14
Examination of witnesses
Craig Garbutt and Nicky Jones.
Q77 The Chair: Welcome to the Built Environment Committee’s further evidence session on modern methods of construction. We are very fortunate today to have two witnesses from Daiwa House Modular Europe: Craig Garbutt, the managing director, and Nicky Jones, the business development manager.
We have a series of questions, and I would be grateful if members and witnesses could keep their questions and answers fairly brisk. My name is Daniel Moylan and I chair the committee. I will not introduce other members of the committee now, but when they ask their questions. Two of our members, Lady Cohen and Lady Thornhill, are joining us remotely and can be seen on the screens.
I will ask the first question. Based on your experience working in Germany, the Netherlands and other countries, could you tell us what factors have made MMC more successful aboard? Are there any lessons that we could learn here in the UK?
Craig Garbutt: Thank you for having us here today. The simplest way to explain it is that the procurement routes in Europe are very simple for MMC, and the way they deliver it is different. When a piece of land gets identified for housing and a new development, the local authority—the term is slightly different in Europe—procures the modular solution directly from the modular provider. There is then a three-stage process, which all goes together. The local authority enters into what we would call a PCSA agreement with the developer—the modular provider—and then they go through a PCSA period discussing the design. During that period, they also have what they call building permits in Europe; our equivalent is planners in the planning authority. They get in a room and do that together up front as a single exercise. While that exercise is going on, the groundwork investigations are happening on-site at the same time. You are covering two elements of work simultaneously, which speeds up the process.
Once you come out of that ground investigation survey and have completed your design for the modular aspect of the houses—or whatever modular development it will be—you start the next process. The groundworks are appointed separately, so the groundworks contractor commences them. That fires the trigger for the modular provider to produce the modules in the factory. Again, you are working simultaneously, so it is really quick. As the groundworks are finishing—the foundations and plots are coming through on the identified land—the modular volumetric solution can be delivered straightaway.
I will explain how that process works successfully in Europe and how the costs work. The housing cost is more expensive for volumetric, but when you cut down the time on-site, the cost becomes equal or less, because the prelims are a lot less and less time is spent on-site.
With housing associations in the UK, for argument’s sake, if you can cut down that upfront time, you can get rents in sooner, so it changes their model. They can have people in those dwellings, and they could gain 12 months extra rent from the first sets of houses. It changes the model slightly, which is why it is a lot more successful in Europe than in the UK at the moment; it is because they have a very adaptable model that delivers it faster. I hope that makes sense.
Q78 The Chair: That makes sense. I have a number of questions about what you are describing. At the heart of it seems to be a local authority where the people who wish to procure housing—what we would call the housing department—is, from the outset, working hand in glove with the people giving planning permission and building regulation approval, which is what we would call the planning department.
Craig Garbutt: Yes. They call it the permit department in Europe.
The Chair: That is prohibited by law here. In fact, the prohibition has been strengthened as a result of a test case related to Victoria Gardens next to this building, such that over the last two years Chinese walls have existed between planners and the council as an applicant, which is how we would describe it. Those walls are now thicker than ever. They absolutely cannot talk to each other now; they cannot even be in the same room or on the same floor.
I saw this separation during my membership of the Ebbsfleet Development Corporation—it is a planning authority as well as a development corporation—until August. It previously existed Chinese wall-style, but it is now absolutely eager and has lawyers crawling all over it the whole time. Have we gone in totally the wrong direction on that, as far as you are concerned?
Craig Garbutt: For simplicity’s sake, I would say yes, we have gone totally in the wrong direction. It is easy for me to sit here and say that, because I do not live in the world that you described.
Q79 The Chair: I can tell you what it is like. You are also describing a situation where the commissioner of the housing is the local authority. You have not described what happens with the private sector, so my second question is this: what happens where you have a private sector client who owns the land and wants to commission houses?
Craig Garbutt: It is pretty much the same process.
The Chair: But then the local authority is the permitting authority.
Craig Garbutt: Yes.
The Chair: So it is brought in as an external party. It is an additional complication, because it is not all in-house where they are all sitting together in the same building.
Craig Garbutt: No, it is not all in-house, but they still have to go through the same protocols and the same permit system.
The Chair: Does that make it more complicated and difficult?
