25.Demonstrating long-term performance is a common problem for innovative products which have no long-term data to draw on. A lack of confidence in the durability of MMC buildings from financial service providers, including valuers, insurers and mortgage lenders has been a key barrier to greater uptake. High profile problems with previous housing developments, have caused reputational damage to MMC homes. To combat these problems the Ministry of Housing Communities and Local Government established the Joint Industry Working Group on MMC to draw together representatives from across the industry to improve “stakeholder education and understanding of MMC with particular reference to enabling better access to mortgage finance, insurance and assurance.” The Working Group needs to develop solutions that will encourage these financial service providers into the market.
26.The insurance industry has been particularly cautious to engage with MMC developments due to the lack of data on the long-term performance of homes built using innovative techniques. Without that data, it is difficult to assess the risk level of those homes. The Association of British Insurers said:
At present, compared to the wealth of historical data and evidence on which to assess the risk posed by a traditionally built property, there is a lack of data and evidence on the ability of MMC buildings to withstand the effects of named perils in real-world scenarios, therefore limiting the assessments which insurers can make on such properties.
27.Confidence in MMC for homebuilding has also been affected by a number of high-profile failings in previous MMC developments which have led to long-standing reputational problems. More than forty non-traditional house types were classified as defective under part XVI of the Housing Act 1985. For example, the Cornish Type 1 House incorporated pre-cast reinforced concrete panel walls on the ground floor and a second storey within a timber-framed mansard roof. The pre-cast concrete proved to be susceptible to carbonisation and loss of structural integrity and the homes were poorly insulated. More recently, some of the “£60,000 homes” built in the 2000s and have reportedly begun to rot. Insurance provider, Zurich Insurance plc described case studies from their customers who have experienced problems in their MMC homes:
Box 2: Zurich Insurance plc case study
2.13 Zurich previously assisted two customers who had experienced near identical issues at their respective housing developments which had been built using common MMC such as timber frames, wooden cladding and components manufactured off-site. Just a decade after construction the customers were alerted by staff and tenants to a number of concerns including cracks appearing in walls, uneven floor surfaces and windows and doors not fitting properly in their frames. Given the nature of the construction such movement raises significant concern as to the remaining integrity of the fire stopping within the buildings, given that there is minimal inbuilt resilience to such defects within these structures.
2.14 Structural engineers conducted an intrusive survey of the developments which raised a number of concerns including: the existence of large voids in the internal structures which would allow fire to move quickly and undetected throughout the entire building; holes in the walls and around fires doors breaching vital firebreaks as a result of structural settlement and drying out; and large holes in firebreak walls and floors as a result of contractors installing piping and electrical services and not subsequently back filling them to the required standard and approved detail.
28.In their written evidence, the insurance industry and fire protection agencies raised concerns about the risk of fire in MMC homes due to the types of materials they incorporate. The Association of British Insurers said:
MMC products often incorporate lightweight combustible materials such as wood, polystyrene and recycled materials, which have the potential to increase the risk of fire spread, leading to major damage to property and significant insurance claims costs for reinstatement. Hidden cavities and voids caused by bad practice during the installation phase can also enable the spread of flame, smoke and toxic gases causing harm to any inhabitants within the building.
The Minister of State for Housing, Kit Malthouse MP, told us he is undertaking work on data accountability—on safety in particular—to ensure it is “auditable, inspectable and assessible”.
29.The Association of British Insurers also raised concerns about the repairability, maintenance and modification of MMC homes:
The insurance industry also considers there to be a lack of information regarding repairability, maintenance and modification of MMC buildings, specifically relating to the associated costs and practicalities of repair, and would therefore welcome clarification on this
30.In its written evidence the Association of British Insurers said it was concerned that if a small part of a modular home suffered damage, the whole module may need to be replaced. This makes repairs more difficult and costlier than for homes built traditional techniques. Other witnesses raised questions about the adaptability of MMC homes; the Home Builders Federation said “for homes built out of Structured Insulated Panels (SIPs), homeowners will be unable to add an extension or additional windows once the property has been constructed.” This may make it a less appealing option to consumers.
