MMC Housing: Auckland's Next Building Crisis?

We all remember Auckland's leaky building crisis. Newspapers are still carrying stories as cases wind their way through the courts. This site is a succinct and easy read on the topic.

Unfortunately, another housing crisis appears to be quietly developing in Auckland. The issue of housing affordability has increased interest, and investment, in the construction of what used to be known as prefabricated buildings, or buildings with prefabricated elements, or using modern methods such as panel walls to reduce construction costs. These are generically houses built using MMC (Modern Methods of Construction).

In the early hours of September 1st this year, an uncomplete apartment building at Hobsonville Point went up in flames and despite the presence of 14 fire fighting appliances, it was very quickly reduced to its framing. It is likely the presence of so many units was essential to ensure the fire did not spread to adjacent units. In fact the major prefabricated elements in this case were the party wall sections made from reinforced concrete. These did prevent the fire from burning adjacent buildings. Media reports at the time suggest that the cause of the fire may have been a timber drying fan left operating.

Interestingly, some of the media comments are from nearby residents who were surprised they hadn't even heard the fire engines arrive. They talk glowingly of the high standard of sound insulation in the houses at Hobsonville Point. What they don't talk about though is how safe and secure the medium density houses there - including apartments two, three or four high - are in the event of fire.

So why is this important?

Priory Hall is a controversial apartment project built less than 10 years ago in Dublin. Hundreds of occupants were evicted when it was found to be unsafe. Fire risk was huge. Now media reports suggest that HUNDREDS of apartment blocks built during the boom around the country could be as dangerous as Priory Hall. It appears many could be made safe with "remedial" work. One of the most common fire-safety issues in the structures is the failure to "compartmentalise" apartments, common areas and other rooms where fires might start. In many apartment blocks examined since the Priory Hall evictions, inspectors have found very similar problems around the failure to fire-proof the "risers" – the channels going up the buildings from the plant in underground car parks that handles heating, water and electricity and telecoms wiring.

The Priory Hall saga predates the awful events at Grenfell Tower in London. That enquiry is still proceeding, but anecdotal evidence indicates the presence of vertical channels up the sides of the building that very quickly funneled flames away from the starting point, and fueled it further because construction materials were flammable above a certain temperature.

But the issues with MMC housing in New Zealand don't end with them being a potential fire risk. They include: NZ's MMC building inspection regime, standards and compliance (noting that much of the fabric of an MMC building is glued behind panels which restrict inspection); the perception that MMC assembly does not require skilled workers; the ability of NZ's tiny MMC industry to consistently meet quality and supply needs; and whether MMC homes can be maintained and renovated cost-effectively in the long term - adopting a whole of life costing approach; and whether the resale value of an MMC home will hold up in the medium term.

There are all sorts of technical terms used now: Off-site Construction, Modern Methods of Construction (MMC), Modular, Unitised, Volumetric, Panelised, Kit of Parts, and Flat Pack. System-Built is another term used in the USA. Let’s set the scene by outlining what we might think of as the Construction Method Continuum. At one end of this continuum is entirely on-site construction. In New Zealand we think of this starting with foundations, then up goes the timber framing from sawn 4x2 timbers, roof timbers, tiling or corrugated iron, then exterior wall materials (could be brick or weatherboard), window frames go in etc.

Fast forward, and at the opposite extreme of the Construction Method Continuum lies wholly off-site prefabricated construction, delivered to site for connection to services. As an obvious example we might think of the ubiquitous office sheds so familiar on building sites, characterised by utilitarian design and basic creature comforts. Being robust, portable, reusable and economical, they have proven to be particularly well suited to these temporary applications.

In between these two examples, the continuum encompasses an array of almost limitless degrees of prefabrication, some of which are already commonplace in modern construction. Increasingly, practical, robust and scalable prefabrication options are being added:

• Modular services units for an otherwise conventionally constructed office tower. These units are pre-installed with the requisite electrical, hydraulic and mechanical components and are transported to the site once the building core is complete and lifted by crane into the risers designed specifically to accommodate them. 
• Built up and fully fitted bathroom or kitchen pods for delivery to apartment buildings and hospitals, where they are lifted onto each floor of the building, located in place, and connected to pre-designated services points. 
• Flat-pack floor, wall and roof panels delivered to project sites for rapid assembly into completed buildings (typically by a team from the manufacturer). 
• Complete modular homes lifted by crane into position and fully finished apartment modules which are trucked to site and lifted by crane and stacked into place on otherwise conventional base building elements (which may include lift core, stairs, car park and podium as required).

 The National House Building Association has been established in the UK in 2006. The NHBA Foundation "provides high quality research and practical guidance to support the house-building industry as it addresses the challenges of delivering 21st century new homes...." NHBC is the UK’s leading independent standard setter and provider of warranty and insurance for new homes. In a report surveying the building and housing industry about the use of MMC methods in the UK which was published in 2016, among the findings the NHBC states:

• One of the key attractions driving the use of MMC is the perceived ability to build more quickly. While house builders reported that faster construction is being realised in practice, housing associations were less convinced; they did, however, believe that a weathertight envelope was achieved quicker with the use of MMC.
• It was also felt widely that MMC would have a role to play in improving the quality of construction and overcoming current shortages in the availability of skilled labour. For those already using MMC these perceived advantages were being realised in practice.
• There is some evidence of MMC leading to a reduction in costs and improved profitability, with 44% of house builders and 27% of housing associations pointing to benefits such as reduced preliminary costs, improved cash flow and faster sales revenues.
• Most participants expect the role of MMC to grow or remain static over the next 3 years; only 3% expected it to decline. Over half expected the use of panelised systems, in particular, to increase during that period. Drivers to increased use include overcoming skills shortages, faster build, increasing output and improving build quality.

