There’s no silver bullet for the housing crisis, but using modular construction in the private rented sector could be part of the solution. How do we achieve higher density housing in crowded cities?
Is it correct to say that every crisis brings about an opportunity? If that is right, then a major, long-running crisis in housing supply in the UK should bring about very many opportunities. At the very least, this urgent need should be driving government to work with the development and construction industry to provide more publicly owned land which is able to be developed, swiftly with modular construction, to meet housing demand.
If we look to different parts of the world to see how other countries provide housing in response to market demand, a consistent theme is the use of more mass market units made available as private rented sector (PRS) units. Once locked in as the PRS, the units are available to soak up demand on a reservoir basis - the reservoir never running dry because those PRS units remain simply that, and are not available for sale.
This kind of vision for the UK will need to be backed by investment funds from the US. Even if we discount the possible, likely or theoretical effects of the Brexit vote, the wall of money that it suggested is waiting for investment in the UK seems to be destined in part for the PRS sector.
What does a PRS scheme look like? It’s housing. It is blocks of apartments, built to a modern specification - well built - in attractive locations. In part, the PRS reflects the more modern digital native society - the need to be swift, to be able to move while at the same time living in a stable environment that is safe, secure and sustainable in a social, economic and environmental sense.
Local authorities get residential units which are just that - rather than an asset class of residential units for sale, which as we know are commonly (on account of land values) priced well beyond what many of us - particularly Londoners - can reasonably afford.
For investors, the PRS, now that it has substantial and continuing policy support in provincial cities and London, looks to be a sound platform for further investment and return. Planning authorities and the mayor of London, Sadiq Khan, have also realised how a PRS scheme, whether in part or as the whole of a residential development, can also be regarded as a form of affordable housing.
In terms of sustainable communities, you can reasonably argue that a PRS scheme provides a planning authority with the very nature of what sustainable communities are all about.
The mayor of London’s draft supplementary planning guidance (November 2016) recognises that among the numerous issues to do with PRS which have to be juggled, the potential for high quality PRS blocks should mean local authorities can take a more flexible view on space standards, layout of dwellings and the density of the units in the blocks. With a mix of size of units, including family units, and locations around transport hubs, that sustainable community vision gets closer.
Modular housing - or for those who are older, prefab housing, or homes for heroes - has been taken up by a number of large and small housebuilders in the PRS market, market housing and student housing. This entry into the market does not mean that the availability of modular housing is on a mass-market scale.
Within the UK, capacity is constrained because there are only a small number of factories that are able to produce modular housing, although the private sector has a vision for more UK factory capacity to meet demand.
Combined with that, the suggestion from government (with the housing minister Gavin Barwell quoted in the Sunday Telegraph on 29 October 2016) was that the government sees a huge opportunity in manufacturing houses off site and then building them block by block on site and that it is looking to increase access to finance for modular housing providers to help secure the delivery of more than 100,000 ready-made homes by 2020.
It’s unknown the extent to which those homes can be the basis of what the mayor of London is looking for. Together with the mayor’s recent announcements about wanting higher density housing around transport hubs, government has been speaking about the need to increase the density of urban development.
In October Barwell talked of the need to assist London in accommodating more of its own growth and at the same time protecting what he called the “precious Green Belt.”
If that is going to work we’ll need a mix of the following:
a wider definition of what is affordable mass-market PRS to provide more rental properties more quickly.
The PRS is certainly not the answer to the housing crisis - everyone needs a home, those who have more money want to spend more money on their homes, those who have less, spend less.
What’s important is that the PRS model adds significant benefits to housing demand and supply in our crowded country. Who can possibly disagree with the benefits of that?
Al Watson is head of planning and environment at Taylor Wessing