31.The panel of representatives from financial service providers was asked whether they look to different building types such as schools or to other countries where MMC is more commonly used, in order to find data, but Mike Basquill of the Royal Institution of Chartered Surveyors explained the unique nature of the residential market, which, from their point of view, makes it difficult to read across from other types of building. James Dalton from the Association of British Insurers told us they were engaging with industry colleagues in Germany to understand their experience of MMC-related products. The advice they received was: “It gets better once you know how the product responds”. The Building Societies Association had also been on tours of the self and custom build town of Almere in Netherlands to better understand the product. Charlie Blagbrough of the Building Societies Association was also positive about the potential for the categorisations developed by the MHCLG Joint Working Group on MMC to help marshal information and enable them to aggregate data on the long-term performance of different types of MMC.
32.The lack of long-term data on the durability of MMC homes in the UK is a considerable barrier to industry actors—the insurance industry in particular—engaging with MMC housing schemes. The Minister of State for Housing acknowledged this in his oral evidence to the Committee and said that he was working on data and accountability that is “auditable, inspectable and assessible”. The Minister should engage industry to ensure this work results in a tangible output that helps industry actors access the relevant data.
33.The industry needs to demonstrate that MMC homes are safe and can be easily repaired and adapted if they are to be a viable product. The Government should encourage financial service industries, including insurers and mortgage providers to gather data from other types of buildings such as student accommodation, which incorporate MMC, or from other countries where use of MMC is more prevalent, if applicable.
34.A number of written submissions said that it can be difficult to decipher which materials and processes have been used in the construction of MMC buildings and whether modifications have been made after completion which might affect how they will perform over their lifecycle. The Association of British Insurers said:
Another issue relating to design and installation, is the ability to identify the materials used within the property, particularly when various types of MMC are installed within one structure. During the installation phase other risks may appear, such as the extent to which combustible elements are exposed, leading to an increased risk of accidental ignition / arson or other hazards. In addition, it is important to consider insufficient knowledge of installers on the impact of deviations from the installation requirements may have on the building’s performance. These problems in the design and installation phases make it more difficult for insurers to accurately identify the risks associated with MMC buildings and have confidence in insuring the buildings once completed.
35.The materials and processes used in the construction of homes and later modifications will affect how they perform in a fire. The London Fire Brigade said the lack of information available to them about the construction of buildings can endanger firefighters and members of the public:
There has been an overall lack of cohesion across the industry, with fire services left out of the loop with regards to MMC and, as such, information and knowledge regarding these systems and materials are not always shared in a transparent and accessible manner or in a way that can be translated into the knowledge that firefighters need to conduct firefighting operations. This leaves fire services learning retrospectively, which has the potential not just to hamper firefighting operations, but also to endanger firefighters and members of the public.
36.Many written submissions suggested that information relating to the construction and maintenance of homes built using MMC should be recorded and shared with relevant stakeholders using digital technology. In their 2016 report ‘Laying the foundations for MMC’ The Building Societies Association suggest a property log book for homes built using MMC could assist the customer with arranging a mortgage, home insurance and undertaking future maintenance of the property. It would be passed along with the property in the same way as a log book is used for cars and would expand on the NHBC Foundation Home User Guide (HUG). It could record property type and construction method data. Zurich Insurance plc also suggested that building construction data should be collected and shared:
Building construction data must be clearly documented and maintained to ensure contractors (including those involved in minor day to day maintenance) have an awareness of the complexities and limitations of the building–including such aspects as fire protections, service routes and protections, and structural integrity
37.The Association of British Insurers, Zurich Insurance plc and insurance provider, LV= all suggest that a publicly accessible database would enable this information to be stored and shared to overcome the lack of information available to relevant stakeholders. The Royal Institution of Chartered Surveyors said digitisation could “transform” stakeholder confidence and the data collected could be used to inform future designs. They explained how digital technology and Building Information Modelling (BIM) could assist in deploying such a database:
Digitisation may be deployed both in the production process to achieve precision assembly, and also provided through BIM and successor models, a dynamic database which is capable of tracking the unit through design, specification, procurement, construction/assembly, quality control and finishing, handover, letting/selling, residential occupation and management, depreciation and replacement and recycling and renewal.
