Modern methods of construction Contents

Conclusions and recommendations

Government’s homebuilding targets and the case for MMC

1.We support the Government’s ambition to add one million additional homes to the housing stock by 2020 and increase annual output to 300,000 by the mid-2020s; however, these volumes will not be achieved unless there is much wider adoption of MMC, alongside traditional building methods. Adopting higher levels of MMC would diversify the market and help to increase the numbers of new homes delivered, but capacity in off-site construction will have to increase rapidly and new entrants come into the market, if it is going to play a significant role in meeting the Government’s homebuilding targets. To track how much the Ministry is spending on MMC specifically, it should report annually the total amount allocated to MMC developments across all its different funding streams, including generic schemes such as Help to Buy. It should implement a coordinated strategy across all relevant government departments to increase MMC homebuilding and monitor how many homes are built using MMC, in order to evaluate the impact of this strategy. (Paragraph 12)

2.We received a wide range of evidence that detailed the potential benefits of using MMC to build homes. As our predecessor Committee said, MMC have the potential to make an important contribution to addressing the industry’s problems and increase the speed at which homes can be built. Therefore, the Government should take steps to exploit these benefits and help the MMC market to grow. (Paragraph 14)

3.We received a wide range of evidence that explained the current barriers to uptake of MMC to build homes. The Government must adopt the recommendations in this Report to overcome these barriers if we are to achieve greater uptake of MMC and enable them to play a significant role in delivering the homes this country needs. (Paragraph 16)

Defining MMC

4.To benefit from the predicted advantages of MMC, such as better-quality finishes from precision manufacturing and developing a high-tech industry that is more appealing for potential employees to be employed in, homebuilders should use more digital technology such as Building Information Modelling (BIM) in their processes and not simply move construction off-site. (Paragraph 19)

5.The definitional framework for MMC developed by the MHCLG Joint Industry Working Group on MMC enables the categorisation of all forms of MMC and will help industry actors to understand the different types of construction that could be used in the residential sector. This framework is designed to help insurers, mortgage lenders and other industry actors to engage with MMC developments and provide them with the relevant financial products; so they should take this opportunity to make use of the framework and increase their involvement with the MMC sector. (Paragraph 23)

6.It is equally important that MMC is explained clearly to consumers and the benefits and disadvantages are understood by the wider public. (Paragraph 24)

Quality assurance and warranties

7.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. (Paragraph 32)

8.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. (Paragraph 33)

9.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. (Paragraph 39)

10.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. (Paragraph 40)

11.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. (Paragraph 44)

Workforce and training

12.Housing developers identified the lack of skilled workers as one of the main constraints to building more homes using traditional techniques. The workforce will have to increase rapidly if it is to deliver 300,000 homes per year. Adopting more MMC could help to reduce the total number of workers required but will not be a panacea for the workforce shortages. If EU workers choose to leave, or the UK fails to attract as many EU workers in future, current shortages will be exacerbated unless new people are trained in both modern and traditional techniques and brought into the workforce. (Paragraph 50)

13.Adopting more MMC will take some of the work off-site and provide opportunities for more digital working which could help to attract young people into the sector and increase capacity. However, witnesses were clear that traditional techniques will continue to be used alongside MMC to build homes and therefore we also need more workers with traditional skills. Other workforce benefits such as providing new employment opportunities in parts of the country with higher levels of unemployment, could be achieved through strategic positioning of new MMC factories, however, this will have to be balanced with planning obligations to use local labour. (Paragraph 51)

14.The Introduction of T Levels which are equivalent to A Levels will help to overcome some of the reputational problems the industry faces, raise the profile of the jobs available and hopefully encourage more young people into the sector. (Paragraph 55)

15.The Government must ensure skills programmes, apprenticeship schemes and the new T Level give learners the skills they need for both traditional techniques and MMC and encourages more young people into the sector. Homes England must ensure their partners are delivering necessary skills for a modern workforce and the Construction Industry Training Board must ensure it is delivering the skills necessary for homebuilding. It should also support the reskilling of the current workforce so they can contribute to a modern construction industry. (Paragraph 56)

