Swan Housing Association – Written evidence (OMC0076)

Our Offsite Manufacturing Experience:

Swan Housing Association is leading the way in the use of off-site construction in the Housing Association sector. We have invested £3 million in our own factory in Basildon, Essex which uses Cross Laminated Timber to build modular homes which are delivered to site fully fitted out, before being installed, the exterior walls and roof added. We have already delivered our first modular show homes to site and are now marketing our first shared ownership and private sale modular homes. Our factory will be able to produce up to 500 homes a year.

Our “NU build system” won the “Best Approach to Modular Construction” at the Inside Housing Development Awards 2017. The judges noted that we had been able to fund the factory set up and running costs through our £130m regeneration of Craylands; the creation of local jobs; and the delivery of high quality homes in 50% of traditional construction times, with 90% savings on waste and initially 10% cost savings, with further savings expected as efficiencies increase.

We have significant construction experience having already completed over 1,200 starts on site throughout our own in-house construction company NU living using traditional construction methods. We’ve built over 900 homes to date generating over £60m which has been reinvested in affordable homes and services for our residents.

About Swan:

Formed in 1994, Swan Housing Association has been providing high-quality and affordable homes to rent and buy for over 20 years. Today, Swan locally manages over 11,000 homes in Essex and East London, specifically in Tower Hamlets, Newham, Barking and Dagenham, Redbridge and Havering; supported by dedicated, local staff. We were awarded Housing Association of the Year at the WhatHouse? 2017 Awards for our approach, including our innovative offsite construction project.

We have built-up a specialism in large-scale regeneration schemes, such as £300m Blackwall Reach in Tower Hamlets and Laindon Shopping Centre in Essex. The former will see the existing 252 Robin Hood Gardens properties replaced by over 1,500 homes during the next decade and has already won the ‘Award for Planning for Housing Growth’ at the Planning Awards 2015. The latter will use modular construction to build a new town centre and the designs for this scheme have already won national and international recognition as set out in our response below.

Our social purpose: “delivering homes and services to those who need them” underpins everything we do and that is why we focus on large scale regeneration as we can build mixed tenure sustainable communities, where homes for private sale and commercial uses subsidise the provision of affordable homes. Our corporate strategy challenges us to generate £250m this way by 2027 to reinvest in homes and services.

Swan is committed to helping the Government achieve its house-building objectives and our ambitious corporate strategy targets us to build an additional 10,000 homes by 2027. Our secured development pipeline of over 6,500 homes includes the £1bn regeneration of Purfleet on Thames which will deliver up 2,850 homes along with a new town centre for Purfleet as well as one million square feet of film studios and even a new university campus for a leading London University.

With the Committee looking specifically at “The Perceived advantages of offsite manufacture for construction”, Swan would like to share its experience with the Committee to aid its timely and important inquiry.

Perceived advantages of offsite manufacture for construction

1. What are the opportunities offered by offsite manufacture for construction? What are the likely drawbacks? What factors are likely to influence clients, architects, design engineers, contractors and the supply chain in deciding whether to choose offsite manufacture?

What are the opportunities offered by offsite manufacture for construction?

For Swan the key opportunities offered by offsite manufacture are:

• Time: we can reduce both the overall time taken to construct new homes and the risk of delay that exists with traditional construction:

• Off-site modular housing manufacture enables a significant overlap between the onsite activities (infrastructure, foundations etc) and the offsite construction and fitting out of homes saves around 50% of construction time.

• Manufacturing the homes in a sheltered, fully serviced factory significantly reduces the risk of delay due to weather.

• Efficiency: we have been able to introduce efficiencies through the use of less specialist labour; reductions in waste; and more standardisation.

• Quality: we have achieved improvements in quality through the introduction of a manufacturing approach:

• Our factory operates on a LEAN basis, by building quality control into all processes and purposefully designing the homes so that they can be assembled, rather than built, in a factory in a safe and controlled environment.