Craig Garbutt: No, we do not find it so in Europe. There is a collective need and want to get that housing drive pushed forward.
The Chair: Whereas here there is very often a collective wish to frustrate anybody doing anything at all. I understand. That is extremely helpful. What you are describing is a situation that appears to me to contravene national justice, the rule of law and the procurement rules of the European Union, but it works. Here, we observe all these things, even though we are not members of the European Union, and it does not work.
The next question will be a virtual contribution from Lady Cohen of Pimlico.
Q80 Baroness Cohen of Pimlico: Good morning, I am very glad to see you. I originally trained as a solicitor—
The Chair: I am sorry, but we cannot hear what you are saying. We can only hear you making a noise. Can you speak up? Get closer to the microphone.
Baroness Cohen of Pimlico: Having originally trained as a solicitor, I want to know whether you have faced difficulties in obtaining warranties for your projects in the UK more than in other countries.
Nicky Jones: We have not experienced difficulties in obtaining the warranties. Our units are under a category 1 volumetric system. We have hot rolled steel section frames with concrete floors.
Speaking with local authorities and housing associations, particularly in Wales—our office is in Wales, so we have more experience at the moment with local authorities and housing associations there—we have received a lot of negative feedback from the top warranty providers. They say that it is a long, drawn-out process—it often takes 12 to 18 months—and that often the project construction is quicker than obtaining the warranties, which is ridiculous. They also say that there is an inability to answer some of the questions and queries, so these local authorities continually ask us to use other providers. We have a couple of companies that we have a very good relationship with; you can speak to somebody on the phone or face to face and they will answer questions very quickly. So the answer to your question is no, we do not experience any difficulties.
Overseas, if you want to look at that element, the Netherlands, for example, does not have warranties in the way we have structure warranties. That is something that is offered directly from the company.
Baroness Cohen of Pimlico: So that is the answer: that it is not more difficult.
The Chair: I am afraid we cannot hear you clearly.
Baroness Cohen of Pimlico: I got a very good answer to the first half of my question, so what is your view of the concern that MMC introduces fire risks that are difficult to assess? Of course, if you are using steel as opposed to timber, that may be better, but do you have a view?
Nicky Jones: We were both going to talk about this. At the moment, we are continually being asked by clients to look at fully non-combustible options to fully mitigate that risk.
Craig Garbutt: I will second Nicky’s answer. There is a huge concern about MMC at the moment. The National Fire Chiefs Council has raised it with regard to timber-framed buildings. We do not deliver timber-framed buildings. We deliver a hot-rolled steel section that incorporates a reinforced concrete floor simply for sustainability. We cut down globally a football pitch-sized field of trees every second. You can only manufacture timber a certain number of times before you end up with nothing. It cannot be recycled indefinitely.
We have gone down the concrete and steel route, because steel can be recycled indefinitely. Globally, we do a lot of work with Tata Steel, which is making huge strides in green steel making now with arc furnaces and stuff like that. Arc furnaces are reducing the carbon footprint by 80%. We have gone down the concrete and steel route not only because it gives us a sense of security—it is not timber-framed—but because it lasts longer, it can be indefinitely recycled, and it eliminates the risk with regard to insurers. The industry will be driven by insurers anyway, I believe. If we can give them a non-combustible solution, it will eliminate a lot of risk, making it more viable for clients and customers.
The Chair: I want to understand this. You have a concrete base. What are the walls made of?
Craig Garbutt: The infill walls are made of plasterboard.
The Chair: So the steel is in the structural elements only.
Craig Garbutt: Yes. It is a steel cage, for want of a better word, and British gypsum plasterboard and framing on the internals, which is all fully insulated.
The Chair: With volumetric construction, that still leaves the possibility of gaps between the units that you assemble being uninsulated.
Craig Garbutt: The gaps are insulated, but if we go for a full, non-combustible route, the fire cannot go anywhere because there is nothing to burn.
The Chair: Plasterboard burns.
Craig Garbutt: It takes a lot for plasterboard to burn. One layer of plasterboard will give you 30 minutes of fire protection, two layers will give you an hour of fire protection and so on, so we can go down a non-combustible route if needed.
Q81 Lord Faulkner of Worcester: Thank you for coming to see us. I would like to ask about training programmes and apprenticeships in the construction industry. Are they adequate for getting the workforce equipped to use MMC effectively? Also, are there any examples of better training systems abroad?
