Unlocking Solutions: Modular Construction Addresses Housing Crisis Despite Industry Challenges

Modular construction emerges as a promising remedy for the housing crisis in the construction industry despite the challenges it faces as a demanding business amidst low demand from various sectors. Nevertheless, its innovative approach holds significant potential for addressing housing shortages and transforming the construction landscape.

(Photo : Business Insider/Hyoung Chang)

Challenges in Modular Construction

Advocates for housing and policymakers alike are searching for various potential answers to the housing crisis. It is noted that there has been little progress in the productivity of housing construction for two decades. Compared to conventional building methods, building homes in factories can be more productive and less expensive. Even when workers prepare the foundation on-site, the house can be created simultaneously in a factory without the process being slowed down by the weather or any other delays.

As mentioned, contemporary tech-enabled variants of modular housing could provide a more practical and environmentally friendly solution to housing shortages. However, the industry has seen a higher adoption rate in certain nations, in contrast to other countries, such as the United Kingdom, where it has yet to scale. Modular housing is manufactured in a factory setting under strict control, which results in a reduction in the amount of trash produced and in more energy-efficient homes. The managing director of British modular developer TopHat Communities, Andrew Shepherd, stated that for the last three years, the company's facility had 'zero waste to landfill.'

According to Shepherd, constructing entire portions at a single location reduces delivery trips to the corresponding sites. A report published in 2022 by the industry association Make UK Modular found that modular construction required 80% fewer vehicle transfers to reach development sites. But despite these advantages, the industry has had several drawbacks in recent years, and it is still in its infancy in both the United Kingdom and the United States.

Following Modulous's failure to find a buyer, the company went into liquidation in January. Moreover, the modular house plant owned by Legal & General was shut down when Ilke Homes went bankrupt in the United Kingdom in the previous year. In 2021, the company Katerra, financed by SoftBank and located in the United States, filed into bankruptcy, making it one of the most prominent failures in the sector.

Professor of sustainable business Jonatan Pinkse at King's College London emphasized that one obstacle for modular construction companies is that they must first invest in a factory to manufacture modules and then have sufficient projects in the pipeline to recoup this expenditure. However, he indicated that this provided a more significant challenge when combined with the headwinds that affected the entire construction business. These headwinds included rising mortgage rates, energy costs, and a crisis in the cost of living in many countries that caused people to delay purchasing households.

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Benefits of Modular Construction

One of the most notable advantages of modular construction is its extraordinary speed. Projects can be completed fifty percent more quickly than with conventional building techniques since the excavation and foundation preparation occur on-site while the modules or components are being manufactured off-site. Moreover, turnkey solutions, including fire safety equipment, furniture bundles, and white goods, can be customized to be installed in modular structures, allowing for immediate occupancy. 

Modular building allows for a quicker return on investment compared to techniques that have been used in the past. The ability to occupy the building sooner is a benefit of modular construction, irrespective of the project budget. Accordingly, this eliminates the need for significant capital investments, making modular structures more inexpensive. Other procurement methods, such as leasing and hiring, are also available.

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