Practical tips on making factory-built housing work for social landlords

Trina Chakravarti sets out some steps social landlords can take to improve the adoption of factory-build homes that use modern methods of construction

For years the social housing sector has been trying to make offsite construction work. Challenges around volumes of demand, standardisation and risk appetite are well known, but there is one blocker that gets less airtime – the fact that landlords still engage offsite manufacturers in the same way they would a traditional contractor. The sector presses its needs on the market rather than shaping the future together.

Many people may be surprised that this approach is a problem. I often hear it said that modern methods of construction (MMC) only work when developers are 100% certain on the specification from the outset, avoiding costly fixes later down the line.

Having certainty is important, but it’s the learning beforehand – early honest engagement with the supply chain, asking manufacturers the right questions and listening to their answers – that we need more of.

Since 2018 I have been working with colleagues to interview housing organisations, local authorities and specialist consultants about their experiences with the offsite supply chain, firstly through the National Housing Federation’s Greenhouse project and then via Building Better, a group of 29 housing associations and local authorities looking to increase the use of MMC.

Construction specialist Cast Consultancy has fed into this research and the results have been eye opening. Social landlords told us that when they worked collaboratively with manufacturers, right from concept stage, success around MMC increases. Quality is often better, in some cases thermal performance increases, downstream maintenance can reduce and, I bet, resident satisfaction improves, too.

But early market engagement is not the norm. Understandably, landlords want their blueprints and standards adhered to, but sometimes manufacturers are required to bid on pre-determined designs, with fixed payment terms. To meet the needs of individual housing organisations, manufacturers often deviate from their normal methods and costs rise.

There is another way – a collaborative approach. It is possible to get an offsite home that is right for your residents and your budget, while working openly with manufacturers. In fact, an approach that balances landlords’ needs with manufacturers’ ability to produce homes is central to getting things right.

Here are some practical steps.

Focus on process, not product

Don’t start by creating a precise idea of the perfect home and putting that pre-set specification out to tender. The process should always drive MMC and that begins with landlords identifying their minimum requirements and requests, such as the standard assessment procedure (SAP) rating they’d like to see or a particular facade customisation, and testing these with manufacturers before agreeing a specification.

This collaborative process should continue once a contract has been awarded. In a longer-term partnership with a manufacturer – for instance, a five-year framework as opposed to just two years – it’s in the supplier’s interest to develop the product with you. That might mean sharing post-occupancy feedback from residents to adjust storage space or feeding property data to maintenance teams to improve proactive asset management.

Choose the right procurement route

Given the nascency of the market, plus changing regulations, it’s tough to know which procurement approach to adopt. Traditional project-based procurement can be lengthy and costly. Right now it does little to move the market away from a defined-design, ‘lowest capital cost wins’ approach and towards early engagement and true collaboration. Although this may change in the future.

We’ve found that a framework approach takes on some of the due diligence, which reduces barriers to entry and expediates the process. It also offers a visible pipeline that locks in long-term partnerships with manufacturers, enabling greater standardisation but also the ability to customise more long term.

Offer flexible payment terms

Traditionally, landlords pay in stages for what they see on site during construction. But with MMC, most of the work is done in the factory and a home might be assembled on site in four days, so it’s not possible to make payments in the same way.

Housing providers are paying for a product and this different type of transaction requires a different way of thinking. Sticking to conventional payment profiles could hamper a manufacturer’s cash flow but equally, paying 50% up front and 50% when buildings are delivered to site is alien to many landlords. The key is finding a balance that manages risk for all parties.

With the government announcing that it will use the £11.5bn Affordable Homes Programme to drive adoption of MMC, there is now a real window for wide-scale change. Housing associations and local authorities must lead this, driving new thinking around residential construction in all sectors.

As custodians of sustainable solutions rather than profit, and with their procurement experience of balancing social value, quality and commercial priorities, social landlords are well placed to change the status quo and help the many. But they must share the successes, and the failures, with the supply chain.

By Trina Chakravarti

This article was first published in Inside Housing on 31 March 2021

Membership of Building Better is open to any housing association or local authority housing provider in England and Wales.