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'I want to reverse climate change through housing'

'I want to reverse climate change through housing'

Eco-entrepreneur Joseph Daniels will build 2,000 new sustainable, affordable homes a year to help reverse Britain’s housing crisis. The Project Etopia CEO opens up about the difficult past that drives him and tells us what’s next

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Mark Essex

Director, Public Policy

KPMG in the UK

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This article first appeared in The Times.

The CEO and founder of modular housebuilder Project Etopia, Joseph Daniels, had a rocky start in life – made homeless four times from the age of 15, he left school without any qualifications. But he’s channelling that experience to help him take on the challenge of solving the UK’s housing crisis – and tackle climate change at the same time – by building high-tech eco-homes that ordinary people can not only afford, but will also really want to live in.

“We have had a housing deficit of four million since 2008. Homelessness is rising, and people are sick of living in sub-par accommodation because they can’t afford a home of their own. My father was a physically abusive alcoholic and my mother was sectioned when I was 15. I’ve lived on the street and I need to do this,” says the straight-talking 27-year-old entrepreneur.

The homes that Daniels’ mission is built on are not traditional bricks-and-mortar dwellings, nor are they the timber-framed, brick-skinned designs that pass for “quick build” structures among mainstream house builders. They are modular homes constructed from mineral-board-faced, foam-filled structural panels, made in Daniels’ own factory in Cheshire and slotted together speedily on site, like supersized Lego bricks.

Where traditional houses take months to complete, Project Etopia’s homes go together in a fraction of the time due to being partially pre-built in the factory. The firm’s flagship scheme in Corby, Northamptonshire, is a commuter village that will comprise 47 homes, the first four of which were each built in nine days flat.

The factory, which opened last year, has an initial capacity of 2,000 houses a year. Houses are not only faster to build, but will also have smart “internet of things” technology built in and be much more energy efficient than the average home.

With integrated solar panels (battery storage built into the staircases is on the way too), Daniels says he can build houses that will generate more power than they consume, potentially offsetting some of the six tonnes of carbon emitted annually by the “typical” house as a result of the heat and power required. “I want to reverse climate change through housing,” he says.

 

To showcase the full potential of his approach, Daniels is building a test home for the Building Research Establishment in Watford, which he says will be “the single highest performing building in the world. It will be ten times energy positive during the summer – we can power ten homes from that one.”

Championing innovative new technology in a conservative industry such as housebuilding is an uphill battle, he admits, but Daniels believes he has the current generation of twenty and thirtysomething customers increasingly on his side. “We are conscious about what we buy and eat, and we care about the planet. People have only chosen traditional houses because up until now there have been no alternatives available.”

Daniels’ zeal and determination – since founding the business in 2015 he’s taught himself everything from thermodynamics and electrical and mechanical engineering to web design – has attracted some impressive backers to Project Etopia. His chairman is hedge-fund titan (and former Conservative Party treasurer) Lord Fink, and property magnates the Reuben Brothers (whose £18 billion net worth makes them the UK’s second-wealthiest family according to the Sunday Times Rich List) invested £19 million last September.

Daniels’ number one rule for working with such high-octane boardroom colleagues? Be ready to learn. “I said to myself when they both invested that if I am voting for something I believe in and want to do, if I don’t also listen to why I might not want to do it then I am not a smart businessman,” he says. “So I always listen.”

Not content with a disruptive new product, he’s also trying to modernise the construction industry’s timeworn vertically integrated business model, replacing it with the kind of collaborative ecosystem more commonly associated with growth-orientated tech businesses. “The modern method is not to be vertically integrated – you can’t be an expert in all things. We innovate in construction materials and we innovate in technology – do what we do best and then bring together partners to work collaboratively.” So he has a deal with Daikin, for example, to provide heating and ventilation systems, and another with a leading, yet to be named, global consumer electronics brand for appliances and technology.

In the same collaborative spirit, Daniels is working with local authorities and other property developers on how modular construction can help achieve housing targets more quickly – and grow Project Etopia, of course.

He’s also busy looking for partners across Africa, and in China and India, and his ultimate ambition is to make Project Etopia an international success story. “In five years, we’ll have built a home on every continent, and we’ll hopefully have scaled to 25,000 units globally.”

