Phecda Global Insights | Housing
The economics of factory-built housing depend on turning a national shortage into a steady flow of orders.
Debbie Bin Deng, 18th September 2026
Delivery of Modular Home Units <Source:The Housing Innovation Collaboration>
In October 2016, a cavernous factory just outside Leeds promised to make housebuilding resemble car production. Legal & General Homes, part of the insurance and pensions group L&G, planned to turn out around 3,000 modular homes a year. Moving construction onto a production line would, in theory, reduce reliance on fragmented subcontracting and scarce building labour, a prospect made more attractive by concerns over recruitment after the Brexit vote. Britain needed homes; industrial production appeared to offer a way to supply them.
Less than seven years later, in May 2023, L&G announced that it would cease new modular production while reviewing the loss-making business’s future. Existing projects still required completion. The company cited planning delays and disruption from Covid among the reasons it had failed to secure a sufficient pipeline of projects. Britain still needed homes. L&G’s factory lacked enough work.
The government’s subsequent pledge to deliver 1.5 million homes in England during the parliament elected in 2024 makes that failure worth revisiting. L&G’s experience points to a mismatch between continuous factory production and developments that proceed site by site. Could another model of supply manage that mismatch more successfully?
One possible obstacle was confidence in factory-built housing. In 2016, The Economist traced British scepticism to the poor-quality prefabs associated with the post-war housing shortage. L&G’s executives argued that modern modular homes should not inherit that reputation. Prefabrication describes a construction method, encompassing both components and complete three-dimensional modules; it does not establish a quality standard.
The company also challenged the image of identical boxes. In a pre-closure interview republished by WoodWorks, Rosie Toogood, then chief executive of L&G Modular Homes, said roughly 80% of processes were standardised, leaving scope for design differentiation. Buyers’ confidence matters, but these accounts do not establish that resistance to modular housing caused L&G’s retreat. The stronger evidence concerns its production economics and pipeline.
L&G Modular Housing Factory <Source: Architectural Designs>
Modular village: one of 120 show homes nears completion in Selby, not far from L&G’s factory <Source: Clixifix>
Housing need becomes factory demand when land, finance, permissions and a purchasing commitment come together. The House of Lords’ 2024 inquiry into modern methods of construction identified inadequate order books, individual business decisions and the shocks of Covid and rising interest rates among explanations for the sector’s failures. Evidence on cost savings was mixed: the benefits of scale depended on achieving it.
L&G also faced a prolonged production ramp-up. A report republished by WoodWorks noted that more than two years had passed before the first eight homes rolled off its production line. Toogood attributed that time to refining designs, improving production processes and broadening the product range. Costs, she said, were approaching those of traditional construction; further savings remained an ambition. This exposed a commercial dilemma: L&G needed more orders to achieve the scale that would lower costs, yet had to secure those orders before it could offer the promised savings.
Its commercial choices added to the exposure. Terry Fuller, a former employee writing for Building Better, described a large factory supported by limited business-development resources and land-purchase capital. He recalled an early decision to avoid procurement frameworks and pursue land-led packages for social housing providers or partnerships with councils. His account is a participant’s assessment, rather than an independent audit.
That approach exposed L&G to both factory overheads and the risks of land, planning and sales. A production line needs continuous work; housing projects secure approval and funding at different times. When those timetables diverge, the factory continues to incur costs while the development waits. A market downturn makes the mismatch more expensive: developers can postpone starts and reduce subcontracted work, whereas factories have less flexibility over fixed costs. Higher borrowing costs can weaken demand and increase the cost of waiting.
For a factory, the timing of planning decisions therefore matters as well as their outcome. In England, decisions must follow the development plan unless material considerations indicate otherwise. Permissions may carry conditions, while Section 106 obligations can secure infrastructure contributions, mitigation and affordable housing. These serve public purposes. For a manufacturer, the practical question is when the requirements can be settled and the site made ready. A permission is an important milestone, but does not by itself guarantee a production date.
More predictable approvals would help manufacturers schedule work, but capacity must still be matched to projects with funding and purchasing commitments. Even then, the production timetable has to fit what happens on site.