• The modules are constructed to millimetre fine tolerances and so we can ensure levels of consistency that enable us to standardise the components that we install into the modules to such a degree that we can pre-order kitchen work tops for and know they will fit.

• Mitigation of labour/ skills shortages: By creating a high-quality manufacturing environment, as opposed to a traditional onsite building environment, we can attract people who might not otherwise want to work in construction. This will help us address the labour shortage and enable us to attract skilled workers who may no longer wish to work on site. Working on shifts enables flexible working and we are already seeing the benefits of this environment for encouraging a diverse workforce. We are supporting for example one employee, who is on the spectrum, and who is able to work with us in the controlled factory environment, whereas he would be likely to struggle on site.

• Sustainability: We are able to deliver a home that is sustainable for it’s lifetime. We use Cross-laminated timber (CLT) which is a sustainable construction material, it is tough, long lasting and used widely throughout Europe and the USA to construct homes. Structurally it can produce CLT units from 1 to 12 floors, it's an easily machinable, large scale product which is thermally and acoustically efficient. Off-cuts of CLT are used to heat and power the factory. Our experience shows we can also achieve up to 90% reduction on waste compared to a traditional building site.

• Customer Choice: we can offer purchasers of the private sale modular homes up to 36,000 combinations of layouts and external and internal finishes in just one of our houses. The customer can design their own home, much as they would a new car, seeing the price of each option reflected in the cost of the home with each choice made. We have created a bespoke “online configurator” to allow buyers to do this from the comfort of their own home. This in turn enables us to create a varied street scene at Beechwood where no two homes will be the same but using a design guide approach will complement each other across the estate. This also helps us to attract buyers to the area, which pre-regeneration may not have been one they would have considered, helping build a mixed tenure, sustainable community.

• Less disturbance to communities surrounding regeneration sites: We are able to realise benefits for the environment and for residents’ local to the construction site as modular creates less disturbance and less fuel used for deliveries etc.

What influenced Swan to pursue an off-site construction approach?

• The decision to open our own factory was driven by the opportunity presented by the development of the Beechwood Village scheme in Basildon, Essex, where we are building around 570 homes over the next 6 years as part of the regeneration of the Frierns and Craylands area.

• Unlike most housing associations (HAs), Swan has its own in-house construction team, which was set up in 2007 to enable more control over the construction process and cost savings.

• In March 2015, we completed 28 homes at Beechwood and a further 125 affordable homes were handed over in June 2015 (121 rent) and July 2015 (4 shared ownership) with the assistance of funding from the Homes and Communities Agency, now Homes England (HE).

• The scheme had been very difficult to deliver on time due to a combination of bad weather and issues with some key sub-contractors. Both the fit-out and timber frame contractors went into administration during the contract.

• In early 2015, we started to look at the existing market for the supply of modular homes and commissioned a detailed study comparing various systems and options including one of developing our own factory. 

• From this review it was clear that the existing market was quite immature and had limited capacity. The market had very high overheads, which we believed arose from the need to build in contingency for lack of continuity of work and a higher profit target than traditional construction.

• In addition, traditional construction necessarily included the extra costs of rent and business rates arising from the operation of a factory.

• In the case of Beechwood Village, the overhead was in the region of 25-30% compared to a traditional main contractor’s margin of 6-8%.

• As a result, we developed a business plan predicated on building around 100 homes a year – initially in a factory capable of producing three times that number. The business plan showed that we could build new homes at around 5% lower cost than we were at the time, even when producing only 100 homes.

• As additional capacity in the factory is fully utilised, we expect to save a further 10%.

• With our development programme currently delivering around 700 homes a year, we believe we are ideally placed to ensure the factory operates at optimum efficiency in the future, by having a guaranteed order book that Swan is fully in control of.

2. It is often claimed that offsite manufacture can lead to:
• lower costs, faster delivery and increased quality;
• increased productivity;
• improved health and safety;
• greater provision of new, affordable housing.
 

What is the evidence for this?

