Property podcast: Technology can fix “antiquated” construction industry and enable Government to meet net zero targets

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Disjointed, outdated and unproductive - these are three words commonly associated with construction. Average productivity levels in the sector have remained consistently below the national average and have grown more slowly, according to official government statistics, resulting in a lack of ambition and resources to innovate at the required pace necessary to keep tabs with other sectors - such as car manufacturing.

“We are still ruled by the antiquated models of industry transactions” says Mark Farmer, government champion of modern methods of construction (MMC) in homebuilding, when asked what progress has been made since he published his 2016 report, Modernise or Die.

“People just aren’t bucking the trend”, warns Farmer. “The industry is misaligned. Those working in MMC are innovating but the contractual structures and procurement models that enable it are constraining change –the traditions of the industry are weighing down how we do business”.

While Farmer notes his landmark report’s success in putting MMC on the political agenda over the last five years, he believes more now needs to be done to mature the market through scalability, responsible innovation and positive legacy building.

Since the Farmer report, the Government has committed to mandating MMC delivery.

Homes England has been championing modular housing as a solution to speeding up the delivery of affordable housing across the UK. Last year, the Government’s national housing agency announced that housing associations looking to sign deals under the new £11.5 billion Affordable Housing Programme will have to commit to using modern methods of construction (MMC) to deliver at least a quarter of their pipelines.

Just a few months later, in March 2021, chancellor Rishi Sunak announced the creation of an MMC taskforce, backed by £10 million of seed funding.

However, Chris Bone, Modulous’ chief executive, believes that: “The Government needs to do more to bring the sector together, align their ambitions, and deliver more homes at a much greater scale. Homes England - now with heavyweights like Peter Freeman and Peter Denton at the helm - has done some great work in moving the dial on delivery, but housing secretary Michael Gove needs to look to the private sector too and embrace MMC fully if the government has a hope of meeting net zero targets.”

Inspired by the opportunity to use digital technology to better align interests and create higher quality buildings, Bone co-founded Modulous in 2018 with the dream of digitising housebuilding to make it a more productive and sustainable industry.

Modulous, a company that recently raised £5 million from a trio of global venture capital firms, sits at the centre of a development ecosystem that includes landowners, developers, funders, designers, suppliers, and contractors. The company’s software streamlines project design and planning by generating fully-engineered and locally viable design solutions, detailed cost information, and accurate programmes at concept stage - all within seconds.

The software is connected to its high performance, sustainable ‘Kit of Parts’ which, when combined, creates highly energy-efficient homes for a mix of developers, housing associations and councils.“We quickly realised that you couldn’t digitise the process without having that Kit of Parts”, remarks Bone.

“There’s no point building in days when you’re spending months designing and digitising your projects. Our models allow all parties to see the true costs very early, removing disputes later in the process”, Bone continues. “Our long-term strategy is to enable others with their own kits of parts to use our software, bringing stakeholders together and aligning their interests to deliver homes at scale”.

Modulous recently expanded to the US, where it is headed up by four former Katerra executives. However, unlike the Softbank-backed offsite giant, Modulous operates an asset-light business, which has no factories itself. Instead it relies on an integrated supply chain to deliver its Kit of Parts, making it more responsible to the cyclical nature of construction.

“We’re far more agile and less reliant on the supply chain, allowing us to move in and out of markets quicker and deliver homes more effectively,” Bone adds.

Farmer points out that “there’s a misalignment in the industry where money is made in land, speculation and sales value inflation, and everything in between is just seen as a necessary evil. The industry needs to make more money in contracting and the construction process if it is to modernise,” highlighting the example of Carillion’s demise.

However, Farmer posits reducing waste and focusing on safety and sustainability as key targets for the MMC sector going forward: “The industry has to be more sustainable and we can fund more profit by cutting out waste.”

“By increasing the use of modular techniques including kits of parts, using regenerative design and increasing pre-manufactured value, we reduce the waste and costs of construction and can give a more precise retail standard of price certainty,” says Farmer.

Bone adds: “Designing for manufacture and assembly is something the sector has to come to terms with to reduce waste - 30 percent of every construction project goes to landfill, so from an environmental and financial perspective reducing waste is a no brainer.” In comparison, MMC is thought to typically reduce construction waste by up to 90 percent.

As material recyclability and the circular economy come to the fore, Farmer calls for better regulation around material usage, and slams the Building Safety Bill as a “missed opportunity to better signpost the pre-manufacturing as a route to delivering safer buildings”.

Farmer continues: “The potential for large-scale MMC development is huge, and construction is one of the least automated sectors so it’s becoming a really interesting space for technically well-advised investors.”

You can listen via Apple Podcasts or via Spotify or SoundCloud. Search “PropCast” to subscribe. Or listen by scrolling down to the audio player above.