Insights into Affordable Modular Housing in England, the US, and Around the World w/ Homes England[podcast transcript]

John McMullen

Hello and welcome to Inside Modular: The Podcast of Commercial Modular Construction brought to you by the Modular Building Institute. Welcome everyone. My name is John McMullen and I'm the Marketing Director here at MBI. Today I'm joined by Edward Jezeph of Homes England and we're just here to talk about what England is doing to combat its affordable housing crisis, and to share insights from his recent international tour of modular manufacturing facilities. Edward, welcome.

 

Edward Jezeph

Thanks, John.

 

John McMullen

I really appreciate your time. Thanks for being here. Tell me about yourself. What's your background and how did you find yourself at Homes England?

 

Edward Jezeph

So, I lead off site innovation and MMC at Homes England. I'm a chartered surveyor by background real estate investment professional. I started my career for about a decade in private wealth in multifamily wealth, doing real estate investment around Europe. I joined Homes England about seven years ago, during which time I've very much transitioned into my current role as the MMC off site and modular agenda has grown in the United Kingdom.

 

John McMullen

Very good. So, what is Homes England exactly? What is its goal as an organization? What's your role there?

 

Edward Jezeph

Homes England is a government housing agency in the UK. So, there's a separate government department which sets policy and some of the regulations around the housing market. Homes England is a delivery body that supports the housing market to deliver the government's housing, objectives and housing targets in terms of number of homes delivered per year. So, Homes England supports about 50,000 homes per year in delivery, but we don't actually build any of those homes ourselves. We work with landowners, house builders, housing associations, municipalities to deliver those homes. So, we managed about 22 billion US in public money and achieving that through a really broad financial tool set of loans, grants equity investments, alongside public land that we dispose of, supporting those partners to deliver the homes that we need in good places.

 

John McMullen

In a general sense, whether it's in England or in the United States, what's your opinion about the role of government when it comes to affordable housing? I know there's a lot of thought about that here in the US. What's that like in the UK?

 

Edward Jezeph

So, the UK government sets the political context for the affordable housing in the UK. At the moment, that's 11 and a half billion pounds, about $15 billion funding program. This provides grants subsidy to local authorities, municipalities, and housing associations, the private often charitable bodies, which manage much of the country's public housing. The grant funds the value gap between construction costs and subsidized market value. Homes England is the delivery body for this program. When the government launched the program in 2021, they included a 25% mandate for offsite construction to really shift the focus of the affordable housing sector, towards the offsite, MMC and modular delivery routes. This will result in around 20 to 30,000 affordable homes being delivered in a modular panelized format, supporting both the growth of the offsite sector and delivering higher quality affordable homes faster.

 

John McMullen

I know you've been very busy lately. Traveling around the world learning from and about different modular housing manufacturers and methods. Where did you start? How did that sort of international tour come about?

 

Edward Jezeph

It came about actually due to a collaboration with the United States and the United States Government, particularly the Department of Housing and Urban Development. They've launched a research program and a roadmap into offsite construction. That involves three stage international tour, followed by a conference in the US. The first stage of that tour just happened to be the United Kingdom, where I connected with the US research team, and policy officials from the US HUD department. I hosted them on a tour of many of the modular manufacturers we have here in the United Kingdom, both panelized construction and modular, also Scotland as well, which was supported by some Scottish colleagues.

 

John McMullen

I'm interested in where you went originally. I know we had a couple of conversations before this call it started, I think Japan.

 

Edward Jezeph

Yes. So, after the UK trip where myself and Homes England hosted that US delegation, the next stage of their research trip was to Japan in March last year. I was very kindly invited to join that to continue the collaboration, that international experience and understanding. So, I joined that trip which was for a week in Japan predominately based out of the Tokyo region where we met with a really impressive array of modular manufacturers and panelized manufacturers. Sekisui House and Sekisui Hein, which is part of Sekisui Chemical alongside visiting projects and seeing a wide range of traditional construction methodologies alongside.

 

John McMullen

I'm interested in your impressions of Sekisui House. Our executive director was just there a few weeks ago and was hugely impressed by what he saw. I'm curious what your experience there was like.

