Stop using prefab – it's not the answer, says select committee

off-site manufacturing should not be used to build social housing, an influential parliamentary select committee has told the government.

The recommendation has dealt a serious blow to the credibility of government plans that put prefab at the heart of tackling the South-east's affordable housing crisis.

The comment was made in a report by the Office of the Deputy Prime Minister select committee into affordable housing, published last weekend. It said that after "past disasters, it would be rash to encourage more than a modest increase in off-site construction" and continued: "We will remain sceptical about off-site construction until it is widely used in the private sector."

Deputy prime minister John Prescott will be especially embarrassed by the report as he has been particularly connected with the drive to increase the use of prefabricated building techniques. Last year, he announced the £200m Challenge Fund, which aimed to deliver at least 1000 prefabricated homes in the South-east – some to be built as soon as 2005.

The response from developers to the fund was so positive that housing minister Lord Rooker hinted later in the autumn that a second round, involving more money, would follow (HT 14 November 2002, page 13).

Simon Dow, chief executive of the Guinness Trust, former acting chief executive at the Housing Corporation and present chair of the Housing Forum's off-site manufacturing group, said the select committee's recommendation was "extraordinary".

He said: "I'm very surprised they've drawn that conclusion. We mustn't limit ourselves in what we can achieve with OSM in the future based on mistakes made in the past.

"It's a shame the select committee doesn't appreciate the impact of the severe skills shortage that will hit housebuilding hard in the next decade – OSM can alleviate this and will have a big role to play.

"The committee is leading British people into a future where they have to live in substandard housing."

The select committee, chaired by Labour MP Andrew Bennett, also expressed concern that the government and Housing Corporation were "not moving far enough or fast enough" to address the problem of key-worker housing.

Priorities need to be set at a local level between social rented and low-cost homeownership schemes, said the report, because the current division of funds fails to take into account those who want to buy but cannot afford to.

A spokesperson for the ODPM said it would not comment on the report until after a formal response had been made in parliament.