Pioneering New Hybrid Building Solutions to Tackle the Housing Crisis in the UK and Abroad w/ Sano [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. I'm the Marketing Director here at MBI. Today, I'm joined by DJ co-founder and COO at UK-based Sano. DJ is here to talk about the current housing challenges across the United Kingdom and the potential for his company systems to make a difference.

DJ, welcome.

DJ 

Hi, John. Thank you so much for having me on board.

John McMullen 

It's my pleasure. So, tell me about yourself, DJ. What's your background, and how did Sano come to be?

DJ 

Thanks, John. Yeah, so I'm definitely not from this industry. So, my background was chemistry. Did a degree in chemistry and then PhD in nuclear chemistry. So very much, not from the industry, and then joined a startup looking at vaping and tobacco technologies. And that's where I met Sano’s co-founder, Ross and between us, we had various roles, looking from product design, product development, product innovation, looking at manufacturing.

So, how do we manufacture devices? How do we manufacturing consumables? Where do we manufacture them? So, this involved finding a building, and it was an ex pharmaceutical site, so 100,000 square feet, 15 grade D clean rooms. It was all about, you know, understanding about air handling in a pharmaceutical site. And how do we switch the building on? And there was a whole raft of ideas. And they started, then got acquired by a big FTSE 30 company, and then became responsible for the vision team, which was a team that was really looking forward 510, years ahead into the future to go, actually, what does the world look like in terms of products? And from that, then working backwards to go, what sort of patent and IP should we be filing today, so that in 5, 10 years’ time, when world has moved on and consumers have moved on, we've got a sort of got the pattern sewn up, ready to go and become market leaders, and then there's an opportunity over this sort of weird COVID period for being Ross to escape. And we thought, well, what should we do next? And it was about, well, we're all at home at that time as well. We discovered that Ross had a massive mold sensitivity. So, we thought, actually, this is linked back to some accommodation that he lived in 20 years ago. And then this was just before mold became a big thing in the UK. So, we were thinking, actually, there's got to be a better way to build and live in houses. So, we thought, well, how do we create healthy homes for everyone to live in? From that, then Sano sort of started focusing on healthy homes, healthy materials, healthy living, fundamentally looking after the house. Should be looking after the occupants.

John McMullen 

Wow, that's quite a journey. That's amazing. And I love your approach to thinking ahead and working backwards and coming that's, that's smart. So, Sano is trying to build better housing. Tell me about your organization, how it's set up. How are your days spent? What do you do day to day?

DJ 

Yeah, great. Our mission is all about empowering the construction industry. So we sit here, we identify problems, figure out how we fix the problem, but by thinking much more broader than sort of thinking about the problem in isolation. So, we're all about stepping back, zooming right out, and because we're not from the industry, you know, we haven't got any sort of baggage or super constrained views, you know, so we can be too super holistic, zooming right out. And it's about, you know, San is all about creating high quality, efficient, healthy and sustainable housing for everyone, and massive, massive believers that everyone deserves to live in a house that does not impact their health negatively, and I think that some of the broader challenges that we're trying to fix.

And so as part of Sano, it's a small, diverse, multi-disciplinary team, so less than 10 people, but it's about, you know, the collective power of the group of people that make Sano special. You don't need big teams of 40-50, people to have something that's really cool. And that, for me, is what Sano is about. And it's about solving these problems, and then the way we protect our solutions is really interesting, that we file patents, which is something that happens quite a lot in the construction industry, but rarely spoke about.

John McMullen 

How would you—and I want to get back to those patents in a bit—how would you describe the housing situation in the UK right now?

