Off-site is catching on

The thinking goes with this: if manufacturers see orders come flooding in for social housing, they will invest in the infrastructure necessary to bring down costs and convince private housebuilders that the next generation of prefab is not too much of a risk, setting off a snowball effect and breaking the deadlock that the industry has been in up until now. Money is not the only barrier, though; concerns over access to land and manufacturing capacity still have to be addressed.

So far, the use of OSM has been limited to a few, largely experimental projects. The Housing Forum will publish a report into the level of activity in the sector in the autumn, but it's already clear that there is a long way to go to meet deputy prime minister John Prescott's target of building a quarter of new social housing using next-generation prefab in 2004/05.

Funding to boost OSM use
It does look like RSLs will follow the money.

In a Housing Today straw poll of the top 50 developing housing associations, which together were responsible for just under half of the Housing Corporation's approved development programme budget for 2002/03, all the respondents planned to use some element of OSM in the future. But the survey also reflected the sector's uncertainty – nearly half of planned projects were either pilots or still subject to research.

Brendan Ritchie, innovation director at contractor Willmott Dixon, believes social housing providers are waiting to see how the OSM pioneers fare before they commit fully. "Many providers don't have the funds of the Peabody Trust and they can't invest in these big projects," he says.

The government has been talking up OSM since 1998 – when Sir John Egan's Rethinking Construction report singled it out as key to the industry's future – and it has now put its money where its mouth is. In September 2002, housing minister Lord Rooker announced the £200m Challenge Fund – increased to £300m in the Communities Plan – a quarter of which will fund 1000 OSM homes in 2003/04. And earlier this year, Prescott confirmed that a quarter of the Housing Corporation's estimated £1.4bn budget for 2004/05 would be channelled towards OSM projects, about 5600 homes.

Throwing money at the problem
Money alone, though, is no guarantee of success. The Housing Corporation's Kickstart programme was launched in 2001 to promote prefab but had still not allocated £35m of its £80m budget by last October (HT 7 November 2002, page 9), although it now has only £8m left. The corporation must also make good on promises in the Communities Plan to take a longer-term view of funding allocation – crucial for RSLs embarking on the large projects that will drive down costs. "Unless, or until, guaranteed long-term programmes are developed, RSLs and their contracting and manufacturing partners will only be able to successfully develop pilots, demonstrations and experiments," says Tom Clay, director of regeneration at Arena Housing Association.

To date, the higher upfront costs of OSM have been a major stumbling block – cited by two-thirds of the development directors in Housing Today's poll. The Housing Corporation may take whole-life costs into account when grants are given out; but for volume builders it is likely to remain an issue.

Modular construction, used for award-winning developments such as the Peabody Trust's scheme in Murray Grove, east London, and Yorkshire Housing Group's Sixth Avenue in York, costs up to 10% more than traditional methods. Although panellised timber and steel frame systems are reckoned to be on a par, price-wise, with traditional methods, the difficulties of coordinating subcontractors and getting parts delivered on time – experienced by nearly half of associations in our poll – can mean costly delays on site.

This is set to ease as manufacturers invest more and RSLs' relationships with suppliers and contractors become more established; the scarcity of skilled tradesmen will also drive up the cost of traditional construction, especially in the South-east, narrowing the cost gap. Simon Dow, chief executive of the Guinness Trust and chair of the Housing Forum's working group on off-site manufacturing, says: "Maybe the market will balance out with people coming from Eastern Europe, but I doubt it. The reason that off-site manufacturing is so prevalent in other parts of Europe is because those skills don't exist."

The role of the private sector
Housebuilders, responsible for 80% of new homes, generally accept the importance of OSM to construction's future, but there is still some hesitation on their part. "Off-site manufacturing involves a lot of investment, and there is some reluctance to invest at the moment. There will need to be improvements to the planning system to ensure delivery," says Pierre Williams, spokesman for the House Builders Federation. Luckily for OSM, Communities Plan promises to get tough on sluggish local authority planning departments, reaffirmed in the Budget, show the government is already moving on this.