• We have already delivered our first modules to Beechwood, our £150m regeneration of a failing 1960’s Radburn Estate in Basildon, Essex. We are now moving into full production at our factory and through that full production we will:

• • lower costs accelerate delivery and increased quality: we will deliver up to 500 homes (or 1000 modules) per year. These homes will be delivered in 50% of the traditional construction time and we expect to achieve 15% cost savings when in full production. Due to the precision manufacturing process and the controlled production environment (tolerances are to millimetres) defects are significantly reduced and residents will have a higher quality home.

• increase productivity: Now that we have established our “NU build System” and set up our production line on our factory, the move into full production will see us deliver 10 homes a week.

• Maintain and enhance health and safety: As a traditional contractor we have a clear focus on ensuring the highest standards of health and safety on all our sites. The factory however, presents an opportunity to have a very controlled production environment with all tasks clearly documented and carried out in a clean, dry factory environment with clear visibility of all works. The use of significant cutting and lifting machinery does need to be properly managed but again, this is happening in a stable, controlled environment.

• Be able to deliver greater provision of new, affordable housing: We are using our factory, which was viable at 100 homes, to deliver far more at up to 500 homes. These homes will be used to provide both private sale and affordable homes at the regenerations set out below. However, the Committee should note that even where private sale homes are provided, because of our business model, with all profits being invested in either new affordable homes or services for our residents, these private sale homes will subsidise further affordable homes including homes for social rent as well as shared ownership helping us deliver our 6,500-home secured development programme making schemes more viable through the benefits outlined above:

• Beechwood Village (above left)
• Laindon Place, Laindon Essex: 222 homes: 69 shared ownership apartments and houses; 155 private sale apartments and houses
• Watts Grove, London Borough of Tower Hamlets (image left): 65 homes: 45 apartments for shared ownership and 20 for rent.

3. What are the drawbacks to offsite manufacture for construction?

Our experience of opening our factory have highlighted the following challenges to successful production, although these are not necessarily “drawbacks” as we have been able to overcome them:

• Finding a suitable, affordable factory building in Essex or east London – we have invested £3m in a factory in Basildon, just a few miles from the first two of the regenerations that we will use modular construction to deliver.

• Understanding the accreditation options and processes to ensure mortgageability – we have secured BOPAS accreditation (Buildoffsite Assurance Scheme) for our new homes.

• Recruiting a suitable MD for the business – We have appointed Paul Williams, who is vastly experienced in the manufacturing field at an executive level and is bringing a fresh perspective to the manufacture of the homes.

• Front ending all the design: You must do this all up front to ensure that the product can be produced in the factory and seamlessly delivered to site in what is a new way of working for everyone. Our manufacturing and construction teams, our architects and engineers etc all must be involved. There is also a cultural divide between the construction team and the manufacturing teams– they literally speak a different language. The manufacturing team focus on lean thinking, production processes and designing out issues – they can design in standardisation because of the high level of tolerances which streamlines production to a level that you cannot achieve on site – e.g. worktops can be templated and pre-made as the kitchens will be made to precise measurements. However, we have overcome this with the right teams on the ground, this can be overcome and both teams have learnt from each other in a positive way!

• Overcoming the design challenges of creating the custom build product – we worked closely with our architects and Basildon Borough Council planning team to agree an approach which will enable reserved matters to be used to quickly deal with custom build selections.

• Productivity – you need to build in time for the teams to develop the processes and product – R&D is standard in the manufacturing sector for a reason. Prototypes take time to develop but all that learning contributes to a speedy but high-quality production line later.

• Securing another long-term project, like Beechwood, to ensure continued production – we will use modular housing at both Laindon Place and Watts Grove.

In the future:

• Ensuring that the factory output is matched to on-site processes to avoid either a lack of production in the factory or an oversupply of modules which will have to be stored. Our intention is to use modular as a base, using traditional construction on top, that way we will always have a core of work going through the factory, accelerating the delivery of homes.

