futureproof

A disruptive value-based funding model for housing.

Last updated: 5th January 2021

Date uploaded:

Approved for use

Innovation Lead: Christine Coonick
Project number: 105865
UKRI funding: £454,147

Website:
daedalusenvironmental.co.uk/futureproof/


Edit this story

Summary

Daedalus Environmental has created an alternative finance and delivery model to break the cycle of homes built on short-term cost or shareholder return. futureproof spreads the risk and shares the reward of investing in housing. It draws on Modern Methods of Construction (MMC), digital platforms, active energy technology and data-monitoring systems to deliver new homes in days rather than months. This high level of productivity and precision creates certainty for investors who stand to benefit from a consistent level return over the lifetime of the development. For residents, they can rent or buy higher quality, zero-emission homes that require less maintenance, generate their own energy and can adapt to their longer term needs. And if their income changes, the flexible ownership model adapts to their means.

Innovation type: Digital, Energy, Manufacturing, Offsite, Process, Procurement
Organisation type: ACE (Architect / Consultant Engineer), Innovative SME

Open allClose all

Project pioneers

Daedalus Environmental is an SME delivering energy and sustainability consultancy to the built environment sector. It develops projects in the low carbon and social economy, both on a new build and retrofit basis. With 20 years of experience advising public and private sector clients, the organisation understands each stage of the value chain. It's this perspective that drove the organisation to explore a new, flexible and sustainable way to fund and deliver new homes.

The problem

The housing market is dominated by a few major house builders who control the rate at which new homes can be built and how much they cost a resident or homeowner. This suits certain forms of investment risk profile, but doesn't typically address the social and environmental needs of a society desperate for a more accessible housing market.  In 2018 the Investment Property Forum survey showed that investment in housing development made up only 8.6% of a total £240 billion of real estate investment, with investors drawn to opportunities that have less perceived risk, such as retail and office spaces. The current financing model also ends up being relatively inflexible, and does not meet the evolving - and increasingly variable - needs of a growing population. Something needs to change.

Vision

Daedalus believes it's possible to create a housing finance model where everybody benefits - from investors to the supply chain to households. It's based on the principle of spreading the risk and sharing the reward across the lifecycle of these new homes. By drawing on Modern Methods of Construction, there will be added certainty around delivery times and costs to build the houses, and they will have improved performance with more predictable repair and maintenance costs. Reliable access to homes is a fundamental tenet of futureproof. The development of a new, flexible means of owning property for the first time will give people access to high quality homes in a way that meets their needs, not in a way dictated to them by the market.

Key Insight

Daedalus Environmental recognised that there is growing appetite from institutional investors to provide long-term, low-cost finance to housing developments in a way that offers known and manageable risks. However, the majority of opportunities are currently limited to smaller scale build-to-rent schemes. A new model to fund large-scale housing developments would require investor engagement from the start and greater certainty around financial return over a much longer period of time. It would also rely on new approaches to construction methods and technology to improve the delivery and quality of the housing. Daedalus needed to bring together expertise from across the supply chain to develop a model and prove its potential impact. And so it turned to the Transforming Construction Challenge to help create this financial proof of concept.

First step

The funding and connections from the Transforming Construction Challenge fund allowed Daedalus to seek out and work with policy makers, investors, experts and stakeholders to develop and refine this original concept, taking on board and learning from existing and best practice. The result is futureproof - a collaboration led by Daedalus Environmental with Haven Gateway Partnership, Swan Housing and Homes England to develop a financial proof of concept study that delivers both long-term return for investors and flexible ownership models for residents.

Barrier

The UK housebuilding sector is traditionally, and overly, reliant on a single, short term, high return, business model that has seen little innovation in half a century, and does not meet the number of homes needs, sustainability targets or, indeed, society's wider needs from housing. The current system lacks attractive propositions for the wider range of investors with funds to place. Nor does it help residents who are seeking more affordable rates of tenure that can flex if their income or needs change.