DJ 

Yeah, it's absolutely, really interesting. So, we a couple of months into a new government now, as we're recording this, so it's a at a pretty critical turning point. And you know, we're well into a well-documented housing crisis, and off the back of that, there's an unprecedented demand for new housing. But the challenge is the number of new house completions has just stagnated. And isn't growing at the same rate, so that demand is just zooming far beyond the capacity. So last year, for example, in the UK, we built about 220,000 new homes, which, on the face of it sounds like a big number, but the target has been about 300,000 new homes. There's always been that lag there and then, of that sort of back in 2017 about 9% were MMC. And then back in 20 now in 2023 about 16% was MMC. And then some of the other challenges that are currently faced in the UK is the temporary housing, or temporary accommodation crisis, of which UK government is spending about 5 million pounds per day temporary housing people I just haven't got anywhere to live, which is just an absolutely shocking stat, and it just shouldn't be a thing. And then with that as well, there was a there's been a few initiatives by local governments, where tenants could purchase their purchase their property at a heavily discounted price, which is great, but there's rarely been a plan to replace the stock.

So, I think there's just a bit of a perfect storm at the minute in that there's a massive demand, massive need for new housing, and, you know, we'll get onto it. But MMC, for me, or a modular construction has got a big, big role to play in that. On the flip of that, there's sort of one big watch out for me is that we need to make sure that we're setting and building to the right standard, because we can very much open a flood case and go we need to build, build, build, build, build. But, actually, building to the wrong or poor standard will only exasperate the problem further down the line.

John McMullen 

You mentioned before housing stats from last year, you mentioned local governance initiatives. I know the UK recently went through a larger government transition. What's being done by the new government to generate new housing possibilities, and how, if at all, is this different really, from the last government?

DJ 

Yeah, really, really, good question, and it's still early days, but there's loads of positive noise coming from Central Government, and honestly, I really think that they are trying to do the right thing. But for that to manifest the material itself, the whole industry need to get behind it and get cracking. We need to get building as soon as possible. And there's loads of early initiatives that they've started talking about.

So, for example, changes to the planning regulation, which historically in the UK, has been a bit of a massive blocker two sites. These changes, coupled with unlocking more land, should speed up the process, but also could should give developers more confidence that actually, by going into a planning application, they'll come out of the other end with a positive outcome. Whereas at the minute, people are going into a planning process expecting a two-, three-year, if not longer, journey. Whereas, you know, quite frankly, there's just not enough time now to go on that process alongside that. So I mentioned the 300,000 targets that's now been increased to 370,000 new homes target to build every year. Wow, that's a massive number, right? So compared to the 220,000 that was built last year, and it's a 70 odd percent increase. And as you know, you just can't switch that on overnight. So there's a massive growth phase that needs to happen pretty quick now to get us to that target number alongside that local authorities.

So, local governments have now been given a housing target. So they did have hours nuggets, they got taken away. We sort of relaxed the whole thing a little bit, but now they've been given a target again, so that should promote people to get building again. And also local cities or local counties have been given more control and power over what happens locally and also how local funding is spent. But historically, it was controlled centrally, but now that's being devolved more into local counties. So actually, they've got better control over what happens locally, but to sort of get this ball rolling, there does need to be a significant section of cash to get it moving. I think that that's going to be an interesting barrier to overcome now, to support that, there is some relaxation of some of the financial regulations that should make it easier for local authorities, local government based to sort of borrow fund against some of the assets that they've already disposed so that might just help bridge that gap a little bit, and what's really. Really exciting is that there is a commitment to new homes being sustainable and affordable and high quality. So they're all the right buzzwords to sort of get MMC and off site construction integrated into this new housing target, but there's no further detail on that as of yet.

John McMullen 

Well, as you said, early days, early days, right?

DJ 

There’s a good journey to go on, and definitely early days. But I think in the over the last few weeks, I think there's some good, positive noise, and it's now just about keeping the momentum on top of that, not only from a government perspective, but also as an industry, right? We just need to get cracking and go behind it, rather than sort of having this sort of insight in debating over, well, what does this mean? What does that mean? Let's just crack on and get building.

John McMullen 

Sano has a tagline that I really like. It's a leading global housing innovation from behind the scenes, and you mentioned earlier in the interview, forward thinking, working back a lot of patents that you're filing. Tell me about what your tagline means and how your work goes into that. What is, what is Sano doing to influence how people live in the UK now?