 

Edward Jezeph

Sekisui is an extraordinary company. I mean, it's one of the largest house builders, if not the largest house builder in the world, probably 50,000 homes or so a year. It has seven or eight manufacturing facilities domestically, about 4.4 million square foot of manufacturing capacity within its own business. So, it's a business of truly extraordinary scale, delivering both steel and timber systems. So, in terms of what is possible with modular and offsite construction, from my perspective, Sekisui House is a real international leader demonstrating what has been possible. It didn't happen overnight. It's a very mature company, a company that has achieved that technical capability over decades. But it is impressive in terms of its scale of automation, and the level of customization that it offers its customers.

 

John McMullen

Do you think there's any potential for the building systems like they have for what you guys are doing in the UK?

 

Edward Jezeph

Absolutely. So, Homes England actually partnered with Sekisui House as they invested into the UK. They partnered with a business called Urban Splash, which is a regeneration company based out of Manchester in the UK, 25 years of regeneration history as that company. They created a partnership called Urban Splash House, which was a modular manufacturer, and Sekisui co invested was looking to bring their skills and technology to the UK. The challenge of that is getting the market fit in a different geography in a different housing economy and that was particularly challenging Urban Smash House.

 

So, the modular manufacturer launched its production in early 2020, which was pretty bad timing with the global pandemic. Therefore, they had a lot of challenges in getting the industry to agree to innovate and to do things differently at a time of global crisis. What we did see was how challenging it is to do something new within an existing housing system and how so much regulation, warranties, existing market practices and behaviors need to be adapted to adopt that methodology. So, it's not about just skills and technology transfer. It's not about bringing one of those advanced manufacturing facilities to a different geography. It's about how you integrate it into the business models.

 

The Japanese business model that sells your house and the market that they operate in is very different to what I've seen in the UK and in the US in terms of its predominantly direct to consumer solution. So individual homeowners buying a piece of land or securing a piece of land and then going to a benefactor and saying, Will, you replace this house, demolish what's there and build me a fully customized home on that site. Secondary House has 1700 in house architects, that you can deliver that consumer process so very different to what we have here in the UK.

 

John McMullen

So, after Japan, where were you off to next?

 

Edward Jezeph

So, after Japan, the research trip, led by the US team went to Sweden. There was probably a greater focus on timber and timber construction systems. Sweden has 70% forest cover. It's got a very mature and stable forestry industry and forestry products. Therefore naturally, with that resource and that natural skill set they build extensively out of timber. We kicked off the research tour at the Wood Hotel in Skileffler just below the Arctic Circle, which is a 20 story CLT timber hotel above a ground floor concrete podium. So certainly, the largest timber building I've ever personally been in, which is incredibly impressive. We met with a number of timber, sawmills, CLT manufacturers and the modular manufacturer linkbacks in putea. In the Arctic Circle, which has got a 452,000 square foot manufacturing facility delivering timber multifamily, between three and nine stories.

 

John McMullen

Outside of Sweden, I know they have huge access to forest products and they're making lots of CLT products, do you see any advantages of using CLT in a large-scale construction of modular offsite housing? Is that something you think is best done in areas that have more access to it? Is there an advantage to bringing that elsewhere?

 

Edward Jezeph

That is a fascinating question. I think it comes down to what you are trying to achieve. Clearly if you want to achieve a very low embodied carbon building in its entirety and you are willing to look at doing the superstructure out of that CLT solution, then you can do that to certain heights and certain locations. You need to take some of the safety aspects into consideration as well and that aspect is certainly important, but it's very impressive what is achieved. In the UK, we actually have regulations that ban combustible materials in buildings of a certain height, which is limiting the growth of timber and residential at the moment. The government has launched a timber construction strategy trying to explore how we can actually change that in the UK and start using it more extensively. At the moment, we actually see hybrid structures for office buildings. So, steel frame buildings with CLT floors, and ceiling cassettes systems as being kind of a hybrid solution, where you're taking the best of what the steel can offer and offering some of the carbon benefits of what the CLT can offer. So, I think it's you can achieve whatever you want to. It's really what outcomes you’re trying to obtain.

 

John McMullen

So, you've been to Japan, you've been to Sweden recently and I understand that you've traversed a few time zones here in the US as well. Tell me about that trip. What was your first step here in the States?

