Prefab houses off the production line

One day soon, we'll be making houses in much the same way as we make cars, says Merryn Somerset Webb – in the factory.


Keeping up with the robots in prefab houses for now
(Image credit: © 2013 Bloomberg Finance LP)

One of the conversations that comes up around every dinner table these days is the jobs of the future. In a world of super-fast-moving technology and marching robots, what on earth might our children do for a living? If everything is made on a precision production line, will there be anything left for them to make? The answers to these questions are mostly unknowable (which is a good thing, by the way it saves parents the relentless stress of having to prepare children for anything specific). But it is also worth noting that not all jobs have been disappearing or will continue to disappear at the same speed.

Stop by a residential building site almost anywhere in the world and you'll see lots of men with hammers and handfuls of nails. They're knocking together houses in the same way they have been knocking together houses for decades. Sure, various components of the houses are mass-produced and the materials used for insulation and the like have changed here and there, but to the casual observer the overall scene looks as much like an Amish barn-raising as it did 50 years ago (albeit very much slower; a good-looking barn can go up in ten hours, a new-build house takes four to five months). This makes little sense. After all, why shouldn't a house be manufactured in a factory in exactly the same way that, say, an SUV or a giant wind turbine is, and then taken to its site?

Doing it that way would mean all sorts of good things. First, higher quality. The hammer and nails route is fraught with difficulty. If plumbing, windows, doors, electrics, wallpapers and carpets are all put in on site under time pressure, mistakes and short-cuts are almost inevitable (anyone in any doubt need only spend a few minutes viewing the fury and the misery on any internet forum dedicated to new-build snagging). It is also dangerous. Second, less disruption. The longer it takes to put up a new housing estate, the angrier its neighbours are going to get. If you can build in a factory and drop a house on to a site in four days instead of building it there from scratch in five months, why wouldn't you?

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And third, rising productivity. One of the stunning things about current construction methods is just how bizarrely unproductive they are. Days are constantly lost to bad weather; mistakes are constantly made; the right materials are constantly in the wrong place; and (according to the big housebuilders in the UK at least) keeping labour on site is an increasing problem. Look at a chart of changes in the productivity of various sectors over the past 25 years and you will see this writ large: while productivity in manufacturing has almost doubled over the period (hello robots!) that of construction has barely budged.

So why are housebuilders so stuck in their ways? Simple answer: because it's easy. Let's look at the UK. There is very little competition. The UK had 12,000 small builders in 1988, according to the Home Builders Federation. By 2017, there were just 2,500, something that leaves the big boys with no one to force improvement upon them (there isn't any real global competition in housebuilding). There is very little effective regulation nothing to stop builders shovelling up meanly-sized, low-quality identikit housing with claustrophobically low ceilings, tiny cheap windows and pathetic ten-year guarantees. And there isn't much push back from buyers.

In a market in which the government relentlessly pumps the demand side via subsidising purchases, any house can easily look better than no house and anyway, unlike with lesser purchases, a miserable buyer can't protest by either selling on (too hard) or going to another supplier next time (according to Savills Residential Research the average homeowner moves only every 14 years so there aren't many next times). If you had a ready supply of buyers for any old rubbish and a ready supply of cheap labour to put that rubbish up would you bother with the kind of pesky long-term investing in innovation so vital to the longevity of other industries? Of course not. You'd hire a lot of men with hammers.

Still, before you rush out to get your kids a toy tool belt with a view to giving him or her a skill set that will endure even as the world's lawyers, and doctors watch their careers fall to the robots, have a little look around the market. Times might be changing. Japan is, as ever, ahead of the game: more than 15% of new homes are in some way prefabricated with Sekisui House, Misawa Homes and Daiwa House all producing factory-perfect homes in scale think 10,000 high-quality, durable and long-lasting houses a year, albeit fairly ugly ones.

Elsewhere, as the supply of cheap labour dries up (global wages are finally rising) and buyers and governments start to think about the environmental and social cost of the current system, the chatter about finding a way to make thousands of real homes, rather than "units", in factories for the middle and lower end of the market is getting louder. It is already possible, and increasingly common, to go for a prefabricated house of some kind if you are self-building. Everyone knows about the Huf Haus, and the German manufacturer Hanse Haus makes some great models for self-builders in its Frankfurt factory as well (I'd take the Vita model). In the UK, where less than 10% of the new-build market is self-build, there are several firms starting to make interesting prefabs.

One company, nHouse, makes a model that looks pretty special when you put it next to an ordinary new-build. The three-bedroom houses come in around 20 sq metres bigger than the comparable UK average. They are made of cross-laminated hardwood and core materials are guaranteed for 50 years. They have big windows, high ceilings and every energy-efficient feature you could hope for. They create an estimated 75% less traffic in the building process than a site-built house and can be put up wherever you want in three days. Yes, three days even the carpets are already in when it gets dropped off.

Best of all, one could be yours for £125 a square foot at volume prices. That isn't as cheap as the cheapest out there think £80-£90 but as the production process improves (everyone I spoke to about this told me that, right now, housing factories across the world are where car factories were in the 1970s there's a lot of improving to do), the company reckons it can churn out these fully modular factory-produced houses for close to £100 a sq ft. After all, says marketing manager Nick Fulford, why should low-income families have to live in horrible properties? Why indeed.

However, if modular techniques are really to push up the productivity and quality of the home-building industry, the big site developers also need to be on board. Some smaller ones are: Urban Splash, for example, makes long-lasting and good-looking modular terraced houses that buyers can personalise. But the really good news is that some of the big builders are getting in on the game too. Legal & General, the financial services company, has started a modular homes division with the aim of a full-on construction revolution. Its first build, in collaboration with housing association RHP, is the 26 square metre LaunchPod designed by Wimshurst Pelleriti.

Wilson has hired a team experienced in modern manufacturing, mostly of cars, and plans to produce thousands of "defect-free", super environmentally friendly, light and attractive homes from a brand-new "precision-engineered factory". Not a hammer or nail in sight.

This article was first published in the Financial Times.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.