Craig Garbutt: I will answer that, because I come from an apprentice background. I went through a CITB apprenticeship. First, I went through a youth training scheme, which allowed me access to a CITB apprenticeship. A massive amount of work is done by the CIOB. Caroline Gumble there is trailblazing in getting apprenticeships and emphasising the need for them in the construction industry. The level of apprenticeships for early learners needs to be dropped slightly. It would be a great help if we lowered the expectations on the college places so that anybody could enter a CITB apprenticeship or another developer apprenticeship.
We have a lot to do on apprenticeships. We must encourage more women into the industry. That is a big drive for the CIOB. Most of the bigger construction companies are driving for more women in the industry, which is fantastic. We should be lowering the level of qualifications needed to get on to the apprenticeships. I do not work in the education sector, so I do not know how easy it would be to train apprentices in maths and English during their apprenticeships, but we are missing out on lots of talent for the entry-level of an apprenticeship by excluding people for not having the right GCSEs. Someone might not be brilliant in the classroom but be brilliant on a building site. It is really important that we lower that entry requirement and train them through the apprenticeship to get the necessary maths and English qualifications.
Nicky Jones: Yes, and start educating in schools and colleges.
Craig Garbutt: Exactly. The construction industry is a fantastic place to work. We all sing about it in the industry and say how fantastic it is, but we must break down barriers and get that into schools. When I was at school, we had a careers officer who said, “Have you thought about the construction industry? You can work your way through”. I am not sure whether that still goes on. We must get out beyond the industry. The CIOB and numerous other principal contractors in the UK are doing it, but a lot more can be done on it. Lower the entry requirements for the apprenticeships.
Lord Faulkner of Worcester: That is a very interesting answer. I have declared in previous sessions that I worked for the CITB as a very lowly press officer, more years ago than I care to remember but probably before you were born. We have heard a lot of criticism of CITB during our inquiries. You are the most positive.
Craig Garbutt: I entered the industry through the original youth training scheme. It is not there anymore and got a lot of bad press, but people are quicker to demonise with the bad stories than to tell the good stories. I went through the YTS programme without any hindrance and it developed me on to a CITB apprenticeship, which, dare I say it, I completed in bricklaying, so I am sat here today as a bricklayer. I have nothing but praise for the CITB and the original YTS programme. Maybe a new and improved YTS might be the way forward as a bridge to getting people into the CITB.
Lord Faulkner of Worcester: What about training systems abroad?
Craig Garbutt: In Europe, the German system is very similar to our original YTS system. When I went through the YTS you got a placement—for me, it was Taylor Wimpey homes—and you got to do a bit of every construction job on said site, under strict supervision. Whatever you liked is how you would pick what you would become: “I want to be a bricklayer, a scaffolder, an electrician”. In Germany, they still push that and it still works. Going back to what worked in the past might be an idea—reinvent it, reinvigorate it and redeploy it.
Q82 Earl Russell: I have a two-part question and I will ask it in two separate parts, if that is okay. I want to ask you about here in the UK. What do you see as the proper role of government in addressing the challenges and barriers to greater uptake of MMC?
Nicky Jones: We have successfully delivered social housing projects in Wales—I spoke about that earlier. Obviously, housing is devolved to the Welsh Government. The social housing grant scheme not only has targets to deliver MMC but offers increased grant provision in the uptake of MMC, which I do not believe exists in England or Scotland.
The Welsh Government’s approach to increasing the level of social affordable housing is to start with social housing, which obviously helps the poorest in society. Our experience is that MMCs are a positive solution in Wales. The incentives that are available to local authorities and housing associations are creating a pipeline of work, certainly for us and for all ranges of MMC providers, so that together we can deliver a scaled solution. I do not know whether Craig will talk about this in a minute, but we are working on a scheme for Cardiff Council where there are three of us—three modular providers of all sizes—all delivering volumetrics.
Craig Garbutt: We are delivering class 1 volumetrics.
Nicky Jones: We are doing so for temporary housing, and it is working well. There is something for everyone. I strongly believe that there is a need for all systems, whether you have small or large companies. That works very well.
