Modern methods of construction – building the social housing sector’s awareness and confidence

There is an ongoing drive to encourage housing associations to adopt modern methods of construction (MMC) in their delivery programmes. Mark Farmer, CEO of Cast Consultancy & MHCLG MMC Champion, sets out the progress that has been made since 2017 to grow the confidence of the sector in adopting MMC.

For the last three years I have spent a lot of time, primarily on behalf of the Ministry of Housing, Communities & Local Government (MHCLG) looking at the thorny issue of how we open up the mortgage lending, valuation and insurance markets to more widespread use of MMC. The genesis of that work was a government commitment made in the 2017 Housing White Paper to address this key issue as part of the ambition to drive MMC adoption in new homebuilding.

Although the focus, for political reasons, was on domestic mortgages and the home ownership market, it soon became clear to me that the core issues that needed to be addressed were common to asset investment finance for build to rent developers and also commercial lending into the social housing sector where assets are being securitised and put into charge.

Feedback from housing associations in late 2019 indicated there were potential blockers to their increased use of MMC system-built homes delivered beyond balance sheet reserves. Lenders are nervous about the security value of assets that they perceive as ‘non-traditional’. Many often have no established policies covering this grey area and have sometimes imposed notional limits on the amount of MMC assets put into charge, concerned about concentration risk to certain systems across a portfolio of lending.

The concern about systemic failure and past legacies is legitimate but the key now is to better inform and share with the key stakeholders what true modern advanced manufacturing solutions can deliver.

In many cases, the negative perceived comparison to traditional build is a completely false one in that it is increasingly the traditionally built properties, using a combination of different materials and complex assemblies put together on site by a variable competence workforce in an unassured way, that often have greater risk of poor performance and degradation than MMC solutions. This is confirmed by those housing associations who have done the comparative analysis.

I am glad to say good progress has been made on a variety of fronts:

• Firstly, in defining what we mean by MMC (as published here by MHCLG) which can help us create a data and performance framework and understand a hierarchy of risk for different systems.
  
  
• Secondly, there are an increasing number of completed MMC scheme and research and development initiatives underway which are capturing evidence, demonstrating and educating, including the biggest MMC research and development programme in history currently being led by Homes England.
  
  
• Thirdly, there is now a Memorandum of Understanding in place amongst some of the major players in the new build warranty/approved inspector market who have all committed to collaborating and better unifying their approaches to MMC accreditation and to share information on claims.
  
  
• Lastly, a current initiative bringing together MHCLG, Homes England, housing associations, their lenders and the biggest valuers in the sector is looking to create a new valuation protocol for the securitisation of social housing MMC assets on a EUV-SH and more importantly, a MV-STT basis.

I hope to share more on this last point in 2021 with one eye on enabling the sector to unlock its full potential role in growing use of MMC without meeting funding-related barriers along the way.