 

Edward Jezeph

Indeed, eight states in two and a half weeks was quite a whirlwind tour. I started my trip in the city of New York. Fantastic to see what that manufacturer is doing in terms of modular manufacturing and delivery, using a broader supply chain. After New York, I went to Boston, where we visited the Sanger Band North American facility, their research facility, followed by Benson Wood Unity Homes in New Hampshire. Subsequently, we went back to the Volumetric Building Company’s Boston design office. After that, I flew to Washington, DC, which was the main focal point of my trip to meet with the United States government. Alongside that, we went to Baltimore to Blueprint Robotics, and then met with Van Meter as well in Virginia.

 

John McMullen

What was your experience like at that workshop in DC? Who did you meet and what was the goal there?

 

Edward Jezeph

The goal was quite simple. To better understand offsite factory built housing construction, identifying barriers to its wider use in the United States, and to explore whether this construction method could solve the conundrum of providing more resilient and energy efficient rental and homeownership housing at a cost that is affordable to more people. So, this was part of the conclusion of this international research trip, led by the US Department of HARD and their research partners, Mod X. This workshop brought together a cohort of 40-50 people or so from that international research trip from the UK, from Scotland, from Japan, from Sweden, and also Ireland's government and industry representatives. Alongside industry and government folk from the US really bringing to bear in a forum, what we have seen on those trips, how we could apply that to the US contexts and how HARD could use that to inform how they can support the sector here in the US.

 

John McMullen

Really the culmination of all of your travels.

 

Edward Jezeph

Absolutely.

 

John McMullen

What were you most interested in learning during your trip to different manufacturers here in the US? Was there something in particular that you were seeking to learn?

 

Edward Jezeph

Yes, so of the 13, or 14 modular manufacturers I've seen in the US in that trip, predominantly I was interested in business models where they were finding commercial success, the mix of customers that they were delivering to, what extent was it a government or a public housing customer that was leading their growth? To what extent was it private sector customers? Then which segmentation it was it? Was it multifamily or single family? Was it hotels? What was driving their businesses? The conclusion from what I learned was public housing was playing an important role, but it wasn't the majority by far. And it was a diversity of customers purchasing from those businesses in the round. That is interesting for me in my UK contexts. We try and support the growth here in the UK, understanding the role of those public and private customers, and seeing which businesses are achieving commercial success, understanding the scale of industrialization and automation versus more traditional skill sets. So, there's a real broad range of things that you can see. Then right down to the technology, the amount of customization and variation that they provide to their products and solutions, as well. So, as you see more factories, you get a deeper understanding of what is possible through offsite construction. But in younger markets like we have here in the UK, particularly, we're just getting started on that journey about what is really possible through this technology revolution.

 

John McMullen

How would you compare now that you've spent a little bit of time here, you've seen various manufacturers and various states and talk to lots of people in DC, how would you compare the modular housing industry in the UK with what you've seen here in the US?

 

Edward Jezeph

I think it's very similar in many ways. In terms of clearly, by number of manufacturers, the US is larger, but that represents your economy as well. I think the UK is trying very hard to make it its success. The private capital and private businesses, both institutional investors, house builders, housing charities, so many different businesses with different backgrounds are looking at the same challenges we have with our construction, labor shortages, our aging workforce, the quality that we need to deliver, to achieve new sustainability standards.

 

So many different segments of the industry are seeing the challenges, and seeing the opportunity that offsite delivers, is again, trying to find that context within the housing economy here in the UK, which at the moment is very cyclical. We're currently in a housing downturn, not that housing need has actually changed, but the economics have fallen away. And that's made a very difficult moment here in the UK, for most house builders, generally, and particularly the offsite sector, which is trying to deliver through that cycle, and adjust their business models. So, it's certainly challenging, but I'm super excited by what we have seen here in the UK. We've had a number of businesses enter the market and then subsequently leave. I guess, from a government perspective, from a Homes England perspective, what I'm seeing is, did those homes deliver a better housing outcome? Were they faster? Were they higher quality? Were they more sustainable? Did they achieve better energy efficiency and comfort levels for those consumers? In the round, there were some lessons learned clearly on that way. But generally, we did see that and we did see that at large. So, Homes England is supporting the growth of that sector. We're using our housing programs to drive offsite delivery, encouraging our partners to choose that methodology, and we will be looking at the outcomes that we achieved through those programs.

 

John McMullen

Those are some key takeaways certainly. I'm glad that you were able to see that during all your travels here in the US. Did anything in particular stick out to you? Aside from these larger takeaways, was there anything specific that you think might be particularly applicable to your work in the UK?