We participated in the Welsh innovative housing programme—IHP—in partnership with a housing association. It compared three types of build for a social housing scheme: traditional homes and two modular companies—one was us, and the other, sadly, is no longer here. They could look at the two builds from the modular companies and compare them to traditional build. The housing association confirmed that, after two years of them being lived in, you cannot tell from the outside of the homes whether they are modular or traditional. After the users were in them for a couple of years, the housing association said specifically to us that our defects are low, the maintenance is low, the users are happy and comfortable, and their bills are low. Again, this is because we delivered the houses to the Welsh quality design standards, which have very high energy requirements. So they are happy, as are we.
Q83 Earl Russell: The second part of my question is about the affordable homes programme and its relationship to MMC. Have you found the affordable homes programme to be useful? Is it helping you to produce a greater uptake for MMC? Is it working, or could it be improved?
Nicky Jones: Is this question to do with frameworks?
Earl Russell: Have the affordable homes programme and MMC frameworks been useful in incentivising greater use of MMC?
Nicky Jones: We have had a negative experience of frameworks, particularly because we have a few projects in the UK, although we have many all over the world. For one of the requirements, we tried last year to gain access to the CCS off-site construction framework, reportedly worth £10.8 billion, but we were declined access because we did not have the required number of UK case studies, and they specified JCT contracts. We needed five but had two at the time, and despite having many more all over the world we were not allowed access to that framework. By doing that, the framework declined our 60 years of experience in modular and excluded our investment in the UK and our knowledge, given that we work for one of the biggest modular providers in the world, the Daiwa group.
The Chair: Is this a Homes England framework?
Nicky Jones: It was the Crown Commercial Service—CCS—framework.
Craig Garbutt: To further my colleague’s point, the project we are talking about in Wales is delivered by Cardiff Council through its delivery partner, Wates Residential. It is not solely our project; it is not being delivered by us. We are just one of three volumetric class 1 modular providers. The simple and good idea that Cardiff has come up with is that we supply volumetric housing solutions that get shipped and installed on-site really quickly, and that is classed as emergency housing provision to get people out of hotels, off the streets and into these volumetric houses quickly and efficiently.
The more genius part of it is that, when they find more permanent housing for these individuals and families, those individuals and families get moved into traditionally built or more modular housing. The modular units that we provide for Cardiff then get picked up, moved somewhere else and put back together in a different configuration to become social housing. So you get two benefits—two bites of the cherry, if you will—from these volumetric houses. They get picked up, put on a truck, moved somewhere else, redeployed, reconfigured and then deployed as lifetime homes, because they are compliant with building regs and everything.
Earl Russell: As far as you are aware, is that system not happening in England?
Craig Garbutt: It is not at the moment. As I said, Cardiff and Wates Residential are the pioneers of it in Cardiff, and we are part of that. Two other modular providers—At Home and Beattie Passive—are delivering different systems from ours but are doing so at the same speed as us. They are perfectly good systems. We three modular providers are working harmoniously together on the same site. It is a good site, and it would be good to see.
Earl Russell: In summary, is your evidence that you find that the Welsh Government are ahead of the English Government in doing this and are providing greater grants and incentives, and a quicker process?
Nicky Jones: Yes.
The Chair: I am intrigued about the point about greater grants and incentives. I should not say this on the record, but I am thinking about what it must be like for a child to wake up one morning and find that not only have the neighbours moved out but their house has gone with them and there is just an empty site. It must be a rather astonishing experience.
On these grants, you are meant to be offering a cheaper form of housing construction. It should be cheaper to do volumetric work because so much is done off-site: you are not dependent on trades being available on a certain day, the weather and things like that. But everyone seems to be talking about how we have to have bigger grants. Why?
Craig Garbutt: I do not know this for a fact, because I do not have access to the information that you guys have, but the maths and the science need to be understood. My understanding, which might be incorrect, is that the houses are priced at a metre-square rate. Generally, a contractor will say that they have a site and 10 or 100 houses to deliver, and we will base that metre-square rate cost on how long that project takes. That includes the prelims and everything else.