Construction company Westbury is far ahead of its peers in embracing OSM, developing its own Space4 steel-frame system. To date, it has only been used in-house, but a spokesman says: "We have seen increased interest because of the Communities Plan and we are in discussion with other housebuilders and the Housing Corporation about providing it outside Westbury."

A third of respondents to Housing Today's survey said their projects were subject to the will of development partners. Section 106 agreements are particularly important for social housing in the South-east, where the majority of new homes are to be built.

Even if volume builders can be persuaded of the joys of OSM, housing associations' reliance on the private sector needs to be eased. "Only through housing associations being able to take the lead on developments will we be able to truly embrace OSM," says Ian Beckett, regional director (south) at Moat Housing Group.

Dependence on the private sector has caused the most determined forays into OSM to come a cropper. In January Amphion, a consortium of 15 housing associations that has developed its own timber-frame system, said a lack of access to land and difficulty persuading housebuilders had been a major problem (HT 30 January, page 15). It is also having difficulty with supplies since its timber frame manufacturer, Torwood, went into liquidation earlier this month.

New measures addressing social landlords' access to land could help. The involvement of the government's regeneration quango, English Partnerships, in delivering brownfield sites for social housing will hopefully diminish the importance of section 106 agreements. Recession may also cause land prices to fall to more affordable levels as private developers hang back. And OSM could itself mean more sites become available. Because it is lightweight and requires a shorter time on site and shallower foundations, it can be used where traditional methods of construction are unsuitable. For example, architect Piercy Conner is currently working on a steel-frame and modular development above a bus garage containing more than 40 units, and Cartwright Pickard's design for 92 homes in the Living Bridge, which spans the river Lea in east London, recently won an award from the Architectural Review.

Capacity and quality
Concerns about capacity and quality cannot be ignored (see "Quality control", left). They were cited by half the RSLs in Housing Today's survey as contributing to their unwillingness to use OSM. The Housing Forum report will include the first detailed assessment of suppliers' capability.

With manufacturers – understandably – reluctant to commit investment to infrastructure with no guarantee that it will be used, Nick Francis, project architect at Piercy Conner, believes the government could do more. "Just about every quango and consultant is recommending this as the way to go. If that's the case, the government should really start putting effort into building the infrastructure to meet demand, perhaps by offering financial incentives to manufacturers," he suggests.

But for some budding manufacturers, the strength of government commitment is incentive enough, and new companies are pouring into the sector. Whatever the problems to date, developers may not be able to cry "capacity" for too much longer. Steel manufacturer Corus has been producing steel-frame housing for 10 years, and this month launched a venture into modules, Corus Living Solutions, that aims to be producing 3000 rooms a year by the end of 2004. Yorkon, which supplied the modules for the Murray Grove and Sixth Avenue developments, recently took the plunge and opened a production line that could produce up to 12 two-bed flats a week. It is currently running, though, at only 25% of its capacity.

Long-term partnering arrangements between suppliers and developers – another Egan theme – could be the answer, ensuring cost and quality and providing reassurance on both sides. Module manufacturer Rollalong's order book stretches only six months ahead, but marketing manager Nickolas Dicks is looking for longer-term arrangements. "We'd like to commit to customers, to work with them on a partnership approach on a three- or five-year development programme, so we can map out capacity requirements," he says. The company is also considering "playing matchmaker" to associations, to get them standardising on design, he adds. The Housing Corporation requires RSLs to comply with Egan principles by April 2004 if they are to qualify for funding, which should also help the situation.

Overall, housing associations are faced with a carrot-and-stick situation and, as Housing Today's poll shows, they are responding – out of necessity, if not devotion to the cause. The skills shortage, English Partnerships and the Budget's reform of the slow-moving planning process could all be enough to end the stalemate and finally take OSM beyond the pilot stage. Certainly, if the Communities Plan is to deliver its promised homes, the current OSM snowball will have to turn into an avalanche.