L&G’s Bonnington Walk scheme illustrates the difficulty of coordinating factory output with site work. The Bristol Cable reported foundation problems, dismantling and delays there, alongside mould associated with module storage. Their contribution to the production halt remains unquantified, but they show how site work and handling can erode factory efficiency.
Building earlier achieves little if modules wait for an unready site or require remedial work. Storage, foundations and installation must be coordinated with production. Otherwise, manufacturing speed merely brings expenditure forward.
Local labour remains part of that coordination. Brexit strengthened the incentive to reduce dependence on site trades: free movement ended in December 2020, changing recruitment conditions for new EU arrivals without protected rights, while Irish citizens retained separate arrangements. Factory production can move some work off site, but foundations, utility connections and installation still need local delivery teams.
The same attention to site conditions helps explain a smaller success in Coventry. In 2019, housing provider Citizen completed two homes at Littlethorpe with Totally Modular and the city council. Manufactured in Cradley Heath, the two- and three-bedroom properties occupied a former scout-hut site. The plot was small, and conventional construction would have disrupted its surroundings. Modular construction answered a specific development problem.
The reported build cost was £134,000 per home, with part-funding from Homes England and the council; the report does not establish an all-inclusive development cost. A suitable site, funding and a housing provider made the method useful on this plot. The question raised by L&G is whether enough such projects can be organised to support continuous production.
Littlethorpe development in Coventry South <Source: CoventryObserver>
One option is to draw on existing factories rather than build a new production business around British demand. Recent disclosures show that at least some Chinese suppliers have continuing overseas business. CIMC’s 2026 interim report records delivery of a six-storey employee dormitory in Indonesia with 240 rooms. In September 2026, it reported dispatching 104 modules from Jiangmen for the 99-room Earth Hotel Riyadh. Factory work included the structure, mechanical, electrical and plumbing systems, interior finishes and furnishings, substantially more than a basic building shell. That hotel was scheduled to open in early 2027, shipment should not be confused with completion.
These company disclosures demonstrate project-scale manufacturing and overseas procurement. They do not establish China’s total annual housing capacity, spare capacity available to British buyers or the number of overseas purchasers. The defensible proposition is access to particular suppliers with demonstrable delivery experience, assessed against a specific project’s requirements.
There is also a British track record. At Newcastle University’s Park View Student Village, Galliford Try used about 800 accommodation modules imported from China, combined with cores built on site and a conventional façade. The contractor reports delivery in under two years, against an estimated three using traditional methods. The university confirms its use as student accommodation.
Manchester’s 220-room Holiday Inn Express at Trafford City opened in June 2017. Architect Chapman Taylor identifies China’s CIMC as the modular-system provider and reports a nine-month site programme. The client estimated savings of about £1 million against conventional construction. These are project-team estimates, and hotel economics cannot simply be transferred to family housing.
These two projects share a commercially significant feature: repetitive accommodation commissioned in substantial batches by identifiable institutional customers. Like Coventry, they had a specific purchaser and site; unlike that two-home scheme, they offered a large batch of similar units. This suggests how demand can be organised to suit factory production, although the projects alone do not establish a supplier’s long-term profitability.
The potential advantage of sourcing from an established Chinese supplier is access to existing production capacity. A British developer might avoid the factory investment and production ramp-up that L&G undertook, while a supplier serving several markets could spread overheads across more orders. Such advantages require verification through comparable quotations covering shipping, currency exposure, adaptation to British requirements and site integration. That could reduce the cost of creating capacity, while leaving British project requirements intact.
That potential advantage does not establish a scalable model for ordinary housing. Chapman Taylor and CIMC announced a UK modular apartment format in 2021, covering one-, two- and three-bedroom homes. That announcement documents a product collaboration, not a completed housing scheme.
Newcastle University’s Park View Student Village <Source: Newcastle University>
For developers, housing providers and public purchasers, this means establishing which funded sites can receive homes, on what dates and under whose purchasing commitment. Where orders are pooled, the underlying projects must be ready on a timetable the factory can serve. Compare the full cost of delivering an occupiable home, including land, transport, groundworks, utilities and finance, and allocate responsibility for delays, defects and completion if a supplier withdraws.
