Modular housing is on the brink of a major milestone. Construction is under way of the world’s tallest towers built using modular manufacturing, a method by which houses or blocks of flats are built in sections offsite in a factory. Rather than gracing the skyline of Singapore or Beijing, the two towers, which will be 38 and 44 storeys high and contain 546 flats, are to be built in the London borough of Croydon.

Ben Derbyshire, the chair of HTA Design LLP, the architecture practice behind the Croydon towers, and president of the Royal Institute of British Architects, believes modular construction in the UK is at a turning point. “Confidence is now building and the capacity to construct homes in this way is emerging. So we will see it becoming less niche and more mainstream,” he says.

Modular construction, which is popular in countries such as Japan, Germany and Sweden, has been slower to take off in the UK. Of the 200,000 homes built each year in the UK, about 15,000 are modular, according to a report by law firm Pinsent Masons. Factory-built housing has had negative associations with the low-quality prefabricated homes of Britain’s post-war era. Modular housing’s proponents are understandably keen to avoid the “prefab” label. The construction method is billed as an entirely different proposition in that it produces high-quality, cost-efficient homes designed and manufactured using the latest technologies. “The buildings look and feel very solid and there’s no sense they have a transient or temporary quality,” says Derbyshire.

Detail from 101 George Street, aka Croydon Towers. These will be the world’s tallest modular towers. Photograph: Forbes Massie/HTA Design LLP/Tide Construction & Vision Modular Systems

Recent investment in the UK sector has boosted prospects for modular housing. This year, Japan’s biggest house builder, Sekisui, entered a venture with the UK government expected to result in thousands of modular homes across the country. Ikea has been given the go-ahead by Worthing council to build affordable modular homes on the south coast, and one of the UK’s largest house builders, Berkley Homes, plans to open a factory in Kent with the aim of producing 1,000 homes a year.

Factory-built housing is seen as a way of speeding up productivity and efficiency in construction, a sector that’s been singularly resistant to modernisation. The government aims to get 300,000 new homes built a year by the mid 2020s to fix what it admits is a broken housing market and says that modular homes can play a part in this.

Despite pressures on traditional house builders to meet demand, they’ve been slow to adopt new methods of construction. Conventional builders produce homes at the same rate at which they sell them in order to protect their profit margins, so there’s less of a financial incentive to pick up the pace. This is why modular housing has been used primarily for affordable housing schemes, hotels or properties in the rental market. Construction cost for factory-builds is also about 12% higher, according to a report by JLL, the property consultant that led the deal between Sekisui and the UK government. While new entrants to the housing industry are more likely to drive innovation in construction methods, established house builders would have to come on board in order to effect real change, the report says.

Whether the big players like it or not, a shake-up is coming. The housing industry has an ageing workforce and relies on migrant labourers from Europe to shore up its skills shortage. Rising labour costs will eventually force a shift towards new construction techniques, Adam Challis, head of living research at JLL, says. “[The industry’s] not recruiting anywhere near the rate people are retiring,” he says. “We will need to switch to modern methods of construction as a way of offsetting labour irrespective of Brexit, but there’s no question that any labour scarcity from the continent will only exacerbate the problem.”

Factory-built homes not only require less labour, they can be built much faster than traditional homes. Though the speed of delivery varies, they can take less than a week to build in a factory. They also have the advantage of being constructed indoors in a controlled environment as opposed to a building site exposed to the elements. Luke Barnes, the co-founder of Ideal Modular Homes, a Liverpool-based manufacturer, says quality is a key differentiator. “You wouldn’t buy a car that’s been built outside in the rain and mud,” he says. “We’ve got a digital quality control system that follows every process in the factory so it leaves with zero defects, unlike traditional builds where after people move in there’s consistent snagging that has to be rectified.”

But the technology is not without risk. When it comes to the mass production of anything, from homes to electrical appliances, there’s always the potential for any error to be replicated. “If you make a mistake once in construction it’s an isolated issue. In a manufacturing process, you make a mistake once, you make a mistake every time,” says Challis. “Managing systemic risk is the most important upfront issue.”

Modular buildings have a lower carbon footprint because there are fewer lorry deliveries to the site, cutting emissions. People living nearby are also less affected by noise, pollution and disruption. Marc Vlessing, the founder of Pocket Living, a London-based affordable housing company, says the method’s eco credentials will be a key driver of demand. “As residents understand this more, I believe they will press local authorities to ensure homes in their neighbourhood are delivered in this way.”

Vlessing, whose firm uses modular construction, believes factory-built housing will have a big part to play in getting people on the property ladder. “We are in the midst of a housing crisis and we have to find new solutions to break out from the practices that have contributed to it,” he says.

But fixing the housing crisis will take more than a government push to increase the number of homes or a switch to speedier new construction methods. “Anything that fails to [address] the power dynamics in the housing system, that fails to address inequality or land ownership, is not going to speak to the real problem,” says David Madden, associate professor in the department of sociology and the cities programme at the London School of Economics. “Modular housing could make things more efficient and bring down building costs, but it’s not going to change anything on its own.”

• This article was amended on 7 and 13 August 2019. Worthing is in West Sussex on the south coast of England, rather than in the south-west as stated in an earlier version. And the government says that it does not have a target to increase modular homes to 100,000 by 2020. Rather it says that modular homes can play a part in its target of building 300,000 homes a year.