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Back in the 1960s ministers were heralding the dawn of a new era for affordable housing, in which homes would be provided more efficiently through the use of innovative, factory-built flats and houses. A combination of skills shortages, the need for more affordable housing and political expediency sparked a prefab boom.

Then, on 16 May 1968, Mrs Ivy Hodge, a tenant in a block of flats in east London, leaned over her cooker in her 18th floor flat, struck a match, ignited a gas leak and extinguished that vision of system-built cut-price housing for the masses, along with four lives. The explosion blew out the concrete panels in the side of the building and it partially collapsed. That was Ronan Point.

It was a defining moment. Ever since, any departure from traditional housebuilding has been regarded with suspicion and trepidation by everyone connected with housing, from tenants to bankers. But the return of the old problems of a shrinking labour supply and growing demand in the South-east has forced the government to reach for the old solution. Off-site manufacture is back on the housebuilding agenda.

But don't expect it to be a 1960s revival – especially if Darren Richards has his way. As operations director with off-site manufacturing consultant MTech, it is his job to make sure housing providers and manufacturers avoid past mistakes.

MTech's 16 consultants are just as likely to be specialists in manufacturing as in construction technology. The company's individuality is epitomised by Richards himself: just 30 years old and an aeronautical engineer by training, he came to the building industry after spending his work experience year at a system-build company because the aeronautical industry was in recession. While working at volumetric buildings manufacturer the Elliott Group, Richards researched traditional and non-traditional housing, and developed the firm's volumetric modular housing system – the e-house. "It is extremely difficult to build a better value-engineered and more cost-effective product than a traditional house,"

he says. "It is technically efficient, there isn't much redundancy in the structure, and it has a cost-effective supply chain route. But its management structure is very difficult to police, and it is subject to the weather. Current demand for housing cannot be met using traditional methods. And I don't think it is possible for traditional housebuilding methods to produce zero-defect houses."

On the other hand, he says, manufactured houses have had an unfair press. "I looked at nearly 200 system-built houses dating back to the 1920s and found most had outperformed their design life by 100%. Some very, very good technical solutions have been misrepresented."

The system-building industry has been caught out because the growth of demand is faster than it expected

The marriage of off-site manufacture and a housebuilding business is not an easy one. Demand fluctuates, and traditional building methods allow providers to adapt output accordingly. Manufacturing, by contrast, needs predictability for planning and investment. "The system-building industry has never seen enough stability to invest heavily in housebuilding. Now it's being caught out because the growth of demand is faster than it expected," says Richards. "The skills shortage does not just affect construction – there is a need to bring skills into manufacturing."

Slow pace of progress
Yet government moves to encourage housing associations to use prefab are still not producing large numbers of factory-built homes. The Kickstart programme, a grant fund awarded by the Housing Corporation to associations developing homes using selected manufacturers, has spent only about half the £80m it was given to spend between 2001 and 2003. It will continue beyond next year because of this underspend. The government also announced in September that the Housing Corporation is introducing the Challenge Fund, to provide at least 1000 modular homes in areas of London and the South-east.

But masonry build remains the norm for English housebuilding – by a long chalk. "Off-site manufacture is not going to take a 50% share of the housebuilding sector overnight," says Richards. "Discounting timber frame, its share of new-build housing is still in single percentage figures. But maybe in 30 years we'll see most of the industry using more innovative techniques."

Although government attention has been focused on affordable housing, Richards is finding that it is the private housebuilders that are beating a path to MTech's Shrewsbury office. These include St James Homes, with whom it recently worked on a sales pavilion for its Kew Riverside scheme in south-west London. "That's a reflection of the skills shortage," he says. "Something like 12 different trades go into a bathroom. Now there is an insatiable demand for bathroom pods."

Richards' advice is that to take on off-site manufacture, housebuilders need, above all, a disciplined approach. "If technology is not applied in a strategic manner, you won't get the best out of it. There is usually little wrong with the technology. The problems arise when using the wrong kind for the project, or through the inexperience of project managers." And those project managers need to be equipped with different skills. "They shouldn't just be backside-kickers – they become logistics managers, who have to schedule the movement of large elements of a building, understand manufacturers' language, know the interfaces of the building, the tolerances, alignment and fit."

MTech is helping to share its knowledge through its partnership with Rethinking Construction in the Manufacturing the Future initiative. This has just hosted a conference, and is setting up a benchmarking club that will allow UK companies to measure their performance against the world's best. "All we know is that we are an awfully long way behind the Japanese," says Richards. The company is also involved in Product Innovation in Architecture, the RIBA's initiative to bring manufacturing and architects together.