Commercial viability is necessary for continued supply. Its public value depends on what reaches residents. As The Economist argued in August 2024, house prices respond to interest rates and demand as well as additional supply. Lower manufacturing costs may make a project viable without reducing its sale prices or rents. Success should therefore be measured in additional homes delivered and the terms on which residents can occupy them.
L&G’s experience shows why housing need alone cannot sustain a housing factory: the factory bears continuing costs while projects wait for decisions, funding or site work. An established Chinese supplier may reduce the investment required to manufacture homes. British developers and purchasers must still organise the projects that keep production viable. A factory can supply the homes only when someone has organised the development that makes them possible.
[1] The Economist (20 October 2016). Prefabs sprout: Off-the-peg homes could solve a shortage of houses and builders. Supplied full text. Production figures describe ambitions at the time, not achieved output; perceptions are historical, not a current consumer survey.
[2] Build in Digital (4 May 2023). Legal & General to cease building new homes at Leeds modular factory. New production distinguished from existing completion obligations.
[3] The Bristol Cable (4 May 2023). Insurance giant Legal & General to shut factory that makes homes for hugely delayed Lockleaze scheme. Local reporting and company response; does not quantify defects’ contribution to the halt.
[4] House of Lords Built Environment Committee (26 January 2024). Modern methods of construction in housing: letter to Michael Gove. Especially paragraphs 3–8; sector evidence, not a forensic audit of L&G.
[5] Fuller, T. (16 October 2023). Insights on the challenging landscape for MMC. Building Better. Former L&G employee’s assessment.
[6] UK Government (n.d.). Determining a planning application. England’s development-plan starting point and material considerations.
[7] UK Government (n.d.). Planning obligations. Section 106 obligations and the applicable statutory tests.
[8] UK Visas and Immigration (2020; updated 2023). The UK’s points-based immigration system: information for EU citizens. Used for the historical end of free movement and protected-rights distinctions, not current visa thresholds.
[9] PBC Today (31 July 2019). Coventry’s first modular home development complete. Two completed homes; reported build cost is not established as full development cost.
[10] Galliford Try (n.d.). Park View Student Village. Contractor confirms Chinese imports; construction-time comparison is its estimate.
[11] Newcastle University (n.d.). Student accommodation: Park View.
[12] Chapman Taylor (n.d.). Holiday Inn Express, Manchester. Confirms 220 rooms and June 2017 opening.
[13] Chapman Taylor (page dated 20 June 2024). What is modular construction?. Identifies CIMC and attributes savings to the client; not an independent cost audit. Page retains older industry commentary.
[14] Chapman Taylor (5 November 2021). Chapman Taylor and CIMC collaborating on pioneering modular residential format for UK market. Product announcement, not evidence of a completed development.
[15] The Economist (8 August 2024). Would building 1.5m homes bring down British house prices? Supplied full text; analysis of England’s target and the relationship between additional supply and prices.
[16] WoodWorks News (n.d.), reproducing Yorkshire Post. Head of Legal & General modular homes factory reveals plans for its future. Pre-closure interview, not a reopening announcement. Secondary bibliographic records date the original to 11 May 2020; the original publisher page could not be retrieved. Cost and standardisation statements are management claims.
[17] Ministry of Housing, Communities and Local Government (12 December 2024). Planning overhaul to reach 1.5 million new homes. A government delivery target for England, not evidence that 1.5 million homes are under construction or completed.
[18] CIMC (28 August 2026). 2026 Interim Report, p. 17, “Modular building business”. Company-reported delivery of a six-storey, 240-room employee dormitory in Indonesia. The separately discussed data-centre business is excluded. Four months from contract to first shipment is not treated as the completed-building construction period.
[19] CIMC (2 September 2026). An Entire Boutique Hotel, Packed and Shipped to Saudi Arabia: CIMC’s First Modular Hotel Project in the Middle East Officially Ships Out. Company reports shipment of 104 modules from Jiangmen for 99 planned hotel rooms, with structure, MEP, finishes and FF&E largely completed in the factory. Opening in early 2027 is a forecast, not an achieved outcome. Promotional claims about climate, cost, energy performance and overall time savings are not adopted as independent findings.
Dr Debbie Bin Deng has a background in urban planning, transport and land-use modelling, and major infrastructure projects in the UK and China. Her interests include planning law, real estate and regional development, with a focus on how public policy shapes investment.
