Posted: 20 Nov. 2019 10 min. read

The housing sector is huffing and puffing to increase productivity

We all remember the tale of ‘The Three Little Pigs’. The Big Bad Wolf blows down the first two pigs' houses, made of straw and sticks respectively, but is unable to destroy the third pig's house, made of bricks. The moral of the story is that hard work, dedication, bricks and mortar for homes pay off; that whilst the first two pigs quickly built homes and had more free time to play, the third pig laboured in the construction of the house of bricks, with the hope that the structure will eventually lead to the most favourable outcomes. However, perhaps this story doesn’t hold true in today’s world?

Some in the UK’s housebuilding sector continue to be slow to innovate. Most still build homes using the labour-intensive method of bricks and mortar (much like the third little pig), believing this is what customers and our culture still want. The first bricks that we know about were being made in Jericho as long ago as 7000 BC, so it is a hard habit to break. However, we see the Government is increasingly on the march to champion change, to see the sector embrace and pioneer technology and innovation. There’s a growing message that if the sector doesn’t change fast then we will miss our housing delivery targets e.g. for England set at 300,000 new homes being provided per year from 2025, where outturn for the sector was at 217,000 homes being built in 2018, which was noted as the largest increase in almost a decade (reference to number of homes included in this government article).

Mankind may have a long affinity with bricks and mortar, but the UK Government is asking the sector to rethink this traditional approach to address the housing crisis, and citizens are expecting it. Demand for new housing is growing and the supply is too low. Innovation is a fundamental driver of economic growth and competitiveness, which is as true of housing as it is for any other sector in the UK. As with the advent of the production line, the house building environment feels on the cusp of rapid change.

This change to using digitally enhanced construction methods has been given a wide array of labels, including ‘modular’, ‘off-site manufacturing’, ‘volumetric housing’ and most commonly, ‘modern methods of construction (MMC)’. Ultimately the objective behind these terms is the same – use innovative methods to create more and improved homes. Technological innovations in construction can help address demand-supply imbalances; facilitate adaptable solutions so homes are built to meet the differing needs of people at different stages of their life; as well as reducing the cost of building linked to increased volume and productivity efficiencies, helping ultimately to improve affordability alongside quality and availability for people who need homes.

Pre-fabricated builds are not actually a new idea. Crystal Palace, the world’s first large-scale prefabricated building was built in 1851 from cast iron and glass. The problem is that ‘MMC’, dare we say ‘Pre-Fab’, is just not seen as fashionable for homes. In Sweden, MMC however has been embraced, with 84% of detached detached homes noted as prefabricated in 2015 (Global Construction Review 2015). Compare this with c.5% of all construction output in the UK being off-site or Pre-Fab today.

The Government is stimulating action in the market, more and more home builders whether large, medium or small enterprises are now responding, exploring opportunities to adopt MMC with increasing recognition of its extensive benefits for the future of our houses, including:

  • improved health and safety and reduced risks of life threatening and/or serious injury by moving more production off building sites into manufacturing plants;
  • the skills agenda, with more lower skilled people able to join factory production lines, working alongside the skilled trades;
  • higher provision of welfare facilities;
  • sustainability, environmental considerations; and
  • quality control mechanisms to reduce defects to zero prior to homes leaving the factory environment.

Given our observations in the market, some areas of house building we think ripe to be considered for further innovation and positive disruption opportunities include:

Factory construction of homes is a fast emerging trend, but it is not without its challenges including the initial cost investment and the need to be logistics savvy. Whilst such methods currently on offer may also not be the full solution immediately, it should undoubtedly become a bigger contributor to new homes. At the time of writing, an exciting collaboration between an international house builder, Homes England and a UK house builder completed in the summer 2019 is gaining traction. The international house builder, a market leader in their home country is now investing in UK housing, they seem to understand that an approach of placing an architect, thus design at the centre of the process has the ability to ensure the ‘factory benefits’ they also understand does not come at the expense of flexibility, design or bespoke input for creating homes people want to live in.

Does this emerging shift in housing noted above mean we, as a nation who place our trust in bricks and mortar can find the same comfort in alternative, more innovative and productive approaches? Culturally, there is growing recognition that the housebuilding community do not market new homes to consumers as ‘modular’ or the other titles mentioned earlier – they are just ‘new homes’ and a growing number of the modern day consumers do seem to have little interest in how they’re built as long as they can get on the housing ladder, gain a mortgage and insurance products to cover their home investment. Finding a way for more to love these manufactured homes, re-educating financiers that traditional build is typically an appreciating asset and that an MMC home can also be an appreciating home not a depreciating one is important, when these homes can be supported with warranties and servicing. These points are thought to be some of the key bumps in the road to still overcome if the sector is to continue to accelerate these types of housing products being accessed by more customers.

We do need to reduce our reliance on building homes in the same way we have for the last 9,000 years. If you always do what you’ve always done, you’ll always get what you’ve always got. Whilst some of the legacy housing community may not be embracing innovation at speed, when it comes to broader real estate and construction organisations there is no doubt that the stakeholders of this important industry are continuing to seek and drive a step-change. Much like the third little pig, hard work and dedication will continue to pay off in the future, whilst the materials will clearly need to change, alongside improving the innovation when producing things, it is likely that by being bold and striding away from past norms then this sector will stand a greater chance of keeping the wolf from their door.

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Chris Baldwin

Chris Baldwin


Chris is a partner within the Development & Assurance group in Real Assets Advisory, with a background in residential valuation and assurance. Chris has over 20 years of residential property experience. He leads the house builder and residential sector within Deloitte. He has worked with a range of private and public sector clients across the UK and has considerable experience in dealing with house builders, local authorities, registered providers and student housing developers / investors.

Greg Salisbury

Greg Salisbury


Greg is a Consultant within our Real Estate Consulting (REC) team, having joined Deloitte in 2014. Based in Manchester, he has experience in business transformation, portfolio, programme and project management. Greg has a Masters Degree (MSc) and track record in delivering and managing portfolio, programme and project management requirements, as well as business transformation programmes. To date, he has worked in a range of sectors including Defence, Nuclear, Local Government, Infrastructure, Energy, Oil & Gas.