We all know Britain faces a housing crisis, yet few people have any confidence the challenge can be met. I am not one of them, because I firmly believe the colossal market failure in housing can be reversed, provided that we rethink how we procure and construct houses. The key to that is harnessing the power of modern methods of construction, also known as MMC.
Perhaps my confidence is misplaced? After all, if anything, the goal of owning a home or even renting one for a fair price is receding further into the distance for the younger generation.
Successive governments have failed to meet their own targets for building new homes, and the scale of unmet housing need is soaring. A recent cross-party commission, backed by Shelter and co-chaired by former Labour Leader Ed Miliband and the Conservative Peer Sayeeda Warsi, stated that three million additional ‘social homes’ (council or housing association owned) would be needed by 2040. To hit that target, we need to build 150,000 social homes every year for each of the next twenty years, compared to an average of just 20,000 per year over the past two decades.
The picture in the commercial housing sector, whether for sale or for rent, is little better. Overall, with demand outstripping supply, housing costs are rising and the country faces a double whammy to both its economy and social justice.
So, why do I and the team at blacc think the housing market can be unblocked and transformed? Because we have seen a similar market failure successfully overcome in the Education sector. Back in 2015, blacc were asked to help the Department for Education (DfE) with a serious problem. DfE were struggling to find traditional contractors to take interest in delivering their new Primary schools, particularly in the South East of England, within their funding envelope. This was despite DfE paying up to41% more in funding for these projects than the lowest funded areas in the North of England.
Using true programme management principles, understanding the different supply chain and design requirements, we created a new way of procuring new schools. We used production systems efficiencies to drive value rather than the traditional method of cost led procurement that devalues the product and drives adversarial behaviours. This solution led to significantly reduced costs for DfE and it has become their default procurement route for all directly funded new build schools, with £600m of procurements complete or in pipeline and plans for a further £3bn framework at market consultation stage.
The success of the DfE schools’ solutions led to wider discussions with the Infrastructure Projects Authority (IPA) and joint discussions with the Manufacturing Technology Centre (MTC). We explored how to realise the full potential of standardised platform design and how to leverage volume from existing government pipelines. This was a colossal collective effort in which blacc and I were pleased to play a leading role.
Linked to all these discussions, another milestone was achieved with the Chancellor of the Exchequer announcing a Treasury “presumption in favour of offsite construction” for several other Departments in the Budget of November 2017. Interestingly, and unfortunately, the Ministry of Housing, Communities and Local Government was not on this list.
In essence, the focus of my work is understanding the business risks that prevent the widespread adoption of MMC, thus unlocking these marketplaces. The blacc team have also led the diverse consortium for the £1m Seismic programme, funded by Innovate UK. Last month, Seismic was unveiled and garnered positive headlines in the construction press. Again, the focus of Seismic is the Education sector, and in the space of half a decade the DfE have shifted from being the victim of market failure to being widely acknowledged as the most advanced Whitehall department on MMC.
In addition to blacc’s work for DfE, I am an adviser to the Cabinet Office, we work closely with the Innovation Hub and we recently submitted evidence to a House of Lords enquiry on the benefits to UK plc if a platform design approach to MMC were to be deployed effectively. I am absolutely confident that the approach taken to MMC at the DFE could easily be transferred to Housing, enabling new homes to be delivered far more cheaply and on a much faster timescale. The Government is rightly committing more money to housebuilding, but there are serious questions about the value for money this public expenditure will achieve. In my view, Ministers have not yet grasped the massive potential of MMC, and seem unsure how to harness their regulatory and financial power to change the housing marketplace for good.
Here at blacc, a series of exciting conversations about making this happen are well underway. We are talking with developers, housing associations, manufacturers, politicians and, of course, Homes England.
Together, we want to trial our new approach, at scale, and prove its power and potential. A Britain where hundreds of thousands of new homes are built each and every year is possible, and blacc will help to create it. If you would like to join our conversation, please get in touch with us.