Aspirations around modern methods of construction “not yet” achieved, Lee Rowley says
The housing minister has warned that the government cannot subsidise modern methods of construction (MMC) forever, but that it is “proportionate” for it to continue investing for a “reasonable timeframe”.
Speaking in front of a House of Lords select committee, Rowley stated that the government’s aspirations behind investing in MMC – including to increase the range of methods of construction, ensuring better properties are built and producing cost efficiencies – have “not yet” been achieved.
He said “the process hasn’t been the smoothest” due to relatively changeable economic circumstances, particularly through covid, which has seen MMC housebuilders such as Ilke Homes and House by Urban Splash go into administration.
Rowley, who has been in post since Rishi Sunak’s reshuffle on 13 November, said that the question has to be, “how can we make this work in the long-term, how can we make it wash its face?”, adding that MMC should be a “virtuous circle, and it hasn’t got there yet”.
In the 2019 manifesto, the Conservative party pledged to support modern methods of construction as part of its target to build 300,000 homes per year by the mid-2020s.
Rowley was clear that the government “can’t subsidise forever – if we subsidise forever, it doesn’t work”.
As part of evidence provided in the final evidence session for the House of Lords built environment select committee’s inquiry into MMC, Rowley said he could argue that the government may have reached a “natural limit” with traditional building methods, and said that he could also “make a case for subsidy over a certain period of time”.
He added that he would welcome insight from the committee on what the timeframe for such a subsidy should be.
David Bridges and Edward Jezeph from Homes England also spoke at the evidence session. Bridges, chief investments officer at Homes England said that there is progress in the MMC sector, despite the focus on failures and challenges.
When asked how Homes England was measuring success, Jezeph, senior manager at Homes England, said there were 15 key performance indicators which MMC homes are measured against, including pace and cost of build, labour productivity, planning issues, safety performance, energy efficiency performance and sales performance.
Rowley said that the immediate KPI was the percentage of MMC included in the affordable homes programme, which requires strategic partnerships with Homes England under the Affordable Homes Programme 2021-26 to deliver at least 25% of homes using MMC.
Early indications show that housing providers are going beyond 25%, Bridges said.
Bridges acknowledged that Homes England had lost £3m to Urban Splash and £60m to Ilke Homes, which he described as a “significant loss” and “not something we’re happy with”.
Despite this, Bridges said that Homes England’s objective “is to intervene where there is a market failure and to try and go where private investment won’t”, while also catalysing private investment.
Bridges stated that, in the worst market conditions, Homes England has been set the objective of recovering at least 70% of loans allocated out of the short-term fund, and at least 75% of loans granted out of the long-term fund.
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