Process innovation

Swan Housing Association, the manufacturing partner on the project, developed an Offsite Manufacturing Strategy (OSM). The OSM draws on Modern Methods of Construction (MMC) and offers a viable superstructure proposition that could increase the capacity, speed, quality and performance of new homes. This precision creates certainty around construction and maintenance and gives investors the reassurance they need. And by using regional suppliers to deliver consistent outcomes, MMC can improve the productivity, design and quality of house-builds, and increases the speed of delivery by over 60% whilst guaranteeing performance standards.

Digital Innovation

By applying the Project 13 principles from the Institute of Civil Engineers, futureproof integrates engineering and digital technology, and the use of data and information to improve customer outcomes. It also supports active energy technology and data-monitoring systems to ensure the new homes are both sustainable and efficient, and can generate and store the energy they produce. These technologies add further certainty in the investment and financial return in the long-run, as they minimise energy use, reduce the need for repair and maintenance, and even become revenue generating.

Whole life innovation

futureproof is fundamentally a whole-life value model that disrupts the risk and reward structure around the funding of housebuilding programmes. For investors, the use of precision manufacturing and digital technology in construction represents greater certainty, and a more attractive investment proposition that will generate long term returns across the building's lifecycle. For the construction supply chain, futureproof is a blueprint for better quality, sustainable homes that can be delivered on time and on budget. And for residents, this new model will increase access to affordable, quality zero-emission homes with guaranteed running costs.

Collaborators

Daedalus Environmental brought together extensive expertise across different fields: Swan Housing Association is an offsite manufacturer and a social housing provider with a portfolio of 11,000 homes, bringing vital experience in the practical delivery of Modern Methods of Construction and access to market.
Haven Gateway Partnership is tasked with driving economic growth in the East of England. It brings access to significant stakeholder networks and has been part of the futureproof journey since inception, leading the development of the digitalisation strategy, securing political support and customer market research. Homes England is the government's housing agency tasked with the supporting the development of the housing market and the acceleration of housebuilding in England. It has been involved from the project's early stages and has supported its development from early concept design.  SQW is an independent provider of research, analysis and advice in economic and social development. Its Land & Property team was instrumental in analysing the market demand aspects of the initial futureproof concept. Burges Salmon is a law firm and member of the Crown Services legal panel and was contracted to support the legal side of the project, ensuring legislative and regulatory compatibility of futureproof, as well as providing robustness and credibility from the perspective of institutional investors. Ipsos Mori was brought in brought in to provide the necessary expertise on customer market research and statistically sound market analysis. And Blackstock is a communications agency helping tell the story of futureproof to drive investor engagement.

  • Blackstock
  • Burges Salmon
  • Daedalus Environmental
  • Haven Gateway Partnership
  • Homes England
  • Ipsos Mori
  • SQW
  • Swan Housing Association

Lead support

The Transforming Construction Challenge (TCC) funded the project with £454,147 and has helped link the project partners with the Construction Innovation Hub (CIH) and the Active Building Centre (ABC). CIH is providing support with the development of the digitalisation strategy as well as how the partners scale Modern Methods of Construction. ABC is assisting with the further development of futureproof's zero-carbon strategy and exploring energy-as-a-service, as part of the business model.

Long Term Vision

futureproof is a new, lifecycle business model that disrupts the broken systems around how housing is currently funded, designed and delivered - helping transform productivity in the house-building sector. Essentially it shares the risk and the reward of investing in homes throughout the whole life cycle of the homes. It brings investors in from development stage attracting them with the precision certainty of homes built using Modern Methods of Construction. As well as de-risking the construction process, the concept delivers a long-term, low-risk return for investors. This new model will encourage investors to fund the development of sustainable communities that have whole-life value at the heart of their design and delivery. This intrinsic value will deliver better quality homes that are more flexible to household needs and require less repair and maintenance. It provides a mechanism for positive change in the housing market whilst anticipating environmental, technological and social change over the coming decades. 

