Should governments subsidise modular construction to solve the housing crisis?

There’s something deeply uncomfortable about the way we talk about the housing crisis in Britain. We describe it as “chronic”, “systemic”, “complex”. We commission reviews. We announce targets. We reshuffle planning policy and yet, year after year, delivery falls short. Meanwhile, local authorities scramble for temporary accommodation, housing associations juggle impossible funding gaps and first-time buyers watch affordability drift further out of reach, writes John Ridgeway.

So, it’s no surprise that modular construction keeps resurfacing as the supposed solution, offering faster build times, factory precision, reduced waste and greater predictability. It sounds like the rational, industrialised answer to a national emergency. Which leads to the inevitable question - should governments actively subsidise modular construction to accelerate housing delivery?

At first glance, the case is persuasive. Modular can reduce programme times significantly compared to traditional builds. In theory, that means homes delivered sooner, communities stabilised faster and less exposure to weather delays and labour shortages. In a sector wrestling with skills gaps and ageing workforces, factory-based production also offers a more controlled environment and potentially broader recruitment pools.

If the state already subsidises renewable energy, electric vehicles and strategic manufacturing, why not then subsidise a method of construction that promises efficiency and scale? But here’s where it gets complicated because we’ve been here before.

The past decade saw significant investment flow into modular start-ups, many backed by major developers or institutional capital. Some succeeded. Others collapsed spectacularly. Factories closed, pipelines evaporated and confidence took a hit.

The issue wasn’t that modular “doesn’t work” - it does. The issue was scale, pipeline certainty and margin pressure. Modular factories need volume - consistent, predictable demand. Without it, overheads become unsustainable very quickly.

So, if government were to subsidise modular, it would need to do more than throw grant funding at factories. It would need to guarantee a pipeline. It would need to reform procurement. It would need to create long-term frameworks that de-risk investment. And that raises a deeper question - should the state back a construction method, or should it focus on backing outcomes? Because the housing crisis is not, fundamentally, a methods crisis. It’s a supply, planning, land and funding crisis.

Subsidising modular

Subsidising modular without tackling land release, planning bottlenecks, viability constraints and local opposition risks treating the symptom rather than the cause. Faster build times mean little if schemes sit in planning for years. Factory precision doesn’t solve stalled Section 106 negotiations.

There’s also the danger of distorting the market. If subsidies disproportionately favour one method, do we undermine innovation elsewhere? Timber frame, panelised systems, modern masonry - all have roles to play. Construction rarely thrives under one-size-fits-all thinking. Yet dismissing subsidies entirely would also be short-sighted.

If government is serious about modernising construction - improving quality, reducing defects, cutting carbon and increasing productivity - then strategic support for industrialised building has logic. Not as a silver bullet, but as part of a broader transformation agenda.

Perhaps then, the more intelligent approach would be conditional support. Tie subsidy to performance metrics: delivery speed, energy performance, quality assurance, social value outcomes. Reward measurable impact rather than method alone. Encourage modular where it demonstrably improves certainty and efficiency - particularly in affordable housing, where margins are tight and programme reliability matters.

The housing crisis demands urgency. Modular offers potential. But potential is not policy. If government chooses to subsidise, it must do so with eyes open - understanding the economics of factory production, the need for a sustained pipeline and the importance of avoiding another boom-and-bust cycle.

The real solution is unlikely to be ideological. It will be pragmatic and modular construction should be part of the answer. Whether it deserves subsidy depends not on hype, but on evidence, discipline and long-term thinking. And that, more than the method itself, is where government has often fallen short.