Government investing millions with no roadmap for success


Lord Moylan is chair of the House of Lords Built Environment Committee

Modern methods of construction (MMC) should be increasingly attractive, given their claims of being more efficient, addressing labour problems and the demonstrable success seen in commercial and high-rise buildings. But, we aren’t seeing the delivery of MMC housing at anywhere near the scale expected in recent years. Following the closure of several high-profile MMC housing companies, some of which had received public investment, the House of Lords Built Environment Select Committee, which I chair, held a short inquiry that focused on trying to understand why MMC housing, particularly Category 1, had not yet reached its potential.

Throughout the inquiry, we were given several reasons why these businesses have faced financial challenges, including individual business decisions, wider economic problems and structural barriers in the housebuilding ecology. These are reasonable possible explanations, but it left us wanting to understand the Government’s role in, and engagement with, the sector.

The Government views MMC as a central requirement to deliver on its housing ambitions because it “has the potential to revolutionise the sector”.[1] Indeed, MMC has been lauded as the solution to various issues in housebuilding for decades. To support the sector, the Government made significant investments in MMC businesses and provided grant funding to housing associations with conditions requiring the use of certain levels of MMC. However, this has not resulted in a flourishing industry.

In scrutinising the Government’s policies, we found no evidence of clear objectives for the funding it provided, nor any metrics or timescales to measure its progress. Whilst we understand that all investments come with risks, the Government appears to have invested millions with no roadmap for success.

The Government has not done enough to understand the sector it is investing in or the challenges it faces. Throughout this inquiry, we were given increasingly conflicting evidence about fundamental issues such as the costs of MMC and how that affects demand. If MMC is found to be more expensive than traditional building methods, the Government should demonstrate whether these programmes are the most efficient use of public funds. We also heard about the difficulties obtaining warranties and insurance which are alleged to be stifling the growth of the sector and disagreement about the role and form of both standardisation and building regulations for the sector.

We have limited confidence that the Government has a coherent understanding of these issues or any clear strategy to encourage the growth of the sector. Beyond the Government, insurance and warranty providers should take greater action themselves to understand the sector better.

The Government’s interventions appear to have not been successful. Although, it is admittedly difficult to say with confidence, considering the Government has no clear view on what success looks like and does not publish the necessary data to assess its intervention. To be clear, it is expected and right that, given the role of Homes England, it may at times make investments which fail. But those investments should be made with a purpose in mind and a way to evaluate the outcomes.

In addition to the investments in MMC businesses, we heard that the stipulation for housing associations to use MMC in Affordable Homes Programme (AHP) has not been as effective as it could be and does not necessarily incentivise the use of Category 1 or 2 MMC. Housing associations are able to use MMC categories which are similar to traditional building methods to meet AHP requirements. The Government does not publish any data on the breakdown of the categories of MMC that housing associations have used, so we do not know if the policy is working and have no measure of progress. The Government should undertake an assessment into whether these policies are the most effective way to support the sector.

We believe that MMC can have an important place in UK housebuilding, particularly in the context of an ageing skilled workforce and the housing supply crisis. We heard about its widespread use in housing overseas and we know there are many success stories. Homes England was clear that the sector has potential to drive gains in efficiency, energy performance and productivity. If it wants MMC to succeed, the Government needs to gain a deeper understanding of the sector and demonstrate leadership by setting out a clear and coherent strategy against which it can assess success.

 

[1] Homes England, Strategic Plan 2023–28 (16 May 2023): HE_Brand_Strategic Plan_ ARTWORK_HR_single pages DIGITAL LR.indd (publishing.service.gov.uk) [accessed 12 January 2024]



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