DJ 

Yeah, so Sano is all about empowering other people to make better choices and better decisions. And we're about giving people the right ingredients and giving them, you know, the cake that they should be baking, and that, for me, is the really exciting part. So we're not sat here going, we must create the next biggest brand in x, y, z. So that's not what Sano is about. Sano is about getting all the bits together, getting all the science sorted, getting all the product development done, getting all the technical information sorted and aligned, they pull that together as a pack that can then go out to the key stakeholders, whether you're a product developer, a manufacturing facility, an architect, a GC, and it's about giving all these people the right information as early as possible in the process. And, yeah, there's loads of good examples of products out there that you know have been invented, and no one has any idea who came up with that idea, right? You could be stood right next to miss Starbucks, and you'd have no idea. And that is what's really exciting about Sano coming up with all these ideas are not actually being too fussed about the fame and the glory that come of it. We're all about actually, people should be living in healthy homes. Let's just get there as quickly as possible.

John McMullen 

Speaking of products, I was on your website. One of the most prominent ones on your website is a system called M doc. Tell me about M-Dock. How does it work, exactly, and how does it differ from, you know, typical volumetric, modular construction.

DJ 

Yeah. So, M-Dock was one of our very first products. And we were looking at, initially, looking at the US market, and also looking at built to rent funds, and how could they quickly deploy capital to get good return, and what sort of products would they be building if, if I was a built around fund, and it was all about, actually, I need a product that's of good quality, good specification, because if I'm going to own this asset for 3040, years, I need to know that I haven't got to go back and fix any problems.

And so, we started looking at offsite manufacturing, looking at Bath and pods, and again, not being from the industry, this was all sorts of new a few years ago. I thought this is really exciting, but then we sort of quickly realized that actually, especially for a UK market, building fully volumetric single-family houses, was going to be a bit of a challenge because of various manufacturing reasons, transport issues. There are challenging roads in the UK, so there's not many sites that are easily, easily adaptable for a fully volumetric solution. So, we thought there's got to be but manufacturing, the factory does make sense. So, we thought there's got to be a better way of doing this. So, then we concentrated all of the sort of high service areas, your MEP or your SRC pumps, your heating interfaces, your consumer units, your plumbing, bathrooms. We thought that actually, as a module, or a pair of modules, does make sense to be manufactured in a factory. So we thought, actually, let's just focus on concentrating that in a factory and then the pure volume of the house, your kitchen, living, dining, bedroom spaces. Actually, there's a bit of a misconception. Actually, it makes sense for them to happen in a factory. We didn't think it did. So we thought, let's just use a panelized system to complement and create them spaces.

And so that's where M-Dock came from. So, it's a hybrid building system, where it's part modular and part panelized, and it's about creating the right product in the right environments. So it's taking a standardized module that can be manufactured in a modular factory and a standardized panelized element that can be manufactured in a standardized way in a panelized factory, and then these come together on site to create a house that can have flexibility. In size. So the same module, for example, could work for a two bed, three bed or a four bed house.

John McMullen 

The right ingredients for the right cake.

DJ 

That's exactly. It exactly.

John McMullen 

I like that. So, tell me about your manufacturing process. What is that like?

DJ 

Really interesting question. So at Sano, we haven't got a factory, and we have no ambitions to open up a factory. As I said earlier, we're all about empowering the ecosystem. So, it's about Sano doing all of the clever and hard thinking and solving all of the problems so that when it comes to manufacture, the manufacturing facility can focus on manufacturing, which is exactly what they're really good at. So how do they get the process better? How do they improve the quality? How do they get them out faster? And it's just about getting that balance right. And from me and from experience in the UK over the last few years, as we've seen, some pretty high-profile failures, the challenge has always been factors having to diversify a little bit from their core, core business to try and keep the factory busy, because the next order is a few months away. And as you know, you know having a factory that's not manufacturing anything is an absolute nightmare.