Human Stories

futureproof fundamentally delivers a fairer and more accessible housing market. It gives people real choice within a very high quality built environment that genuinely anticipates their needs, now and in the future and, in so doing, overcomes many of the barriers to accelerated housing delivery.   The new model also allows partners to share the reduced risk and increased reward which supports improved partnerships and collaborations throughout the value chain. The financial proof of concept drew together an extensive and complex consortium of expertise across different fields who fed into the collaborative delivery framework.

Powerful Processes

futureproof draws on a range of diverse and complex organisations to reinvent the housebuilding lifecycle model, from experts in Modern Methods of Construction to investment analysts, from supply chain partners to digital transformation specialists. Modern Methods of Construction (MMC) and digital processes create a repeatable, high-quality, sustainable housing model that represents a more certain, less risky investment. Modular structures will improve the productivity, design and quality of housebuilds, and are estimated to increase the speed of delivery by over 60% whilst guaranteeing performance standards. The digitisation for design and construction will improve collaboration and knowledge-transfer across the value chain, from investor through to occupier. Use of active energy technology and data-monitoring systems will allow the homes to generate, store and resell its own energy creating low-cost homes for residents and revenue for investors.

Fascinating Facts

In 2018 the Investment Property Forum survey showed that 80% of institutional investors planned to increase investment in residential property. However, of the investors in the survey, exposure to housing was only 8.6% of a total £240bn of real estate investment. According to the Ministry of Housing, Communities and Local Government, 90,000 homes are needed annually in the South East, yet only 30,000 are constructed, leaving a huge shortfall in supply year-on-year. Added to that 27% of all people of a house-buying age cannot afford to buy in the region. futureproof homes will use digitised design and construction processes and are manufactured offsite and this improves construction standards, productivity and efficiency, aiming to increase speed of delivery by over 60%. The Modern Methods of Construction and volumetric approach employed by Swan Housing Association reduces the onsite construction period for a house to a matter of days rather than months.

Benefits

Assurance
The use of a Project 13 delivery framework supports quality and performance outcomes from housing delivery, not simply assurance of build costs. This approach ensures long-term guaranteed performance of applied technologies and construction methods that use high performance standards (beyond the anticipated Future Homes Standard) and robust accreditation through BOPAS. The integrated construction process links productivity and quality, delivering long term performance for both investor and occupier.

Diversity
futureproof has created an accessible route to home ownership by developing a flexible form of ownership that redresses the socioeconomic inequality in the housing market. Its fair and flexible financial mechanism means people can buy or rent these homes, and benefit from reduced running costs.

Emissions
futureproof seeks to anticipate societal and environmental change and delivers a business model to enable zero emission development. Zero-emission homes are standard within futureproof developments, where active energy technology can produce, monitor and store energy - and are even designed to enable grid flexibility and community energy storage. The design, layout and specifications anticipate issues of overheating and habitability under a changed climate too.

Investment
futureproof is the first business model that addresses multiple housing market failures simultaneously using a single coherent investable financial package. Rather than a short-term approach which seeks to maximise profit, futureproof supports the long term development of a community and uses its financial model to create value over the whole project lifecycle.

Time
The use of Modern Methods of Construction mean greater levels of certainty in the logistics underpinning the construction process. Swan Housing manufactures volumetric housing in both CLT and light gauge steel technologies. The volumetric approach reduces the onsite construction period for a house to a matter of days rather than months. This level of precision, coupled with a digitally enabled construction management process, reduce risk for investors and accelerate the period between investment and returns.

Whole-life Value
futureproof redistributes the value in home construction across the supply chain, incentivising quality-focused outcomes rather than a transactional, lowest cost approach. Its model is more attractive to investors as it minimises short term risk and creates longer term reward through flexible tenure models and properties that generate their own revenue from energy. It also bakes whole-life value into the techniques and technologies used in the construction process. By accelerating the pace of high-quality, zero-emission homes and bringing them to market on an accessible, flexible basis, futureproof delivers homes that are better quality, built with accuracy, require less maintenance, are active energy homes, come with guaranteed running costs and can adapt to evolving user needs and environmental change.