16.We welcome the steps the Government has taken to support innovations in advanced manufacturing for the construction of homes. The networks of catapults and centres of excellence which bring businesses and academia together to develop advanced manufacturing solutions, should be coordinated with the central Transforming Construction Programme and the Construction Innovation Hub to ensure each has a specific area of focus. The Government should utilise these networks to coordinate the testing and standardisation of MMC processes and components to develop innovative products that comply with the building regulations. (Paragraph 59)

17.The MHCLG MMC Joint Industry Working Group should extend its remit to look at advanced skills provision. It should work with Homes England, the AMRC, and other training centres to develop skills programmes that provide learners with the specific skills required for the off-site manufacture of MMC homes. (Paragraph 60)

Supply chain

18.It is clear that for both suppliers and developers there is a lack of robust supply chains and this is a major barrier to greater uptake of MMC. The Government has the potential to shore-up supply chains through wider use of mandating for MMC in developments which benefit from public money. Though this should be used with caution so as not to deter developers from building at all if they are unable to use traditional methods. (Paragraph 63)

19.The Government should consider setting requirements for homebuilding developments that benefit from public funds—such as those sold through Help to Buy Schemes—to incorporate the use of MMC techniques, to aggregate demand for MMC products and bolster domestic supply chains. (Paragraph 64)

20.Homebuilders must deliver a product which is well designed and desirable to homebuyers; homes need to be adaptable and provide ample living space and storage if they are to meet the needs of buyers. When designing homes, methods of construction and transportation need to be considered at an early stage. If the factory manufacturing components for a build is situated a long distance from the site where homes will be installed, developers might need to consider types of construction, such as panellised units which can be transported within the container of standard sized lorries, rather than modular construction. (Paragraph 70)

21.There is a plethora of MMC techniques being developed and utilised by different homebuilders. This means designs and components are developed to suit a particular method but may not be compatible with another type of MMC. The result is that new designs are required for different developments and components being manufactured for one development cannot be used for another. This prevents homebuilders from taking advantage of economies of scale to drive down costs or the speed advantages of being able to recycle designs. (Paragraph 71)

22.Some types of MMC will be appropriate for certain sites but not others, for example, if there are limitations on site access it might not be possible to install externally produced, modular homes. Therefore, it is not desirable to concentrate too narrowly on certain types of MMC. Likewise, it is important there remains room for innovation in the industry, but it would be helpful to identify, develop and promote a smaller number of techniques to enable the industry to take advantage of economies of scale. (Paragraph 72)

23.We welcome the work Homes England is undertaking to identify the most effective types of MMC through programmes such as the Innovation Village in Gateshead. We also welcome the funding the Government is putting into innovation in panellised systems through Innovate UK to improve advanced manufacturing techniques and believe this will contribute to the establishment of a modern construction industry underpinned by robust supply chains. (Paragraph 73)

24.The Joint Industry Working Group on MMC should undertake further work to identify types of MMC that work best and can be used at scale to deliver the good quality homes this country needs with an emphasis on the functional design for the people who will live in them. This will enable the industry to benefit from economies of scale and bolster the supply chains for those types of product. (Paragraph 74)

25.The Government should use initiatives such as the AIMCH project to harness the skills and knowledge of industry actors to learn what their priorities are and develop best practice in construction in order to build the homes the country needs. The Building Better, Building Beautiful Commission should investigate designs for MMC homes that can overcome road capacity size restrictions, while delivering high quality homes. (Paragraph 75)

26.The Government is taking welcome steps to support off-site manufacturing for homebuilding but if the benefits of the Industrial Strategy Construction Sector Deal are to be realised, more of the machinery and components for MMC homes should be manufactured in this country. The Government should record how many components for MMC homes are imported and set targets to reduce their use in proportion to the UK manufactured supply chain. It should enable manufacturers in the supply chain for MMC homes to access low-cost loans through the Home Building Fund so they can invest in factories, increase capacity and help homebuilders to reduce their reliance on imported components. The Government should use its record of imported components to assess the effectiveness of these measures at boosting domestic supply. (Paragraph 78)