Far from seeing it as a handicap, the hardship he himself experienced is what drives Daniels to build a commercially successful business based on helping others in the same position. “It’s our responsibility as humans to enable people. That’s what Project Etopia is about – you can’t create a utopia, but if you can get the economics and the environment right, you can make things better.”

The KPMG view

The kind of high performance modular eco-homes being pioneered by Project Etopia are clearly an exciting new innovation in housebuilding, says Mark Essex, director of public policy at KPMG. “One of the biggest drivers here is the environmental agenda in public policy. These homes certainly have the potential to outperform traditional homes in terms of their environmental impact,” he says.

Furthermore, modular construction – or Modern Methods of Construction as the industry calls it – is increasingly on the radar of policy makers, local authorities and housing associations looking for new ways to accelerate progress towards the government’s target of building over 300,000 new homes annually, and to do so sustainably. “MMC is very fashionable at the moment. It’s making a valuable contribution to the housing crisis by solving one big problem – how to speed up the rate of construction.”

In theory, faster construction means lower capital risk for the developer. However, he adds, any business looking to break into the mainstream housing market in the UK – particularly if they are offering houses for sale – can’t rely entirely on building a better product, faster. “Speed of construction is not currently the limiting factor for houses that are built for sale. Developers release new developments in multiple phases because they have to protect their margins – if they put 1,000 new homes on the market at once the price of each home would fall.”

This creates something of a Catch 22: build at scale for better economies but lose out on sale price by flooding the market. The answer might be to rethink the “build for sale” aspect. Modular eco-homes could make much better economic sense for build to rent developers, he says, because even if initial build costs are slightly higher, that is more than offset by lower running costs in the long term.

Looking for partners who want to invest in build to rent, rather than build to buy, could be one way round this conundrum, says Essex. “But in order to make large scale changes in the market, you have to tackle tenure – the British obsession with home ownership.”

Disrupting how we think about owning bricks and mortar is one of the aims of KPMG’s Reimagine Public Policy: 20 bold and imaginative ideas to achieve public policy goals.

For example, removing the fear of eviction to make renting a more attractive option, which could reduce demand for home ownership and so return house price inflation to a more sensible level. If new-build developments came with a condition that some properties were sold with a covenant requiring them to be let on indefinite tenure, over time the stock of such properties would grow to become a viable alternative to home ownership. Likewise, as many young professionals struggle to afford accommodation in property hotspots, employer-backed low rents (rather than salary incentives that can’t keep up with house prices) could lessen home ownership’s grip on the nation.

But how would that work in practice? Employers might look to the way in which universities create student accommodation or, to go further back, learn from the example of projects such as Cadbury’s Bourneville village. For businesses with more financial clout, a nomination scheme would be one way to reward workers: put simply, an employer guarantees to fill a property development, thus lowering the risk for developers and, in turn, lowering rents for employees.

“Think about an NHS trust with a lot of land,” says Essex. “If it puts up 1,000 rooms for its staff, that’s a long-term guaranteed income stream for the owner of the development. It’s a lower risk yield and if you passed on the saving as a rent reduction to nurses you would never struggle with staffing. It’s something we’ve considered at KPMG, if we could share a development with like-minded employers.”

Extending the kind of partnership models that Project Etopia already has in place for appliances or heating and ventilation equipment to cover the ownership of entire new developments could pay dividends.

“Looking for partner organisations with a longer-term horizon could be the answer, such as local authorities and housing associations – or even large employers like the NHS – who want to build and hold rental accommodation for their residents, members and employees. These organisations would value the longer term savings that sustainable homes deliver through lower running costs.”

Another benefit of employer-built communities is the “instant sense of place” that can tackle social isolation and poor access to services associated with more traditional housing projects, Essex explains. “Retailers, for example, know that there will be large numbers of professional people moving in very shortly, so you can attract high-end shops rather than having vacancies or sub-prime retail tenants.”

Another classic challenge that faces any entrepreneur trying to disrupt such a well-established market involving so many high-profile interests, is attempting to do too much and spreading themselves too thinly. “The risk of distraction is huge. You need to find a partner with the right complementary skills and experience to help you navigate all the politics.”

© 2020 KPMG LLP, a UK limited liability partnership, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

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