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Elasticity of Supply - Modular Housing in the UK

Geoff Riley

14th April 2023

3,300 modular homes were built in the UK in 2022, one in 60 of every new home constructed. But the industry is struggling to scale up production and achieve commercial viability.

This is a super-relevant mini case study. Really good for understanding factors behind the low price elasticity of supply for new housing which is a key factor behind the persistent gap between how many new homes are being built and rising demand for them as economic and demographic pressures mount.

Can the UK modular housebuilding industry scale sufficiently quickly to become commercially viable? This Guardian background article emphasizes the importance of trust among potential buyers and the challenge of improving the quality of build at the same time as scaling up production. Now, the modular sector is making heavy losses, but the depth of the housing supply shortage is clear to all – can this industry be one of the solutions?

The leading modular housebuilders in the UK are:

  • Ilke Homes
  • Legal & General Modular Homes
  • TopHat Modular Homes
  • Berkeley Modular Homes
  • Urban Splash Modular
  • Places for People Modular
  • Yuletide Modular
  • Elementa Modular
  • ALH Modular
  • Your Homes

These companies are leading the way in the development of modular housing in the UK. They are using innovative technologies and construction methods to create high-quality, sustainable homes that are affordable and accessible to a wider range of people.

According to the UK Modular Housing Association, around 3,300 modular homes were built in the UK in 2022. This represents a 20% increase from the previous year. The growth of the modular housing sector is being driven by a number of factors, including the need for more affordable housing, the desire for sustainable homes, and the speed and efficiency of modular construction.

There are a number of reasons why modular houses are usually cheaper than traditional forms of house building.

  • Modular homes are built in a factory, which means that they can be built more quickly and efficiently than traditional homes, which are built on-site.
  • Modular homes are made with standardized components, which means that there is less waste and less need for on-site labor.
  • Modular homes are often made with sustainable materials, which can save money on energy costs in the long run.
  • Modular homes are typically less susceptible to weather damage than traditional homes, which can save money on repairs and maintenance.

As a result of these factors, modular homes can be up to 30% cheaper than traditional homes.

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

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