 

Edward Jezeph

I think what's interesting is many of the challenges we're actually facing in terms of some of the technology and the automation and that digitization, the link between the BIM and the CAD CAM technology is a global problem. The technology that we're using in the US and in the UK, the robotization, that selectively coming into some of this market now, a lot of innovation needs to happen in this space. I think that's got global applicability and certainly the housing crisis is a global housing crisis. While it's relevant to us in our relevant marketplaces, the applicability of the solutions have a mass solution option, which I think is why so much capital has come into this sector. They see that commercial opportunity. The fact that the US and UK are both trying to innovate in this space, gives me a lot of encouragement about, we will find a way through. Having been to Japan I know what is possible, really about how we navigate that labyrinth of regulations and market behaviors to actually get to that outcome.

 

John McMullen

So, from the outside looking in, are there growth opportunities that you see for the modular housing industry here in the United States?

 

Edward Jezeph

Absolutely. I think there's huge housing challenges. That was something that I saw and clearly interacting with US people as I was traveling around the country, it was very visible with some of the homeless challenges, but also for other folks that are just struggling to find places to live and places to rent. The people I sat next to on my four or so internal flights across the US, every conversation ended up being about housing and the cost of housing and that wasn't because I started that conversation. People need housing and people want better high-quality housing. Offsite can deliver that. It's really about how you bring it to the market.

 

John McMullen

With all you've experienced in the past few months with everything you've seen around the world, what are your biggest takeaways in terms of creating more housing in the UK? What's the next step for you?

 

Edward Jezeph

The next step for me is Homes England. As I said it's got a big housing delivery program, this is supporting offsite housing delivery. I want to see that program be a success. I want to see those homes delivered and I would like to see the outcomes that we've achieved. Then I'd like to bring a refocus onto that in the future to go, how do we achieve those outcomes with greater certainty? How do we support a diversity of a sector? We're seeing so many new technologies, so many different construction formats, both modular and panelized construction solutions across different steel, timber and hybrid technologies. How we focus on those housing outcomes is what's really of great interest to me. From my perspective, obviously, how I can work with the government housing department and Homes England by colleagues to drive those outcomes through the resources that that we have, but also building that evidence base to the industry to go, yes, sometimes it can be harder to deliver something in offsite way the very first time. But as you get better with it, as you get that experience, then actually you get those outcomes with far greater certainty.

 

So, it’s that evidence base as well that I'm looking to see as well. Also, stabilization of those businesses with business models that work across different sectors of the economy. So, I think at the moment, the UK housing market is cyclical, and I think it's going to remain cyclical, foreseeable future. So as we create a new manufacturing sector of the economy, how do we support those businesses in the bad times as well as the good times. Otherwise, we go back to stage one, again, every economic cycle, and that is not helping us with our housing crisis. As those economics return, we still don't have the housing delivery capacity. Construction workers are not getting younger, and younger people are very hard to attract into this sector at the moment, which is a real challenge for us. So, we have to change the system, but we have to work with the system nonetheless.

 

John McMullen

MBI is seeing the very same thing. We are starting our own initiatives. I know lots of other organizations are to bring that workforce in. So, it's a problem around the globe for sure. For those who are interested in keeping up with Homes England and the solutions that you're coming up with, what's the best way for them to do that?

 

Edward Jezeph

We have a website, as you would imagine, which is our front door to the UK market, where we talk about what we do and we celebrate some successes. For UK businesses, obviously, you can apply to some of our funding and programs and understand what we do and how we do it. Otherwise, we're on all the social media, again, celebrating a lot of those activities and successes. So, Homes England has 1400 people and about 10 offices around the country. So, we're a big organization, delivering those homes and working with those communities and businesses.

 

John McMullen

Edward, thank you so much for your time. I really appreciate it today. I know it's been a while since some of your travels, but hopefully you've been able to rest and recover a bit. I know that was a haul for you but thank you again for being here and for getting me and everyone else up to speed with Homes England. I appreciate it.

 

Edward Jezeph

My pleasure and thank you to MBI for facilitating my trip and connecting me to those many businesses and they were incredibly gracious with that time. So, thank you to them as well.

 

John McMullen

My name is John McMullen, and this has been another episode of Inside Modular: The Podcast of Commercial Modular Construction. Until next time.