Modular housing: A promising tool hamstrung by market and delivery risk

Steve White

The last ten years have seen modular housing move from a niche off-site curiosity to a mainstream plank in the affordable-housing toolkit. For housing associations and local authorities under pressure to deliver homes quickly and to net-zero standards, volumetric off-site manufacture offers clear attractions: factory quality control, programme certainty (on paper), reduced onsite disruption and the prospect of repeatable, energy-efficient details. Yet the sector’s recent string of high-profile failures and the operational headaches that followed, make it essential to treat modular as a technique, not a silver bullet. 

The wave of administrations: real examples, real consequences

Several UK off-site specialists have gone into administration or liquidation in recent years. Ilke Homes, once a high-profile volumetric builder, collapsed in mid-2023 leaving large creditor balances and projects disrupted. Caledonian Modular, whose failures prompted government probes after safety and quality concerns on school projects, also entered insolvency, with some affected slated for demolition. Other businesses, including Modulus and smaller timber-frame specialists such as Connect Modular, have likewise faltered more recently. These events have left housing providers exposed to delayed programmes, incomplete sites and complex warranty and procurement questions. 

Is modular a valid construction technique? Yes — but context matters

From a technical and environmental standpoint, off-site manufacture can outperform traditional build. In theory, controlled factory processes reduce waste, improve airtightness and make it easier to integrate high-performance fabric and low-carbon systems. For authorities seeking rapid delivery on constrained sites, modular can also reduce onsite time and neighbour impact. Those are material advantages for meeting affordable-housing targets, but they are not guarantees. The technique is valid; the delivery model around it often isn’t. So what typically goes wrong?

1. Concentration risk and single-supplier dependency. Many projects rely on one manufacturer for dozens (or hundreds) of units. If that manufacturer fails, the knock-on is immediate: partially completed schemes, bespoke components stranded in factory yards and lengthy reprocurement headaches. Ilke and other collapses show how quickly supply lines can be severed.

   
   

2. Financial fragility of manufacturers. Modular requires heavy upfront capital investment in plants and tooling; without durable order books, cashflow is fragile. A business model that depends on continual forward sales is vulnerable to market downturns and to a small number of cancelled contracts. 

   
   

3. Quality assurance and latent defects. Off-site manufacture is not immune to design or construction defects. The Caledonian schools scandal — which led to demolitions and a government review — is a salutary example of how failure in quality assurance damages public trust and creates long tail liabilities. 

   
   

4. Logistics, planning and design constraints. Modules are large, heavy and governed by transport limits and cranage capacity; site access, highways consents and storage all complicate programme logistics. Early design decisions can become hard constraints once factory production begins. 

   
   

5. Procurement and contract form mismatches. Traditional contracts and payment profiles do not always suit a factory model that needs earlier payments for materials and manufacture. Without payment security or robust parent company guarantees, associations can be first-in, last-paid. 

   
   

So our advice for housing associations and councils is

• Avoid single-point failure: Split orders across suppliers where possible, and retain flexibility in packages so incomplete sites can be completed by alternative contractors.

  
  

• Strengthen contract safeguards: Insist on performance bonds, escrow arrangements for factory orders, staged payments tied to off-site milestones and robust parent company guarantees that will protect you in the event of mal-performance or administration. Write in retentions so defects are addressed. The traditional building contract has all these facilities for a reason - apply them to modular.  

  
  

• Check the site logistics: Time and time again we see sites put forward for modular homes which simply can not accommodate them. No one has checked the routes to the site avoid that low bridge, or checked that you can place a crane down on the nearby road before the order is placed. This should be done as part of any feasibility study. 

  
  

• Due diligence on financial health: Require audited forward order books and stress-test manufacturers’ balance sheets before committing to large pipelines. Showing two years of audited accounts (which can be up to 4 years old!) doesn’t cut it. 

  
  

• Sharper quality oversight: Front-load inspections, factory witness testing and independent inspection regimes rather than trusting a “factory warranty” alone. The Caledonian episode shows the reputational cost of lax oversight. 
  

• Employ independent specialist: Just as councils or housing associations will engage and Employers Agent, you should employ a modular specialist to oversee the works. An experienced and qualified professional who understands the modular construction techniques, advantages and disadvantages, the logistics, the order contracts, standards and insurances and most importantly will over see and protect the clients interest. 
  

Pragmatic optimism - not evangelism

We still believe modular housing has a role in the affordable housing sector’s future, especially if we’re to deliver 1.5m new homes over coming years, but recent insolvencies are a reminder that technological promise must be matched by resilient commercial practice.

For housing associations and local authorities, the aim should be to capture the benefits of off-site manufacture while designing procurement, finance and delivery strategies that prevent a single failure from derailing whole programmes.

In short: love the technique, but marry the risk-management, and maybe look at the ‘old style traditional’ contracts - they’ve been honed to protect clients over decades of experience!