38.The Association of British Insurers said it is in discussions with the Ministry of Housing Communities and Local Government about how such a database can be delivered but described progress as a “slow burn”. In their written evidence, they said:
The Association of British Insurers has met with the Ministry of Housing, Communities and Local Government to discuss whether this type of information could be available and the most appropriate vehicle for delivery. Initial discussions around the land registry being a suitable platform were explored and MHCLG were going to investigate the potential of using the ‘Building Control Information Hub’ or alternative platforms to deliver an electronic database
The Minister of State for Housing told us that in light of the Independent Review of Building Regulations and Fire Safety, led by Dame Judith Hackitt, the building developers should hold a database where they can prove they have made a safe building, but said they are a long way from launching a central database which fire crews could access:
In the end, the way the system should work, or the way the system will work in the future, coming out of Hackitt—and we keep talking about this golden thread—is that, fundamentally, there is an auditable database held by the producer of the building where they can prove that they have created a safe building that might provide that kind of information. As for whether there should be a central database into which a fire crew on its way to a fire can dial to say, “We are heading for this building; please throw up the blueprints and all the rest of it, so we know what we are dealing with”, we are a step away from that. But you could imagine that, if there are standardised products produced, when they are on their way to a certain address, a fire crew can tap into the iPad, “We are going to 7 Acacia Avenue and it is a Berkeley Homes Balmoral MK III; these are the issues that we have had with this in the past” or, “This is the layout and this is what we need to know”. That would be a great place to get to, but we are not going to get there straight away. What we do want to get to is a situation where everybody who is putting up a building has that data somewhere that is auditable and inspectable.
However, Fergus Harradence Deputy Director for Construction at the Department for Business, Energy and Industrial Strategy indicated the Government had already been undertaking work on this type of innovation. He said they had been looking at how digital information about the built environment should be collected, stored and made available. The Innovation in Buildings group has published a “smart construction dashboard” which will track performance indicators such as energy efficiency of MMC homes. Furthermore, the Department are funding the Digital Framework Taskforce through the Transforming Construction Programme, to provide a forum to discuss the trade-off between sharing data and ensuring sensitive information cannot be used to cause harm.
39.Digital technology makes it possible to collect, store and share data about the construction, maintenance and materials used in MMC buildings. This can be beneficial to customers wanting to make changes to their homes, insurers who need to better understand the products they are underwriting and fire services who must tackle fires in all types of building.
40.The Government should develop a digital database that records the design, processes and materials used in the construction of buildings. For larger developments, such as blocks of flats, the database should also track modifications and repairs made after completion. This would help to track and aggregate data about homes built using different types of MMC in order to build up a model and inform stakeholders of the likely performance of homes built using the same method in future.
41.Despite problems in the past, most of the written submissions to this inquiry agreed that homes built using the precision manufacturing techniques of MMC have the potential to be better quality than traditionally-built homes. However, builders of MMC homes need to be able to demonstrate to financial service providers their homes are good quality and durable in the long-term, so that customers can obtain valuations, mortgages and insurance on them.
42.At present, many developers obtain a Build Offsite Property Assurance Scheme (BOPAS) accreditation to demonstrate the quality and durability of their MMC homes. The BOPAS accreditation is a “risk based evaluation” that demonstrates homes will last at least 60 years but it does not have the financial backing of a warranty scheme that would pick up the cost if failings occur. Therefore, homebuilders must also obtain a warranty for their MMC homes, as they would for any other residential property.
43.Currently, there are several warranty providers, each of which use different criteria for their assessments of homes making it difficult for financial service providers and customers to know what these homes have been tested for. It is particularly challenging when homes are built using innovative techniques and materials which may perform differently to the traditional methods the warranty providers are used to. The Joint Industry Working Group on MMC is developing a standardised set of criteria against which to assess homes to ensure they all reach the same standard. Mark Farmer called this an “MMC Scheme”, the National House Building Council called it a “Warranty Assessment Protocol (WAP)”. The objective of the scheme is to give certainty to customers, insurers and mortgage lenders that homes built using MMC are good quality and will last into the future in the same way as a traditionally constructed home would. This should help provide assurances to financial service providers and help them provide valuations, mortgages and insurance on MMC homes. However, Isobel Stephen, Director of Housing Supply at the Ministry of Housing, Communities and Local Government told us there is currently no deadline for the launch of the scheme.
44.It is very difficult to assess the long-term durability of homes built using new and innovative techniques, which has led to difficulties obtaining financial products such as insurance and mortgages on MMC homes. We welcome the work the Government has undertaken to set up the MMC Working Group led by Mark Farmer to bring together industry actors and overcome barriers that prevent financial service providers from engaging with MMC developments. We also welcome the proposal for an “MMC Scheme” that will set out a single set of standards for warranty providers against which to make decisions and provide quality assurance to industry actors. We believe the MMC Scheme should be launched by the end of this year to help increase the take-up of MMC for homebuilding.
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Published: 3 July 2019