Housing Corporation urges economies of scale in off-site manufacturing

The corporation’s chief executive Jon Rouse told delegates at a conference on Friday that he wanted associations to reduce the number of firms they use in order to put together larger, more predictable orders and drive down costs. At present off-site manufacturing, which is feted by government, can be more expensive than traditional construction.

Rouse said: “The problem we have at the moment is we have affordable housing providers experimenting with myriad different methods. In my view, we have to decide which of these methods are going forward on the basis of volume and flow [of orders] because until we get that change [we will not] get the cost reduction necessary to challenge traditional forms of construction.

“If we do not make that step, we won’t achieve a step change on the impact of modern methods of construction on affordable housing.”

However, he added that the quango would not tell associations which systems to use. He said: “We will never be in the business of prescribing methods.

But it’s legitimate for us to say that to drive down costs we need to … get economies of scale.”

He added that discussion of off-site manufacturing systems would be part of negotiations with associations applying for development partner status.

Rouse added that the National Audit Office would research how best to increase the volume and flow of orders for each system to drive down costs.

The corporation will also introduce a “value for grant” index for associations applying to be development partners. Rouse said the table would allow the corporation to see performance by region, tenure and special needs group. “The highest performers will get more investment to build more homes,” he added.

Martin Donohue, chief executive of Westbury, which has an off-site division, said: “This decision makes sense. We have been endeavouring to communicate to the ODPM and Housing Corporation for some time that greater benefits and efficiency will come out of a greater concentration [of off-site manufacturers]. From this you would get economies of scale, stability in pricing and essentially greater efficiency for all concerned.”