Could Brexit increase modular housing costs?

Modular housing could help reduce the impact of rising material and labour costs forecast to hit housebuilders following Brexit.

With the UK leaving the EU, a fall in the value of the pound, increased trading tariffs on raw materials from Europe and the end of freedom of movement could all increase the cost of housebuilding. 

In January, 70% of builders reported a rise in material costs due to the fall in the value of the pound. 

The research from the Federation of Master Builders found there had been a 22% increase in the cost of Spanish slate and a 20% rise in timber costs. 

Meanwhile, a number of developers and housebuilders have warned of a skills shortage following the UK’s departure from the EU.

How can modular housing reduce the impact of rising material costs?

Speaking to Development Finance Today, James Lidgate, head of housing at Legal & General Capital, - a modular housebuilder – felt modular housing construction could negate some of the risks to housebuilding post-Brexit. 

“Unlike traditional methods of housebuilding, modular construction is faster and far less labour intensive.  

“Modular factories also create employment in areas where it is needed the most and training opportunities can be maximised, providing long-term, stable jobs.  

“Given that 11% of UK construction labour comes from the EU - and this proportion is far higher in London and the South East - and the shortage of skilled labour that currently exists, these benefits of offsite construction may negate some of the risks associated with a structurally different labour force post-Brexit.”

However, James added that it was supportive of keeping strong trading links with its EU suppliers as the UK worked its way through the upcoming negotiations. 

Sam Howard, COO at Regentsmead, felt leaving the EU could have an impact on the cost and consequently the uptake of modular homes due to the falling pound and the related import costs.

“Modular housing using component parts sourced from abroad will arguably increase in price and potentially reduce the perceived cost benefit over traditional housing. 

“Without innovative solutions to the housing market crisis - like modular building - we will never build the amount of new homes required. 

“One solution to [the] impending cost inflation due to the falling pound is to establish a UK modular construction industry.” 

The cost of modular housing can also depend on where the units are being manufactured.  

For example, work has begun on a modular-built hotel in Luton, but is being constructed in Poland. 

“If Sterling weakens further, the input costs will rise, regardless of where the modular units are manufactured,” explained Michael Dean, principal at Avamore Capital.

“That being said, with so many of the construction workforce being EU migrants (many of whom will leave the UK), the construction industry may increasingly rely on modular construction as it requires fewer workers on site. 

“Increased demand plus higher input costs will inevitably lead to higher costs of modular homes therefore.”

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