Jez Sweetland calls for public bodies to show more leadership around MMC in the first in a series of guest blogs.
The UK is facing multiple compounding threats: the housing crisis, the climate and ecological emergencies and the construction skills shortage. To tackle these requires system change that can only be achieved through innovative and collaborative approaches.
MMC is part of this solution. We can help enable this system change by incubating the manufacturing-led housing supply chain and move to ‘outcome-led’ commissioning to deliver quality, sustainable and affordable homes at scale and at pace.
A capital market approach on its own isn’t working
We see the consequences of a devastating systemic failure in the economics of housing provision – a situation that is set to worsen. The UK’s current housing supply chain is predicated on a ‘capital market’ approach to cost and viability, which too often results in the homes we desperately need being ‘economically unviable’. Public subsidy in the affordable sector, too, has been scaled back and is unable to bridge the gap.
This capital market approach takes the form of a risk management model of securing land, unlocking planning uplift, and then controlling the supply of homes to ensure maximum capital receipt. The homes themselves are commissioned and built via a complex and risk-shifting series of sub-contractor supply chains that create challenge and complexity around quality assurance and safety.
This is not to demonise the current housing supply chain – it is very successful in what it delivers and will remain the significant market for new homes in the UK for decades to come. However, we must acknowledge that in the face of recognised supply side failure, the current supply chain is not incentivised to build at pace. Innovation is needed to find additional supply.
The opportunity with MMC: delivering homes as a product
As a manufactured process, MMC can aggregate demand and use its capacity within production lines to align profit and risk with a margin that is based on delivering homes as a product (rather than being concerned with land acquisition, planning uplift and maximising sales receipts as well). MMC is therefore well placed to be incentivised to build at pace, so what’s the problem?
The MMC sector is still emerging and cannot compete in the current market. It is typically more expensive than traditional build. However, it arguably offers a great solution to meeting national targets for carbon, biodiversity, and sustainability and pace.
What is the way forward?
To mature the supply chain requires public bodies to provide leadership. This may mean bringing land forward to invest in MMC and supporting a wider industrial strategy to support jobs and the green skills agenda. Of course, MMC is still an innovation risk as the supply chain matures and care needs to be taken about the management of that risk. But sitting and waiting for the supply chain to wither on the vine is to miss the moment and stifle much needed supply side innovation.
Public bodies with land have an opportunity to engage now and help incubate the quality and values that will underpin the emerging MMC sector. That means responsibly adopting a broader risk approach to mature the supply chain.
There is already a move towards ‘outcome-led’ commissioning and national government has taken great strides including The Social Value Act, the CIH Values Toolkit and the Construction Playbook. All of these seek to rethink value and translate it in a much wider context than just financial build cost and profit.
This is a good start, but there is much more to do. Aligning the emerging MMC supply chain with industrial strategy development and public land to consider longer terms outcomes looks well set to create an ecosystem of unique opportunity to drive zero carbon, quality and affordable housing at pace.
Jez Sweetland is project director and founder of Bristol Housing Festival. Find out more here.
01 September 2022
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