I do not understand—I might be wrong—how the costs for a volumetric system, which can be delivered in half the time, are comparable to those for traditionally built houses. Are we looking at cost as apples for apples and pears for pears, or are we looking at a cost for something volumetric that will be delivered six months sooner, where you are off-site and those prelims stop? Alternatively, are the costs based on the full project life cycle, with all the prelims included? Again, I do not have access to that information, but I would advise that that gets explored further, rather than automatically assuming that volumetric is more expensive, although it gets delivered twice as fast.
The Chair: That does not make sense to us either. It is not something that we assume; we are told it all the time. We are told that it can operate only because of subsidy, but we are then told that it is because factories have to cover the cost of investment in equipment. We understand that, factories having been doing this since the 18th century, but it does not mean that they need a government grant to get started. I, at least, am utterly baffled and am driven more and more to think about an industry that is building up to the subsidy and failing because it cannot manage even that effectively. That is my cynical conclusion.
Q84 Baroness Eaton: I will go back a bit to the discussion where you said that they are used twice. One of the things we picked up earlier is that part of the difficulty with category 1 is the ground preparation and the skills of those who need correctly to move the article that arrives. If that is a problem, how are you managing to do it twice—or is it not a problem?
Craig Garbutt: It is not a problem for our system, because, as I explained, our system is a steel cage. It is quite a rigid structure, and we land it on four holding down bolts in each corner, and the holding down bolts are cast into the concrete.
Baroness Eaton: So it is an easy process?
Craig Garbutt: You land it, you bolt it down to the concrete that is already installed, you unbolt it, and you pick it up and deconfigure it. It really is that simple. Think of Lego.
The Chair: There is no reason why the preparatory works—the prelims—should be any different to a traditional built house.
Craig Garbutt: No. The preparatory works to a traditional build and to a modular build are almost identical. You still need foundations, drainage, power and water.
Nicky Jones: The key to modular is looking at the whole project life cycle, as you have touched on, Craig. Obviously, modular is quicker, because you can do a lot more in the factory and pretty much put in the kitchens, the bathrooms and the floors—and the brick façade on, if you are going for bricks. You are pretty much craning in a built house, so ultimately you have less time on-site, so you can reduce the whole project duration from, say, seven years to five years.
You have to look at the savings you can make. You may say that modular is more expensive, but we are seeing that in some areas it is not necessarily. Looking at the construction industry as a whole, sadly a few modular companies go into administration, but a lot of main contractors also go into administration. You have to look at the whole picture. Modular is more expensive in the beginning, but the time saved on-site also needs to be taken into consideration.
Craig Garbutt: There is also a cost associated with that time saving on-site.
Nicky Jones: So you get rents in a lot more quickly if it is social housing.
Q85 The Chair: I have a question on a totally different subject: transport. How do you transport your beautifully built house that just has four bolts?
Craig Garbutt: The same as everyone else: on the back of a truck.
Nicky Jones: On the back of a truck.
The Chair: But it will be a wide load.
Craig Garbutt: Yes. We have police escorts and outriders, which you see whenever you drive down the motorway and see a wide load. We just follow the same rules.
The Chair: Do the Welsh constabulary accommodate you?
Nicky Jones: They do.
The Chair: Are they available, and do they turn up and do it?
Craig Garbutt: We have to pay them, obviously, and there are a lot of planning, programming and up-front logistical issues, but we are transporting widths of five metres now.
The Chair: We have heard that that is an objection to volumetric housing: that if it is wider than a container—obviously a container does not need a police outrider—it has to be treated as a wide load on a motorway with the flashing lights and all that. You are saying that is true, but it is not an obstacle.
Craig Garbutt: It is not an obstacle; it just needs to be planned and done correctly.
Nicky Jones: We have not touched on standardisation, for example. Each project has lessons learned. You touched on the transport in south Wales. That comes into the standardisation process, and when you design a house or an apartment, you need to take that into consideration. You might say, “Yes, I can do a house. I could do two modules on the ground floor, two on the top floor, but they are quite wide”, and you need to think about how you will get them to site. You might need to make them narrower and add another module. There are lots of things to consider, but once you have a standardised product, you can take all these efficiencies into account going forward, which is where it speeds up.
Q86 Lord Carrington of Fulham: I want to explore this. I understand the construction and the advantages of the category 1 MMC that you are producing. Your experience seems to be at variance with some of the other people we have had in front of us. You are delivering a product that if priced correctly, as you rightly say, looks very attractive. Why are you not selling vastly more of them? Why are the housebuilders not saying that is the answer to all their prayers, because they do not need to train so many skilled people to be on-site anymore because they will all be trained by you to do what they need to do for that particular unit in the factory? Why has this not taken off and pretty much shut down traditional housebuilding, particularly in the affordable housing area?
