For the past several years the UK has been in the grip of a worsening housing crisis, and recent developments in the private rented sector have only further highlighted its severity.
Recent property news has been inundated with headlines exposing harrowing information about the current state of private housing both owned and rented. Some standouts include:
Landlords and renters have struggled to make ends meet amidst surging mortgage rates and rental costs, and the combination of record-high rented housing demand combined with a lack of supply has put even more pressure on the government to meet its housebuilding targets sooner rather than later.
Despite Rishi Sunak insisting that the Conservative government stands by its initial commitment to building 300,000 homes a year by the mid-2020s, housebuilding targets have been consistently unmet since their announcement and affordability remains a concern. As such, the reliance of the public sector on the private sector to meet those targets is becoming increasingly essential as deadlines near.
For private sector investors seeking entry into the high-demand market of affordable housing development and letting, the solution may lie with alternative methods of housing construction that are perfectly suited to the time-sensitivity of the modern housing crisis.
Property development is an intensive and time-consuming process. At best, the average time for a predesigned new build is roughly six months, with some taking as long as 12 months. This is without factoring in any paperwork or legal processes that need to be taken care of before development can begin.
As the Government prepares to meet its housebuilding targets by focusing on inner-city development in urban areas, however, economic growth and the well-being of vulnerable renters will hinge on removing as many obstacles to efficiency as possible. Alternative housebuilding methods could be the ideal answer for the Conservative government's new home mandate.
Alternative housebuilding offers a degree of flexibility at the manufacturing stage that could give the UK’s housing market the chance to stabilise which it sorely needs. One glaring example of the potential value of these non-traditional methods can be seen in the recently highlighted wealth gap between US and UK households that has been largely attributed to housing costs.
According to the Guardian, US homes are 40% cheaper than UK homes per square metre, which has allowed the average US household to become almost a third richer than their UK equivalents while living in much larger properties. The architectural and production-level differences between the way the two countries approach housebuilding suggest that this gap is at least partially caused by the US readily embracing more modern construction methods and materials. Given that these materials are considered both cheaper and easier to work with, it is safe to say that the UK’s inability to adopt modern alternative housebuilding is an obstacle that needs to be overcome to fuel more affordable, efficient and plentiful property development.
But how can government leaders and property investors make a start on that objective? Modular construction could be the ideal starting point for promoting a more cost-effective and timely property development industry capable of meeting housebuilding targets.
According to a report published by global consultancy company McKinsey, the modular construction industry has a vast potential to support more efficient housebuilding without compromising quality.
The 2019 report, titled "Modular Construction: From Projects to Products" provides an in-depth analysis of the past and current state of the global modular construction market to reach data-driven conclusions on its viability. In the report, McKinsey suggests that modular construction could speed up the construction process of most housebuilding projects by as much as 50% while cutting build costs by 20%. This ability to streamline traditional property development could allow the modular construction industry to fill a $1.6tn productivity gap in the US and Europe by 2030, delivering an annual cost savings of $22bn.
Putting the UK aside for a moment, modular housing has already capitalised on its viability in a range of other international markets. Valued at approximately $84.48bn in 2022, the global modular construction industry has seen success in countries like Scandinavia and Japan, according to the McKinsey report. Its mounting global adoption is largely being driven by enhanced design capabilities and improved precision and productivity at the manufacturing stage, with some experts arguing that the modern modular home could be the future of property development.
Although modular construction still struggles against outdated perceptions of poor quality and ugliness, recent projects from various producers of high-end modular homes and the adjacent popularity of the tiny home movement have given many a new perspective on the viability of modular homes as long-term residences that afford occupants the same quality of life as traditional properties.
For modular homes to unlock their full scope for introducing transformative change to housebuilding and combating the housing crisis, McKinsey proposed that industry participants must prioritise the following changes:
Provided each actor within the modular construction market plays their part, the industry should be able to quickly meet demand in areas with labour and housing shortages like Australia, the US and the UK.
As the UK market leader in modular housing investments, Concept Capital Group can prioritise speed and affordability in building high-quality homes for renters grappling with the demands of a housing crisis. Our business model is unique in its ability to provide a strong mutual benefit for our investors and their tenants, giving the former a consistent source of passive rental income and the latter a stable and secure home that stays protected from the market forces dominating traditional private rented properties.
As housebuilding continues to scale to meet extreme nationwide demand, the importance of established private property developers with all-inclusive supply chains that are well-adapted to the rapid deployment of housing will be essential to providing a superior standard of housing across the country.
When you invest with us, you invest in the growth of the modular construction industry and its ability to alleviate the housing crisis using a revolutionary new approach to manufacturing and property investment that promotes equality with a compromise for modern landlords and renters.
To find out more about what we can do for renters, book a call with our team today.