106.The lack of access to finance is one of the main constraints that stops homebuilders from increasing their output. It is particularly pressing for small and medium sized housebuilders that do not have large reserves of their own to draw on. The finance model for MMC developments is an even bigger challenge because capital is required upfront to set up factories and assembly lines before any houses can be installed. Homebuilders, Galliford Try Partnerships and Regeneration said “The modular companies we have been in contact with would all expect at least 30% of the overall contract value upfront.” The Centre for London found that 80% of MMC companies in London find it very difficult to secure funding from high street banks due to a lack of confidence. Research conducted by the NHBC Foundation in 2016 suggested that capital cost was the highest concern and barrier to MMC use among homebuilders.
107.Since the economic downturn in 2008, many small and medium sized homebuilders have moved out of the market. The 2017 Housing White Paper estimates their market share decreased from 68% in 2008 to 41% in 2015 and the number of new homes registered by SME builders decreased from 44,000 in 2007 to 18,000 in 2015. In the White Paper, the Government made commitments to diversify the market, help this sector to grow and add capacity in the homebuilding industry.
108.Recent governments have acknowledged how difficult it is for homebuilders to access finance and have introduced a range of schemes and funds to tackle this. In October 2016 the Government launched the Home Building Fund (HBF) which provides loan finance to private sector businesses to build new homes and prepare sites for new homes. £2.5 billion of the £4.5 billion fund provides loan finance to MMC, SME and custom build developers. The Ministry said the Fund has invested over £206 million in MMC developments so far and over 90% of completed applications received since October 2016 have been from SME builders. Since the 2017 Housing White Paper, the Government has launched further initiatives to help homebuilders access finance and increase their output. The Ministry of Housing, Communities and Local Government explained the Government is engaging with stakeholders to address problems around access to finance:
The Government is working with the Construction Leadership Council, the British Business Bank, firms in the construction and financial services sectors and their representative bodies to identify what types of funding are required, the extent to which these can be provided by the financial services market and current providers, and any gaps in provision. Where gaps are identified, the Government will work with stakeholders to address these, to ensure that the industry has access to the finance that it needs to expand its off-site manufacturing capacity.
109.The 2017 Autumn Budget was promoted as the “housing budget” and promised to make available £15.3 billion in new financial support for housing over the following 5 years. This took the total figure for housing to at least £44 billion over that period. In the 2018 Budget the Government announced the British Business Bank would deliver a new scheme to provide guarantees to support up to £1 billion of lending to SME housebuilders. The ENABLE Guarantee is funded through the ENABLE scheme which helps SMEs to access loans. The Minister said it will be launched in early 2019/20.
110.Homes England launched The Housing Delivery Fund with Barclays in September 2018 to provide up to £1 billion in residential development loans of between £5 million and £100 million, with the aim of increasing the number or accelerating the progress of new homes in England. It has also brokered the £250 million Housing Growth Partnership with Lloyds to forge partnerships with small housebuilders and residential developers to help them grow their businesses and increase the number of homes they build.
111.Homes England’s Strategic Plan says it is considering further types of financial support including equity investment guarantees to support the sector. Another example of support is the Housing Infrastructure Fund which is divided into two parts:
The 2017 Budget more than doubled funding for the Housing Infrastructure Fund to £5 billion, before the 2018 Budget further extended it by £500 million to provide support for up to 650,000 homes in total. It is important the Government helps homebuilders to access finance to build more homes, so we welcome the Home Building Fund, launched in 2016. We note, only £206 million from the Fund has been invested in MMC developments to-date. The Government should use the Home Building Fund to provide further finance to MMC homebuilders urgently. It is not clear whether the other funds the Government has launched will help MMC builders to access the upfront capital they need. The Government should ensure these funds can be utilised to build more MMC homes.
113.Small and medium sized builders are important to the homebuilding industry and some are well placed to deliver smaller schemes using off-site manufacturing. A number of SME builders have proven the potential for using MMC in their developments; Pocket Living planned to deliver 204 homes for first time buyers in London in 2018, with 44% of homes constructed using MMC. In order to deliver those homes, Pocket Living received a £25 million loan from the London Mayor’s Innovation Fund in 2017 to help finance ongoing site purchases. Without such public funding smaller homebuilders like Pocket Living would continue to struggle to access finance.
114.The up-front investment needed for MMC developments is an additional barrier that limits take-up among homebuilders—SME homebuilders in particular, in comparison with traditional methods. We hope the work undertaken by the MMC Working Group to provide assurances to the sector will give more investors the confidence to engage with MMC builders.
115.We welcome the ENABLE Scheme and Housing Growth Partnership to help SME homebuilders to access finance but urge the Government to ensure these schemes allow homebuilders to access the up-front capital required to invest in innovation and MMC. These initiatives must be closely monitored to ensure they are helping homebuilders to increase output, including MMC output. If current schemes are insufficient to increase MMC output, new schemes aimed at MMC developments should be considered.
151 Galliford Try Partnerships and Regeneration 
152 Centre for London ()
153 NHBC 
154 Department for Communities and Local Government, , February 2017, p47
155 Ministry of Housing, Communities and Local Government ()
156 Ministry of Housing, Communities and Local Government ()
157 Ministry of Housing, Communities and Local Government ()
158 [on Housing: Construction] 27 February 2019
159 “, Ministry of Housing, Communities and Local Government news story, 12 September 2018.
160 UK Finance ()
161 Lloyds Banking Group, ‘’, 13 March 2018, accessed 13 June 2019
162 “Ministry of Housing, Communities and Local Government policy paper page, 4 July 2017, accessed 14 June 2019
163 Housing Forum ()
164 National House Building Council, , November 2018, p25
165 Greater London Authority, ‘’, 15 August 2017, accessed 14 June 2019
Published: 3 July 2019