Panelized and Modular Building Systems: UK vs. Global Use

Introduction and Research Framework

Housing shortages following the Second World War, rising housing demand, and an increase in defective traditionally built homes prompted the UK government to pursue sustainable housing development. The principal government aim is to improve the methods by which homes are built in the UK in order to address the housing shortage and enhance cost-effectiveness in housing production. Additionally, changing market forces coupled with evolving planning policy are pressing the house-building industry to reconsider its approach to construction. Population growth in the UK over recent decades, alongside concern for improved housing performance, has necessitated the adoption of Modern Methods of Construction (MMC) (Pan, Gibb & Dainty, 2005). MMC encompasses a range of technologies involving the assembly and/or prefabrication of housing components off-site in less time than traditional methods (the Commission for Architecture and the Built Environment, 2005).

MMC is an innovative system within the construction sector that allows house-builders to produce homes using factory-prefabricated materials in a shorter timeframe. Despite the sustainable advantages that off-site technologies have introduced into UK housing construction, the current level of housing production using off-site MMC remains generally low (Pan, Gibb & Dainty, 2005). In the UK, the majority of homes are still built using the traditional brick-and-block system. The National House Building Council estimates that only 10% of house-builders use panelized and modular building systems. By contrast, in Japan approximately 40% of new housing is built using MMC, and Scandinavian countries, Germany, and Japan all make considerably greater use of MMC for house building than the UK.

The fundamental aim of this study is to advance both industry and academic understanding of panelized and modular building systems, and to explore the key factors contributing to their low uptake in the UK. To achieve this, the study formulates research objectives designed to build greater understanding of why MMC use in the UK lags behind other countries.

To investigate the factors leading to the low use of panelized and modular building systems in the UK compared to other countries, and to provide potential solutions for increasing their use in housing construction.

What are the leading factors behind the low use of panelized and modular building systems in the UK compared to other countries? Which countries have higher use of these systems, and what accounts for that higher use?

This study collects both primary and secondary data to answer these questions. In doing so, it gains insight into the factors behind the low use of panelized and modular building systems in the UK and contributes to the body of MMC knowledge by identifying countries with higher MMC adoption and the major factors enabling it.

"The UK house-building industry has often been criticized for failing to meet the housing needs of the country. The traditional craft-based build process is labour intensive with a long lead-time and is difficult to control for product quality. It is also not suitable for configurable designs that would help to customise the home, and the industry has been criticised for excessive standardisation of its products. Attempts at industrialisation, usually employing frame or panel-based build methods seen in many countries, have failed due mainly to lack of clear objectives. A change in build technology is also only one step in addressing the concerns of poor quality and lack of product variety." (Roy, Brown & Gaze, 2003, p. 137).

The impetus for using off-site technologies for house building in the UK began after the First World War, when traditional construction could not meet housing demand and there was a shortage of skilled labour. A few decades later, the success of prefabricated housing was questioned on quality grounds, and traditional housing regained its dominance. In more recent decades, however, off-site housing has seen a return of market interest. Despite this renewed trend, traditional housing still dominates the UK market and the current use of off-site MMC remains low. The high cost of materials used in off-site housing units has been identified as a major driver of this low uptake (Pan, Gibb & Dainty, 2005).

While a number of studies have explored MMC in the UK in general terms, there remains a scarcity of research examining why panelized and modular building systems specifically are used less in the UK than in other countries. This study attempts to fill that gap, providing a comprehensive investigation of the contributing factors and recommending strategies to increase the use of off-site technologies in UK house building.

The study employs the economic theory of supply and demand to explain the general housing situation in the UK. Wilson (2010) argues that housing supply is failing to keep pace with housing demand. At the time of writing, there were approximately 1.8 million registered households on waiting lists in the UK, leading to overcrowding in private and social housing stocks. The government estimated a need for 240,000 additional homes by 2016.

This study enhances understanding within the UK construction industry of the techniques needed to produce MMC homes at lower cost. It contributes to the body of knowledge on factors behind the low use of panelized and modular systems in the UK, and offers insights for policy makers on the barriers facing the construction industry and the strategies required to overcome them.

Overview of Panelized and Modular Off-Site Systems

Modern Methods of Construction (MMC) involve the use of housing components that are specially designed and manufactured in a factory off-site. There are two major product categories: panelized systems and modular systems.

Panelized products comprise ready-made walls, roofs, and floors. The panels are transported to the building site for assembly, a process that can often be completed within a single day. Some panels incorporate built-in wiring, further accelerating construction. The panelized off-site building approach can include load-bearing exterior walls and may use light-gauge steel, timber, structural insulated panels (SIPs), non-structural panels, or concrete to create the entire building envelope (Parliamentary Office of Science and Technology, 2003).