In the fine print, we read: "The main reason for considering use of MMC is to achieve a faster build programme...the top three other reasons for considering MMC include improving build quality, tackling the skills shortage, and improving health and safety." The "tackling skills shortages" reason is particularly interesting with its suggestion that work on site is regarded as unskilled by comparison with traditional building. Again the fineprint on reasons from the industry (building and housing associations) for concern about volumetric and pod systems is interesting:

• Risk of unfamiliar systems and public perception (41%) 
• Expensive (26%) 
• Insufficient capacity in supply chain (12%) 
• Market prefers traditional buildings and methods (12%) 

The report notes the relative success of MMC methods in Japan compared with the UK, particularly in addressing supply and quality issues, and suggests the reason Japan has a better record than the UK is because Japan has been doing it for longer, and because the market for the MMC buildings has been much greater. This observation raises the obvious question for New Zealand - are we too small to do this well? Before I reach the final challenge, it is sobering to read advice to home buyers in the USA, under the heading: "9 reasons to choose a new home over a resale". Here's a flavour:

• "There is a lot of flexibility for [new home buyers] to kind of put their personal signature on the product," says Patrick Costello, president of Forty West Builders. "Those kind of things you can't do with a used house—it's just not possible."
• "The most recent International Energy Conservation Code came out in 2009 [and] required roughly 17 percent more efficiency than the codes of three years prior," he says. "So using that as sort of a gauge to how newer homes should perform from an efficiency standpoint compared to older homes, it's pretty clear that just as homes meet code, they are going to be more efficient."
• The more energy-efficient mechanics of the house also help reduce utility bills for new home buyers, Morrow says. Newly-constructed homes often include green systems and appliances—like high efficiency stoves, refrigerators, washing machines, water heaters, furnaces, or air conditioning units—that homes built years ago might not
• "People will buy [previously-owned] houses and then the carpet needs to be replaced or it needs to be repainted, or it needs new appliances, or the flooring is shot," Gilligan says. "When they buy a new home in today's market, it really is new."
• "You buy a used house you don't know what you are getting, you might have to do a lot of maintenance," Costello says. "We are trying to look down the road and make things as easy as possible for the homeowner so they can enjoy living there and not have to be saddled with maintenance."
• “A new home is generally fully warrantied by the builder for a minimum of a year and most of all the other components are warrantied for extended periods,” says Jack McCabe. So if your roof starts leaking or the heater breaks during the warranty period, your builder will pick up the tab for the repairs. “When you buy a resale home, even if you have a home inspection done, it still does not turn up hidden defects that you don’t find out about a lot of times for two years,” McCabe says.
• Newly constructed homes often include fire safety features that may not be present in properties built years ago, Gilligan says. "We use fire retardant in our carpeting and in our insulation," he says. In addition, all newly constructed homes are required to include hard-wired smoke detectors.
• Buyers may be able to squeeze more concessions out of a home building company than an individual seller. That's because individual sellers often have an emotional attachment to their property that can blind them to its true value. "People usually think that their home is worth more money than it is," McCabe says. At the same time, builders often have greater financial wherewithal to absorb a loss on a sale than individuals.
• "New home builders, in many cases the larger ones, have their own mortgage companies or they will offer paying points or closing costs and buy down certain rates for you," McCabe says. "The seller of a resale home is generally not going to do that for the buyer."

Got a wry grin after reading that lot?

Now for the final point. It was an architect who has worked on MMC projects across Auckland, who alerted me to the problems described in this post. He reckons it will dwarf leaky building, and will take a similar time to surface and become a national disgrace. He has noticed that very little in an MMC house can be taken apart. No screws or nails in construction. Just glue. Everything's glued together. Especially the panels. If a leak is discovered, or a wiring issue, or new cable or new pipe needs to be fitted, it's a major maintenance problem. If a window needs to be moved, or a door. Again. It's ma major. He sees that the kiwi approach to gradual maintenance and small renovations just won't be possible. The costs will be prohibitive. Nothing will be simple. And all that assumes that there are no problems or future fire risks hidden in the glued panels.

I'm unsure who is ultimately responsible for protecting the interests of MMC home buyers in New Zealand. But given Auckland Council and Central Government are advocating the construction of affordable homes "at pace" across Auckland, it is essential that appropriate regulation is in place to protect the health and safety of new home owners. It is almost as important that their investments in MMC housing are as secure and as safe and reliable over the long term as an investment in a conventional home. And if it is not as safe and secure, then there is a public duty to ensure that buyers of such homes are properly informed of any different risks.  Given the state's enthusiasm for affordable housing this should not be a case of buyer beware.

Don't let this issue be just another example of market failure in NZ's housing market.