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Solving the UK’s housing crisis – could MMC be the answer?

An estimated 232,000 to 300,000 new homes are needed each year to meet demand1, but in 2015 only 152,380 properties were built and the last time the private developers built more than 200,000 homes was in 19682. With a huge shortfall in the amount of homes the UK needs to satisfy demand, a radical approach is undoubtedly needed to solve this growing housing crisis. In November 2016, a new report by the Building Society Association explored introducing Modern Methods of Construction (MMC) into the mainstream repertoire of the UK housing industry in order to increase housing supply, one of the main cruxes of the housing crisis. But what is MMC and is it really the answer to the UK’s complex housing problem? We explore this in our latest blog – where we look at what will impact the market in 2017.


So, what is MMC?

MMC is a collective term which is used to describe a number of different methods of construction. However under this umbrella term there has been a particular focus on off-site construction, which would take construction of new homes into a factory setting rather than the traditional construction of properties directly on site.


There are a number of benefits to this type of construction, most significantly a reduction in on-site labour, better control of costs and improved efficiency through the use of better technological processes. In a nutshell, many believe MMC can be utilised to deliver new homes more quickly and at a lower cost than traditional house building.


Is MMC likely to be adopted?


Research by the NHBC Foundation suggests that far from being a wholly radical
approach to housebuilding, MMC is actually already being utilised to some extent in the housebuilding industry. In a survey of large and medium sized housebuilders, only two said they had not used or considered using MMC in the last three years, with 45% expecting the role of MMC to grow over the next three years3, suggesting that the housing industry is getting on board with more radical approaches to building the homes the UK needs.


What are the challenges for lenders?


If MMC expands as rapidly as housebuilders expect it to, the key question is whether mortgage lending can expand at the same rate in order to meet growing demand. With huge variations in the types of MMC, and MMC itself being an umbrella term, the main challenge will be ensuring standardisation of the MMC industry in order to make it easier for lenders to assess and accept the different variations of this type of housebuilding.


Another potential hurdle is the difficulty for the valuation community to accurately value what is such a new method of construction. The BSA however, has recommended a number of tools in order to make this easier for lenders and valuers alike, including bringing valuers into the process early on and a MMC information hub to inform lenders when reviewing lending policy and making individual lending decisions.


To read more about the BSA’s report go to: https://www.bsa.org.uk/BSA/files/0e/0e05f081-6bb4-4ea2-a87d-aab6c1f5b4c4.pdf

For more information about Leeds Building Society or to speak to one of our team about general enquiries or specific cases call 03450 50 5555. We may monitor and/or record your telephone conversations with the Society to ensure consistent service levels (including colleague training).


This article contains public sector information licensed under the Open
Government Licence v3.0 www.nationalarchives.gov.uk/doc/open-governmentlicence/
version/3/


1 https://www.parliament.uk/business/publications/research/key-issues-parliament-2015/social-protection/housing-supply/


2 https://www.bsa.org.uk/BSA/files/0e/0e05f081-6bb4-4ea2-a87d-aab6c1f5b4c4.pdf


3 https://www.bsa.org.uk/BSA/files/0e/0e05f081-6bb4-4ea2-a87d-aab6c1f5b4c4.pdf