John McMullen 

It is indeed. So, tell me about your affordable housing solutions. How do they work?

DJ 

So we developed a standard set of floor plans that are destined for the affordable markets. An idea is developed two core modules. And these modules have got all the complicated bits, so your main entrance, all the MEP, downstairs toilets, and then your upstairs family bathroom. The idea is we've got some manufacturing partners lined up to manufacture these, and we've got a range of panelized partners that can also manufacture the panels. And so the idea is that these are all standardized, all ready to go, all compliant with space standards and building regs in the UK, so that it's a super slick copy paste, drop and go model. And the beauty of the way we've done it is that everything doesn't have to look the same. So historically, the challenge with modular is, everyone wants something different, but they all have to fit in that sort of box. Whereas we're saying, actually, if you want a house that's slightly wider, that's great. Let's order a slightly bigger panel to make it bigger, but the modular bit always has can always stay the same.

John McMullen 

What kind of feedback have you gotten so far about your M-Dock solutions.

DJ 

It’s been a really interesting journey. So, we've started this a few years ago, and at the time we started fully volumetric was the show in town. And you know, everyone was sort of spending a lot of time looking at fully modular houses. But over the last 18 months, as we've sort of seen the challenge of some of the fully volumetric factories, we've seen a massive uptake in how many people are talking more of the hybrid language around bringing a pod or a module together on site with a panelized system. Now it started off with bathroom pods and kitchen pods. And, you know, Sana were definitely not the first company to come up with a pod and panel approach that's been around forever, but I think we're the first to come up with it in the way we've done it, so that it's trying to keep a standardized core fitting with a flexible doc, as we call it, which is that site built structure.

So, the feedback has been amazing. And as we get sort of further and from along, we're hearing more and more positive noise around actually, hybrid is the way I want to do hybrid. I can only see single family homes now being built in a hybrid fashion. So, yeah, super positive. And I think it's now time to just supercharge that and get building more houses. You

John McMullen 

mentioned developing M doc in response to the challenges of delivering fully volumetric, modular systems in areas of the UK. Do you see a potential for this type of system working in the US? Or are you focusing strictly now on UK and Europe?

DJ 

Yeah, 100% so we're to the point now where actually we've got a really good manufacturing supply ecosystem sorted. We've got a number of architects on board that can deliver this. We've got a few main contracts, or general contractors, that can deliver the system. The whole technical pack, the whole ecosystem is there ready to go for the UK. And given that UK, with a challenging environment, was a really good test market for us, the next plan is to tackle the US, because some of the work that we've done and currently doing with a few smaller developers in the US actually the system, the hybrid approach works really well for bigger houses as well. So a lot of the UK is centered around about 2000 square feet, whereas, you know, in the US, a small house is 1500 2000 square feet. And the work that we've done shows that this works really good by incorporating some more value into the module so we can have, you know, a slightly bigger and. Hallway, we can now start adding elements of the kitchen or a back entrance into the module. We can include more bathrooms in an upstairs module, if it's a two story dwelling. So there's definitely, definitely value in this, in the US, and that's the whole beauty of off site, right? It removes geographic boundaries. The same system can happen globally. And given that the only sort of changes are local standards, local codes, it's purely minor adaptations that need to happen to get us going. That's

John McMullen 

very exciting, very exciting. What? What opportunities do you see for the greater off site and modular housing industry in the UK?