Craig Garbutt: The very simple answer is that we cannot sell our project in the UK yet, because we are not allowed on the framework. We are a company that has been around for over 60 years delivering modular schemes all over the world. We have delivered probably over 2 million houses via modular solutions and panelised systems in the Far East and Australia. We deliver category 1 3D volumetric all over Europe. At the moment, we cannot sell our product in the UK, because we are excluded from a lot of the frameworks, because we do not answer the questions correctly. That is it in a nutshell. That is why we have decided to work in Wales. The Cardiff guys have embraced us, and we are delivering projects in Wales at the moment.
Lord Carrington of Fulham: So we should be putting questions to Homes England about that.
Nicky Jones: There should be more incentives for local authorities and housing associations.
Lord Carrington of Fulham: What you are saying is that the problems of your competitors going bust, and the problems we heard about from the lady from Platform earlier saying that it is more expensive, are really down to the bureaucracy that is failing to recognise that there are products that are used elsewhere in the world that could solve the problems of our failing to build 300,000 houses in this country a year.
Craig Garbutt: In some cases, yes.
The Chair: I will jump in and amplify that, because I hear Mr Garbutt saying exactly that. But he is also saying that the way in which the procurer of the product looks at it also misleads, because they are not taking proper account of the cost of the modular unit itself or of the prelims that go into it or the time savings in what they are doing. We heard that from Kate, our previous witness. Her sole focus was on environmental factors. That was her target. If you said to her, “Is it your target to get people into the house a year earlier than they might, with the financial and social benefits that arise from that?” I am sure she would have said that was a very good idea. However, the focus is on the house. They are not looking at it from a commercial point of view. I understand that. It is quite complex.
Lord Carrington of Fulham: It certainly explains it with people from the social housing side, but it does not explain why the big housebuilders have not said that this is the solution. We have even had the big housebuilders here saying essentially that it does not work and that they like to employ people to be on-site and build the house in the way it has been done for years and years. There seems to be a disconnect somewhere. These companies are extremely financially sophisticated; they will have made the calculations, got the cash flow sorted out and all their analysis, and yet they are saying no. That may well be purely because, as you say, the regulators are not recognising the way to get the solution delivered in this country.
Craig Garbutt: I cannot comment on the big-volume housebuilders—I do not know what their model for costs and so on looks like—but I can definitely say that we can deliver projects faster and more efficiently and that the houses will generally perform better.
Q87 Lord Berkeley: Going back to one of your earlier comments about your system of getting permissions in the Netherlands and here, you said that it was possible there to build the groundworks for foundations while you were still obtaining planning permission. How can that work here? The planners will want to know what will be above the foundations. If they have not been told, or if it is still open to question, how can you go in and build the groundworks without knowing what you are going to put on top?
The Chair: Actually, it can work here.
Craig Garbutt: Very simply, the frames are all the same. They are all uniform frames, and we just bolt the configurations slightly differently; we anchor the corners of each frame, which is a uniform system. Whether what goes above the frame is a two-bedroom or three-bedroom house, the anchor points will generally be in the same locations. They are “boxes”, for want of a better word, that are done differently. The only thing that might change is drainage connections, power intakes and so on.
The Chair: There is a legal answer to that as well. It is not illegal to build something without planning permission. If you think that you will get planning permission, you can start work, but you do so at the risk—
Lord Berkeley: —of being told to take it down again.
The Chair: —of having to remove it all. You are not contravening the law, so if you have sufficient confidence that the planning system will give you what you want, you could in this country still go ahead and do them simultaneously. But, of course, they have no confidence in the planning system agreeing to anything, so why would they try?
Q88 Lord Best: Before we get carried away with how well you and others are doing in the rest of Europe, it is worth bearing in mind that we are talking about 15% to 20% of homes built in Germany and the Netherlands; 85% of homes are still built by traditional methods. They have not gone overboard, so let us not worry that we are so far behind the rest of the world. It is a relatively small part of Europe—except for Sweden.
