18 March, 2021
On 3 March 2021, the UK Budget was announced for the financial year 2021/2022. Included in this was the announcement that the Government intended to launch a Modern Methods of Construction (MMC) taskforce, backed by £10 million of seed funding. This announcement not only highlights the Government's commitment to the creation of MMC homes, but also the accelerated delivery of homes across the sector. We anticipate that this news will cause many in the social housing sector to consider their approach to MMC homes and what benefits this may bring.
MMC has risen in popularity as a means of responding to the ever-increasing risk presented to the construction industry, such as the struggle to obtain and maintain talent and the impact of Brexit on the security of labour. As a result, more businesses and some Registered Providers are beginning to consider, and in some cases implement, MMC. We are certainly seeing an increase across the sector.
In overview, MMC is a wide term used to reference offsite manufacturing and the implementation of alternative onsite building techniques. It is hoped that an increased tendency to adopt these techniques will actively help combat the housing crisis, by increasing the speed of construction, reducing costs and improving overall quality and energy efficiency.
From a development perspective, it is understood that MMC will be implemented and carried out at higher initial cost but with expectation that this will be offset by increased efficiency and sustainability. For many Registered Providers, a key factor to consider before implementing these techniques will undoubtedly be cost certainty and cashflow, be this through private funding and/or grants. Similarly, consideration will likely be given to the impact that MMC will have on the procurement process in the public sector. Potential downfalls of this form of construction may be that it is limited on flexibility (once construction is implemented) and potential for product development mid-way through traditional construction, in addition to the potential for increased costs, including transportation costs.
We expect it will therefore be key, particularly for those in the social housing sector to decide the approach they want to take to construction from the outset, as the use of MMC will require significant compromise and could lead to delays in construction where new methods are considered mid-development.
It is clear that the Government's increased commitment to this type of construction indicates that they see it as a means of increasing housing output without seeing a considerable impact on traditional methods of production. Some suggest that MMC may be a gateway to reaching affordable housing targets, due to the intended time efficiency of the process. Given this, it is possible that moving forwards, the sector increasingly sees a targeted approach from the Government as to the number of homes intended to be produced using MMC (as we have seen in the grant programme specification requirements due to commence in April 2021).
An outstanding challenge facing MMC is the scepticism of key lenders and warranty providers, particularly due to the accelerated time periods for production, leading to unease about the quality and durability of modular homes. Crucial concerns for lenders surround whether or not modular homes could be seen as a depreciating asset and whether adequate security can be charged against these properties as a consequence. To combat this, the Government are increasingly working towards a more unified approach to the assessment of quality and standards, in the hope this will help to share knowledge about assessing modular homes amongst warranty providers and in turn, increase lender, industry and consumer confidence in MMC. Whilst there remain some unknowns about the suitability of MMC across the housing sector, particularly by some key lenders, we suggest that this is an area for those in the social housing sector to keep updated on as it is a rapidly developing, increasing in both popularity and support.
For more information contact Laura Rae in our Housing & Regeneration department via email or phone on 01772 220221. Alternatively send any question through to Forbes Solicitors via our online Contact Form.