Burwood and Jess (2005) describe a more complex variant called the closed system, which involves additional factory fabrication such as insulation and lining materials. Panel types may include steel frame or timber frame, and may incorporate prefabricated load-bearing elements.

Several advantages flow from using panelized systems. Labour savings are significant because the panels are already manufactured before arriving on site. There is a marked reduction in construction time and less wastage of materials. Builders report that a watertight home can be assembled within three to four days, and occupied within 60 to 90 days. A team of construction workers supervised by a trained foreman can assemble a panelised home, and the system does not require extensive shipping clearances. Ely (2006) notes that panelized systems are pre-insulated and subject to rigorous quality control in the factory.

Despite these benefits, the panelized system is not as efficient as the modular system. It requires a high level of on-site finishing and demands considerable space during the building process (Ely, 2006).

Modular off-site building technology involves structural units that are pieced together to form a completed dwelling. Modular construction is frequently used for kitchens and bathrooms, and between 80% and 90% of a modular home is typically constructed in the factory before being transported to the site for final assembly. The prefabricated modules — often called "pods" (Burwood & Jess, 2005, p. 1) — can be finished in the factory complete with mechanical and electrical wiring. Pods may be constructed using light-steel frames, timber frames, concrete superstructures, or hot-rolled steel frames (Burwood & Jess, 2005).

Modular systems offer important benefits to the housing construction sector. Designs can be produced with computer-aided design tools, with the finished design transferred directly to the factory floor. The system enables high levels of internal finishing and a high degree of quality control. It also allows for better efficiencies and improved economies of scale. Walls built to modular standards are designed to enhance energy efficiency and are stronger than traditional brick-and-block construction. Modular materials can even be used for temporary homes, since the building can be disassembled and reconstructed elsewhere. Construction time is reduced substantially: a builder can complete a home using panelized or modular methods in around 16 weeks, compared with 39 weeks using traditional brick and block.

The National Audit Office (2005) argues that labour use can be drastically reduced through panelized and modular construction, and that it is possible to build four times as many homes using the same on-site labour force. The decline in on-site labour requirements reduces overall labour costs. From the perspective of house-builders, both systems improve business efficiency and deliver quality and customer satisfaction.

Despite these benefits, the overall cost of completing a home using MMC technologies is higher than that of traditional brick-and-block construction, primarily because of the cost of manufacturing off-site components and the need to import some materials not available domestically (National Audit Office, 2005).

Notwithstanding the higher upfront cost, panelized and modular systems deliver superior housing quality and durability. A home built using a light steel frame system can have a lifespan of 200 years, meeting requirements for durability, high performance, and whole-life cost. The Parliamentary Office of Science and Technology (2003) similarly notes that MMC homes typically have fewer defects and are more energy-efficient than traditional brick-and-block homes.

The shortcomings of the modular system include the need for shipping clearances before modules can be transported to site, limited opportunity for homeowners to inspect the build during fabrication, and a requirement for skilled installation on site — particularly where materials have been imported (Ely, 2006).

"The government is aware of the importance of developing a capable construction industry driven by technological developments in the manufacturing and service industry that is able to contribute on a large scale towards the economy of the sector." (Azman et al., 2010, p. 4478).

Stakeholder Attitudes Toward MMC in the UK

Since the 1960s, the UK has faced a persistent housing shortage driven by a downward trend in housing supply, while the number of households has grown steadily due to immigration and demographic change. Forecasts projected that the number of households would increase by 3.8 million between 1996 and 2021 — equivalent to 150,000 new households per year — with later estimates revising that figure upward to 189,000 per year (Barker, 2003). The UK government established the Barker Review in response to growing concern about whether traditional housing supply could meet demand (Barker Cross Industry Group, 2006; Barker, 2004). The review warned that under-supply of housing might constrain economic growth and recommended that off-site technologies could help address the housing shortage, quality issues, and skilled labour deficits (Barker, 2003).

The primary driver of the government's focus on off-site technologies is the gap between housing demand — averaging 230,000 units per year, projected to reach 3 million by 2016 — and supply, which stands at approximately 175,000 units per year. The shortage of affordable housing for key workers is particularly acute in South-East England. The government has signalled a commitment to building approximately 200,000 homes by 2016 at locations including Thames Gateway, Stansted–Cambridge, Ashford, and Milton Keynes.

From 2004, the Housing Corporation directed funding toward building the equivalent of 5,000 social housing units per year using MMC. In 2005, English Partnerships and the Housing Corporation agreed to build 1,300 homes for key workers in South-East England using MMC. Kempton (2010) reports that the Housing Corporation expects 25% of homes built by registered social landlords to be constructed using modern methods of construction.