Craig Garbutt: I pointed that out, because we seem to be getting there faster in Europe. It was not to say that the UK is miles behind, so I apologise if I gave that impression.
Lord Best: We all hoped to find that, in Europe, the problem was fixed and that they were just going hell for leather, while here we were left behind. In fact, it is a relatively small portion of the total.
Would you accept that the fact that it is faster is not so important for housebuilding for residential homes as it is for hotels, care homes or building a new McDonalds? In those cases, the day you finish and get started, revenue is coming in big time. The speed does not matter so much with residential building.
The Chair: Why does it not?
Lord Best: Rents are a relatively modest return.
The Chair: If you are in the private rented sector, why would you not be happy to have an extra year’s rent.
Lord Best: You will already face delays of all kinds. In fact, you will not rush too hard at it, because you do not want to reduce the price by flooding the market.
The Chair: That is for sales, not private rent.
Lord Best: So speed for average housebuilders—a few months here or there—is not a very big issue. If it cost a lot more, it would make a big difference.
Craig Garbutt: My understanding—this might be incorrect, so apologies if it is—is that there is a desperate need for housing everywhere in the UK. My understanding is that the faster we get housing to those in need of it, the better off everybody is. Building things in factories and bringing them to site are volumetric offerings, be it level 1 or level 2. If we can in any way, shape or form speed up the process of getting people out of hotels and off the streets into volumetric housing, that is the way to go.
Lord Best: You are quite right that it is a good thing, but it is not so important just in money terms for the housebuilder. I absolutely agree about the social good that follows.
Craig Garbutt: Apologies, but I would disagree, because if the housebuilder can have a site with 100 houses six months or even a year sooner, the rental model changes. Cash is being brought in straightaway to the registered provider.
The Chair: I think Lord Best is drawing a distinction between the private rented sector, where that argument, I think, does apply, and the builds-for-sale sector, where there tends to be a choke, a control, on how quickly properties are released, so speed does not matter. If demand goes up, you do not build faster, you put the price up.
Nicky Jones: Government could help by starting with social housing. We find that different housing associations have different requirements, and it would help if government could set a standard requirement for the whole of the UK for social housing. That would standardise what you want, and everybody would be able to build a lot more quickly.
We often have lots of discussions, and our system is fortunate in that we can change and tweak a few things. If somebody wants a different kitchen from another supplier, for example, we can get it from them. We are trying to develop a standard housing association offering, but perhaps government could step in and say, “Actually, let’s look at social housing and how we can achieve our targets. We’ll set a standard specification for all local authorities and housing associations going forward”. That would help to speed up procurement.
The Chair: I think that is extremely unlikely.
Q89 Earl Russell: Do you think there is a quid pro quo here in you using MMC to provide houses that have a much higher thermal U-value and, in exchange, the Government providing more grants and incentives to build them?
The Chair: Why grants?
Earl Russell: Maybe not grants, maybe through other ways. Can something more be done for the greater environment good and helping this sector more? Put it that way.
Craig Garbutt: In all honesty, I do not know. There have been a lot of questions on how government can increase the uptake of MMC. Nicky made a good point about standardising what we would call an affordable house. For argument’s sake, if government waved its magic wand and asked how to increase the uptake of MMC, my suggestion—this is a personal suggestion, not my company’s—would be to produce a standardised affordable house, categorise it by saying, “This standardised affordable house will be accepted by all RPs across England, Scotland and Wales”, and use that to design two-bedroom, three-bedroom and four-bedroom houses.
You would then go a step further and modularise it. You would speak to all the modular companies, not just us, and say, “Right, these are our standard footprints for houses. We want it modularised”. Traditional constructers can build whatever they can; it is not a problem for them, so they can build whatever. If you have standard homes that are affordable and modularised, it gives a level playing field, and so modular providers can also deliver that house as well as traditional constructers. A modular company can say, “Actually, we can deliver that house there, because we can modularise it. It’s nice and simple. It can be delivered either panelised or volumetric in boxes”. A traditional builder can build it anywhere, because it is bricks and mortar. That would be a first step—a big step—in getting a bigger uptake of MMC and creating a level playing field.
The Chair: Thank you very much. That brings us to the end of the evidence session, which has been one of the most interesting we have had. We are very grateful to you for the time you have given.