Local authorities

27.If we are to deliver 300,000 homes annually and meet demand for social housing, local authorities need to start building homes in far greater numbers than they have done in recent years. MMC are particularly well suited to this type of tenure because the large volumes of standardised accommodation help to bring down unit costs. Some forms of MMC have also proven to be more energy efficient than traditional construction techniques which helps to reduce fuel bills and running costs for tenants. Housing associations have been among the early adopters of MMC for building homes. Swan Housing Association and Accord Homes have both chosen to integrate the supply chain and build their own factories in which to construct homes off-site. (Paragraph 84)

28.While social housing has a role to play in supporting greater take-up of MMC, it is important that lower cost designs are fully tested to ensure that MMC is delivering sustainable, durable, high quality social homes, so that MMC does not become associated with negative examples. Its use in this context should not be seen as a testing ground for its wider use and steps should be taken to promote MMC in all tenures, as we outline through this Report. Local authorities should increase rapidly the pace at which they build new social homes. They should further engage with housing associations which have already adopted MMC, in order to better understand best practice and explore the potential for more MMC use in the supply of social housing. Local authorities should also factor in whole-life running costs of social homes when tendering for building contracts. (Paragraph 85)

29.The localised planning system causes challenges for all homebuilders but does not present an insurmountable barrier to homebuilders using MMC techniques, so no major changes are required for MMC specifically. Local plans should be neutral to the type of construction method used in new housing developments as long as the homes meet local design standards and need. (Paragraph 87)

Access to land

30.Helping homebuilders to access land for development is key if we are to increase rates of homebuilding. Homes England should have utilised The Accelerated Construction Programme to boost MMC homebuilding, but it has become another stalled initiative. Construction is still at pilot stage and zero homes have been delivered so the expected benefits of the Programme are yet to be achieved. Homes England must speed up progress on its Accelerated Construction Programme. Current developments must keep to their deadlines and Homes England should prevent delays on future sites. We reiterate the recommendation made by our predecessor Committee that Homes England should provide the Committee with regular updates on progress across the full range of initiatives to bring additional land into use. (Paragraph 92)

31.We welcome the introduction of the Single Land Programme and hope it will increase uptake of MMC. We also welcome the Small Sites and Land Assembly Funds to help SME builders access land and therefore diversify the market, but these have not been designed to increase MMC homebuilding in particular. It is quite early to assess how effective the funds are at helping SME builders to access land, but the Government must ensure progress on these programmes is quicker than previous schemes. The Government should ensure the Small Sites Fund and Land Assembly Fund do not become additional stalled initiatives. It should provide the Committee with an update in September 2019 to show what progress has been made in the year since the launch of the Funds. (Paragraph 95)

Building regulations and energy efficiency

32.The current suite of Approved Documents is confusing and difficult to comply with. It is particularly difficult for homebuilders that use MMC to apply the regulations to their developments. This could result in compromised safety standards in MMC buildings. The consultation on the building and fire safety system is welcome but does not consider specific guidance for MMC builders to help them comply with current regulations. The Government should urgently set out a clear plan for the review of the whole suite of Approved Documents, including a timeline for implementation. This review should consider how the Approved Documents relate to MMC buildings and where relevant, provide additional guidance on how MMC homebuilders might reach the required standards. (Paragraph 101)

33.To meet its target to eradicate the UK’s net contribution to climate change by 2050, the Government should embrace every opportunity to reduce carbon emissions. It should be ambitious in setting carbon reduction targets for the built environment both during construction and in use. The building regulations should set more stringent energy performance targets for homes to take into account achievable levels of energy efficiency. MMC should be used to deliver more efficient homes now to avoid costly retrofitting of homes later to comply with more rigorous energy efficiency targets. (Paragraph 105)

Access to finance

34.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. (Paragraph 111)

35.The plethora of different funds is confusing, so the Government should provide signposting for homebuilders, to enable them to easily identify which funds they can access. (Paragraph 112)

36.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. (Paragraph 114)

37.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. (Paragraph 115)

Conclusion

38.Now is the time for consistent action to: give clarity on standards for MMC homes; provide certainty of demand for the supply chain; introduce a bigger social housing programme and substantially increase funding for MMC homes. We must stimulate a lasting increase in the use of MMC to help deliver the homes this country vitally needs. (Paragraph 119)





Published: 3 July 2019