Moreover, it is particularly aligned to both the government and the Mayor’s promotion of the build to rent market. It works for all types of housing, too, from family housing, student accommodation and older people.

Fresh Thinking for Successful Delivery
The industry has told us that they are poised to provide a step-change in delivery and the Mayor can catalyse that change. He is best-placed to overcome the barriers by providing strategic leadership and creating more effective partnerships. The full advantages of OSM depend on scale and continuity of demand. Given that few institutions are large enough to achieve this critical mass, a grouping of smaller suppliers might achieve this. London lacks collaborative partnerships within and between local authorities, registered social landlords and private sector. Collaboration is key.

Other parts of the country are ahead of the capital: a consortium of North-West housing associations (Modular Allianz) led by Manchester City Council is hoping to drive higher uptake of offsite manufacturing by pooling demand to create a potential 500-home programme. Add to this The Central Housing Investment Consortium – a group of 85 Midlands based affordable housing providers that work together with the aim of securing efficiencies and savings through procurement of contracts, labour and services. It is actively seeking offsite manufacturers to join the consortium.

Painful lessons have been learned from adapting designs to OSM part way through a development. Given that OSM needs to be ‘designed in from the start of the process’, Building Information Management (BIM) software can be an enabling tool, assisting with collaboration, advanced planning at the design stage and building maintenance down the line.

If we want volume and scale the industry will need to move to more interoperability and commonality of product. Repeatedly we were told by Local Authorities and investors that some form of replicability is required, otherwise the sector will remain a cottage industry. The Mayor already has an existing traditional Housing Design Guide, the report recommends that he develops a Manufactured Housing Design Code – a ‘kit of parts’ if you like – which builds on emerging government construction strategy thinking and incorporating national and London space standards. This should in no way stultify design style and diversity.

Job Creation and Environmental Performance
We want to encourage the traditional sector to continue to supply new homes. The report’s aspiration is to provide as much additional supply as possible. Given London’s demand, London could work collaboratively to stimulate new factories, jobs and skills right across the country; effectively creating a new industrial sector and making a great contribution to the UK industrial strategy. If this ambition were realised, we would match the performance achieved by the best European examples. Meanwhile, the industry needs to do research to estimate a realistic figure which we can all work towards.

OSM offers a route to delivering homes that can be built to higher sustainability standards, with potential advantages in terms of build quality, speed of delivery, construction health and safety, energy-in-use, whole-life carbon footprint and tackle fuel poverty. OSM homes outperform energy use of traditional homes, reducing utility bills by 25% and more, 80% on gas bills and 30% on water. Add to that reduced transport pollution where fewer vehicle movements to transport materials to site also reduces noise and disruption, in turn improving local air quality and the reduction of carbon. These are longstanding strategic priorities for London that OSM could help tackle.

This new way of building offsite could make a career in the construction sector more attractive. Moving production from the construction site inside to a factory environment will create new jobs and skills and attract new recruits into the industry, particularly among young people and women, diversifying the workforce.

Furthermore, manufacturing homes for London could assist a national economic strategy.  Although London will continue to be a real engine room for the national economy, there is a strong case for a more balanced economy where the regions support London’s growth ambitions – by making homes for London – and that in turn supports the regional economies. As Mark Farmer, author of the Farmer Review on the construction industry, Modernise or Die has said: “Future skills in construction may look very different to what we currently see on a building site, and we should be planning ahead for this in London right now.”

Funding for Manufacture
To fund OSM for manufacture requires a new funding model. Even for a small production run, start-up costs can reach more than £500,000. Many small manufacturers do not have access to this level of debt funding.

Another aim of the report is to give confidence to clients and lenders, many of which are unaccustomed to the front-loaded nature of the finance needed for OSM so may be unwilling to lend the whole amount, or attach a higher level of risk and interest to the sum, making it more expensive. Generally this means there is a smaller pool of lenders willing to finance OSM developments than enjoyed by traditional builders. This is especially a challenge for offsite manufacturers, most of which are SMEs. Around 80% of these companies find it very difficult to directly secure funding from high street banks due to a lack of confidence or a track record of successful borrowing. The situation is compounded by the absence of organisations prepared to undertake ‘financial due diligence’ for manufacturers seeking to borrow.  Members of the Build Offsite Property Assurance Scheme (BOPAS) reported that accessing finances through Tier 1 constructors is therefore necessary, and this adds to their costs.

In London, the Mayor is signalling his support for the OSM sector through his Innovation Fund and his Revolving Loan Fund. He is also bidding for a share of London’s Accelerated Construction Fund. The report recommends that in order to give confidence to lenders and other stakeholders the Mayor should set up a dedicated OSM Framework Panel made up of developers and contractors who can work with manufacturers, and an Independent Advisory Group which covers the whole development cycle process including financial due diligence.

Call to Action
Since publication the report is being widely debated and has been well received across the industry. The report has been sent to the Mayor for his formal comments, which we should receive by the end of the year. We are encouraged by the inclusion of offsite housing in the Mayor’s draft housing strategy and look forward to the sector benefitting from a renewed interest with funding and strategic direction from City Hall. 

However, I am hugely encouraged by the Mayor’s response to my question at the Mayor’s Question Time 14 September 2017 where it was described as “a timely and important report”. The Mayor went on to say: “We have to find ways to support the sector… one of the things that really attracted me to it when I was reading about the sector after reading your report was how we can use the sector to help other parts of the country… Precision manufacturing will not just help London but will help the rest of the South-East and the UK as well. Not only are we going to use the various Strategies we have, we are going to use the bully pulpit of City Hall to persuade others to use this as well… It is a good example of an interventionist industrial strategy… I am happy to talk with the sector through my Deputy Mayors, if not through me, about how we can give them the reassurance they need. We want this sector to thrive and flourish.  We want this to be a centre of excellence going forward.”

Original Link - Offsite Magazine

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