• Finding incremental efficiencies in the manufacturing process to further drive down costs.

• Finding ways to enable us to deliver extra capacity to meet future demand.

4. What re-skilling of the construction workforce is required to facilitate a change to more off-site manufacture for construction?

It is our experience that whilst specialist manufacturing experts are required to ensure a precision manufactured approach can be applied to production, the construction of the modules requires skilled multi-trades construction tradespeople, the majority of whom we have found are easily able to adapt to working in the factory environment. We are working with PROCAT to develop the first modular construction apprenticeships at our factory. We also have been partnering with Essex County Council as they recognise that modular construction will be a key construction method of the future and want to ensure that there are training young people to have the appropriate skills to work in this sector.

5. Can the benefits of standardisation and factory manufacture be realised without hampering architectural ambition? If so, how?

• The projects that we are delivering through modular manufacturing demonstrate that there is no need to hamper architectural vision. We have worked closely with our architects on both schemes with the result that both are architecturally visionary:

• At Beechwood West, we have worked with our architects PTE to create an ambitious scheme. A sense of arrival, new human scaled streets and a substantial green heart form the focus of the new masterplan. Each of the new houses has been organised around a series of streets and green spaces to create a variety of different characters and places of interest. The new public realm will offer a highly legible layout that is both attractive and easy to navigate. A series of “Linked Greens” connect the significant public amenities adjacent to the site. The homes themselves are steeped in the Arts and Crafts attention to detail that is so sought after today, whilst remaining contemporary in appearance and boasting 21st century environmental performance.

• Beechwood West was highly commended at the National House Awards 2017 in the Best Scheme in Planning category (losing out to Laindon Place our other Essex based modular regeneration). The NHA 2017 judges said they wanted to highly commend Beechwood because it was “a refreshingly different submission, not only with the design of the homes but also the self-build/customisation. It shows outstanding community engagement and the use of innovative construction and local labour is fantastic and deserves recognition.”

• Laindon place (above) will deliver a new High Street for Laindon, with shops, a new integrated medical centre, Swan office, high quality public realm and 224 new homes. Laindon Place, designed for us by PTE and CF Moller has already been recognised nationally:

• scooping the coveted Best Scheme in Planning at the National Housing Awards 2017;
• the Best Regeneration Award at the Housing Design Awards 2017; and
• was shortlisted for Masterplan of the year in the Architect’s Journal Awards 2017.

The NHA judges said about Laindon “A great scheme that is both regenerative and visionary and brings together residential and commercial uses to create a new heart for the town.”

• Laindon Place has also received international recognition being Highly Commended in the MIPIM/ Architectural Review’s Future Project Awards for Regeneration and Master Planning. An award which showcases outstanding architectural projects from around the world proving that offsite manufacture need not hamper architectural vision.

6. What R&D is needed, and by whom, to realise fully the potential benefits of off-site manufacture?

Systems need to be mortgageable and acceptable to our lenders in terms of charging as we rely on borrowing against completed homes to fund our future developments. Some funders are cautious about accepting too many modular homes as security as it is a relatively new product. Further guidance and R&D to support this would be useful. We have already achieved BOPAS (Build Off-site Property Assurance Scheme) accreditation which entails an independent assurance that our modular homes will last a minimum of 60 years, and our developments will come with a 12-year warranty in line with traditional construction but further guidance for lenders would help accelerate adoption of this approach.

7. (If published) does the construction sector deal correctly identify the issues faced by the construction industry and the actions that the Government and other stakeholders need to take to address them? What should it contain/what is missing?

8. What changes could be made to public procurement processes to encourage more economically and environmentally sustainable practises in the construction industry and facilitate off-site manufacture?

Central and local government can help to accelerate the development of more off-site manufacturing facilities. They can set clear targets for the adoption of off-site manufacture on sites that they own, they can incentivise councils and housing associations to build affordable housing using these techniques through prioritising grant funding for such projects, and they can encourage the sharing of knowledge and best practice.

4 May 2018