Despite this encouragement, government efforts remain limited. Private builders construct approximately 90% of new UK homes, yet the government has not provided direct financial incentives to persuade private builders to adopt MMC. Nadim et al. (2009) argue that the government has also overlooked an acute shortage of professional manual labour alongside the skilled labour shortage it has sought to address.

The UK construction industry has long faced criticism for poor performance, which has been attributed to high levels of waste, the fragmented nature of the sector, and a lack of research and development (Nadim et al., 2009). The industry's poor image has also impeded recruitment of qualified graduates and skilled workers. Partly in response to government initiatives, the UK construction industry has recognised the need to improve construction quality in a global market environment.

Azman et al. (2010, p. 4478) note that "the construction industry is highly aware of the need to improve the integration, planning and control of its mass quality production, open new economic global trends, achieving open construction systems and developing the standardisation of products in line with the global market." One major driver encouraging the shift toward off-site building is the growth of multinational corporations and the consequent internationalisation of construction (Nadim & Goulding, 2009).

Historically, the impetus for panelized and modular building in the UK grew after the First World War, when rapid demand for new homes outstripped what traditional methods could provide. After the Second World War, pressure to house returning soldiers intensified the use of MMC still further. Innovation in timber framing between 1927 and 1941 — timber being easy to form into panels suitable for factory fabrication — further accelerated the shift. Despite this history, only a small proportion of the 18,000 house-builders registered under the National House Building Council (NHBC) undertake the full range of building activities, and the use of prefabricated techniques remains concentrated in urban centres (Barker, 2003).

A well-known example of prefabricated construction applied commercially is McDonald's restaurants, which use prefabrication technology to build new outlets. A completed McDonald's outlet was once built and opened for business within 13 hours of work beginning on a prepared site. More broadly, hotels, retail outlets, and a range of other commercial clients have adopted prefabricated procurement in the UK (Na, 2007, pp. 22–23).

Despite the intensified effort of the construction sector, the UK off-site market was valued at £2.2 billion, representing only 2.1% of the total UK construction market, which was worth £106.8 billion. UK house buyers remain strongly attached to traditional brick-and-block styles, which inhibits the implementation of new construction technologies (Azman et al., 2010).

Pan et al. (2007) point out that the UK construction industry remains reluctant to adopt off-site technologies, partly because buyers' memories of poor-quality post-war prefabrication persist. Human perception barriers also exist among architects and other designers, compounded by technical difficulties such as site specifics, logistics and interfacing problems, high costs where economies of scale are not achievable, and the fragmented supply chain (Pan et al., 2007, p. 184).

An investigation by Pan, Gibb, and Dainty (2008) found that half of 100 builders or developers and 200 social housing organisations had used off-site manufacture (OSM) for house building in the previous decade; however, OSM accounted for less than one-quarter of their completed buildings. While the majority of house-builders reported using panelized construction, fewer than one-fifth used modular construction. A MORI survey from 2001 found that 69% of respondents still preferred traditional brick-and-block housing, and prefabricated housing carried a stigma associated with social housing (Roy, Brown & Gaze, 2003).

More recent data from AMA Research (2011) show significant growth in modular systems for bathrooms and kitchens. Within the UK construction sector, 22% of new housing partly or wholly uses panelized systems, contributing to a 10.1% (£601 million) increase in industry turnover. The UKTFA (2008) reports that approximately 51,700 commercial and housing pods were built in 2006, and timber frame housing recorded growth of 8.1% in 2005 and 11% in 2006, rising to £542 million in 2006.

The UK has experienced four consecutive economic downturns — in the mid-1970s, the early 1980s, the early 1990s, and from autumn 2007 to spring 2009 — driven by macroeconomic fluctuations, tax and regulatory changes, interest rate movements, and changes in credit conditions (Goodier & Pan, 2010, p. 16). Each downturn has affected the housing sector, and lenders have responded to the most recent crisis by imposing stricter lending conditions.

Gallent (2009) notes a recent increase in loan approvals for precast housing, although lending conditions remain tight and are leading some house-builders to focus on higher-margin, more marketable housing types. The Office of Fair Trading (2008) also notes that many mortgage lenders demand large deposits from borrowers seeking to buy precast homes.

However, Home Building (2011) reports that lenders do not set their lending criteria based on the type of construction system used. Halifax, for example, states: "Halifax takes the view that properly constructed timber frame housing with a suitable external cladding is equally as good as housing which is built in brick or block, and we make no differentiation in the lending terms offered on either form of construction." (Home Building, 2011, p. 3). Similarly, the NHBC and Zurich Municipal recognise timber frame construction for guarantee purposes, and the Association of British Insurers has confirmed that insurers generally draw no distinction between modern timber frame and brick-and-block construction (Home Building, 2011, p. 3).