DJ 

Yeah, I think there's still a massive opportunity. You know, 370,000 new homes a year is a big, big number, right? So I think there's plenty of opportunities for the existing players and also new players in the markets, right? So there's several high profile volumetric factors that have failed, but it's been clear why they fail, and I think a lot of learning has happened now. The challenge with that is that has caused massive instability in the offsite sector in the UK, and there's a general nervousness now, especially sort of geared towards single family. What's really interesting is fully volumetric solutions work exceptionally well in other sectors. So health, education, hospitality, students, you know, when it's a high rise or a school, fully volumetric is the perfect solution. It's just not quite the right solution today, or residential now, in 10 years, 15 years, when the market settled, there's loads more automation that's happening. I think, yeah, fully volumetric will be the way to build new houses, and full homes will come out of a factory in the UK. There's no doubt about it. But I think today, as we're balancing where we are in terms of manufacturing capabilities, also the skills shortage, that's a huge, huge challenge in the UK now, and that's only going to get worse over the next few years, there's not enough people that can install the right MEP. There's not enough people that can do some of the site labor stuff, which is why we're seeing that balance between actually taking some of the labor intensive processes into a factory that changes the ecosystem a little bit. So yeah, there's definitely a huge opportunity

John McMullen 

for those interested in making an impact on housing in the UK through either building or providing some other form of product or service. What advice would you offer? So I think the

DJ 

main thing at the minute is we're still waiting on more clarity from the government, right? So what is this new standard going to be that's hopefully going to be enforceable? What is the funding situation? Is there any more funding? Is there a funding target? So there's a few questions that need to land first. And I think, you know, UK is a challenging market, right? It's got probably some of the hardest planning regulations globally, but there needs to be a degree of flexibility that comes with the solution that you're thinking of. Because, yeah, that planning is just a challenge. The exciting part, though, is, as I mentioned, there's a massive, massive, massive demand. But with that, we need to make sure that the new ways of building homes Don't devalue what we do as an industry, right? So this can't be a new race to the bottom. This isn't about building I can't be about building the cheapest house possible, because we're just setting ourselves up to fail in 510, years time, when we start seeing quality issues manifesting themselves. People are built to the wrong specification. Heating costs are going through the roof. So we just need to make sure that we don't trigger that landslide. And at the minute, yeah, the UK is quite distinctive in that there's too hard, really. There's a social housing, affordable and built to rent, developers who are currently definitely focusing on building higher quality, efficient, healthy homes that they own the assets for 20, 3040, 5060, years, who are going towards MMC for the benefits of higher quality, higher standardization, and the flip of that is your big volume house builders that are more focused on building to current building regulations and have the challenge of they can only build as fast as they can offload so as fast as they can Sell them, so there's no real incentive for them today to build faster. So speed is not interesting. However, the big benefit for the volume house builders is that there's a massive skill source that I've just mentioned, and the only way to fix that short term is by using MMC and off site manufacturing.

John McMullen 

Tell me about what's next for you and what's next for Sano.

DJ 

Yeah, so, it's about how we keep on empowering the construction industry and, more importantly, governments as well, to help define what this specification is, so that we're building better, sustainable, healthy homes everyone deserves to live in a home is not detrimental to their health. So it's about establishing this manufacturing ecosystem in the US as well, and also understanding, right? What does the rest of the world look like? So, the UK is a big market. Us is a huge market. Actually, this is a global solution. What market should we? Should we be challenging next? And then finally, we're also looking, in the next few months to bring in some external funding to support this global rollout, post our sort of really positive UK validation period.

John McMullen 

Well, very good. You mentioned a global rollout. That sets up my next question nicely. You may have heard MBI is coming to Europe. It's bringing its World of Modular event to Brussels in October. Are we going to be able to see you there?

DJ 

Absolutely, I'm super excited about it. Actually, I think I definitely attended the one I was long ago in Florida, and that was hugely popular and gives a really good insight into off site in the US. But super excited about Brussels. I think there'll be some new partners that we've not spoken to before there'll be new connection, there'll be and I've seen the program, and it's looking super exciting.

John McMullen 

Oh, excellent. I'm excited thank you for for coming to that event in advance. It's going to be a great event. So we're definitely looking forward to that. DJ, thank you so much for your time. I really appreciate it. You've got a lot of exciting things happening. I'm looking forward to following you and following Sano here in the near future.

DJ 

Brilliant. Thank you, John. Thank you so much for having me on. Really appreciate it.

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.