Housing: Modern Methods of Construction

Baroness Thornhill Excerpts

Thursday 5th September 2024 Lords Chamber

[Baroness Thornhill (LD)]

My Lords, I say at the outset that I am really grateful that, yesterday, the Government Whips’ Office gave the winders some extra time, but I feel that two minutes for a speech is not making use of the expertise in this Chamber. That said, all the two-minute contributions have been insightful and informative and have, amazingly, captured all the issues around modern methods of construction—and the debate has definitely bounced along. What is striking is that there is a consensus that there is a role for modern construction and agreement about the challenges and barriers to MMC but plenty of suggestions for improvement, which I hope the Minister will take back to her department.

I, too, was a member of the Built Environment Select Committee, which carried out the inquiry, ably chaired by the noble Lord, Lord Moylan, whose contribution it is a pleasure to follow today. It was a wide-ranging, if frustrating, inquiry, as the noble Lord, Lord Carrington, accurately outlined.

It was not that the Government were not putting money into tackling the problem—our usual complaint—but that they had done so in an undirected and haphazard way without a coherent strategy and measurable outcomes, although I am certain that the noble Baroness, Lady Scott, will put up a spirited and informed defence of the previous Government’s advances in modular build, and I genuinely look forward to her contribution.

I turn to the consensus that we have a housing crisis and that modular build could and should be a way to build more homes, more quickly and, more importantly, to the future homes standard. It will add diversity to provision, which is at present monopolised by the big builders.

The number one issue for the industry is the supply chain, which was mentioned by several noble Lords. There are clearly real issues of business survival when you have inconsistent and insufficient demand for your product, unpredictable delays and workforce challenges. In this climate, we have unfortunately had recent experiences of companies going out of business or struggling to continue in business. I really have only one question for the Minister: what is going to change and what plans do the Government have? Will they consider incentivising builders to use MMC by offering tax breaks, reducing VAT on modular homes, or giving tax credits to companies that invest in modular construction? We hear excellent mood music from the Deputy Prime Minister about a revolution in social housing. Will the Government consider setting targets for the construction of modular homes within public housing projects? Will the Government actively use their own land as part of a deal to create more public/private partnerships to build more modular homes and encourage and incentivise councils to do likewise?

The regulatory framework mentioned by the noble Lord, Lord Banner, and others is designed with traditional construction methods in mind, making it more difficult for MMC builders to navigate the approvals process. The regulatory maze can deter builders from opting for modular approaches, even when they might wish to use them. This applies particularly to SME builders. Could the Government consider a fast-track approval process for modular housing developments to encourage quicker construction? Creating a streamlined process aided by national policies specifically for modular homes, as mentioned by a noble Lord—I apologise for forgetting his name—would encourage plans to come forward, reduce delays and overcome the bureaucratic hurdles that are currently faced.

As we heard in the contributions by my noble friends Lord Teverson and Lady Brinton, we feel that the Government should use the future homes standard to ensure that modular-built homes are built to high environmental and safety standards and provide for more lifetime M4(2) homes. In that regard, we disagree with the remarks of the noble Lord, Lord Fuller, about building to a lower quality.

There is some disagreement about the overall costs of MMC build versus traditional build but from the perspective of housing associations, which was touched on by the noble Baroness, Lady Warwick of Undercliffe, the upfront costs are more expensive than traditional build. The upfront costs are more pertinent to housing associations than the lifetime costs as they are under considerable financial pressure now and, regrettably, environmental standards are often reduced to keep costs down. Additionally, as more accessible homes take a larger floor plan you get fewer homes for your money, a realistic dilemma that targeted grants could help to solve.

As the noble Lords, Lord Rooker and Lord Best, pointed out, there is a skills shortage in construction in general and in MMC specifically. The skill sets and technological challenges are different. The Government should encourage more investment in research and development in MMC technologies to improve efficiency, reduce costs and enhance design options. There are still too many stories of poor construction and construction failure. As we know, this does not need to be the case; we can only envy my noble friend Lord Thomas’s tenants. The risk aversion of warranty and insurance providers plus the reluctance of lenders to provide mortgages on homes built by MMC are further barriers. These issues need unpacking and only the Government can do that and offer strong clear guidance about what will be expected in future.

Finally, to make this shift needs radical change, and the current system is not being sufficiently incentivised to change. We have a risk-averse culture and are cautious in trying new methods. Therefore, the Government have a real role in being the driving force for change. I do not think we can wait for demands from clients and homeowners because for me the other significant barrier, mentioned by the noble Baroness, Lady Wheatcroft, and my noble friend Lady Miller, is public perception and the stigma left over from the prefabricated homes of the past. I remember visiting my Auntie Marion’s prefab in Tenby, south Wales. She lived in it happily until she was forcibly evicted. These two things—cautiousness and public stigma—act as barricades to change.

It seems from the debate that MMC is part of the housing crisis solution, but nobody is dewy-eyed about this. It is certainly not a silver bullet. It could contribute significantly but it needs political will and leadership to create a whole-market approach to ensure that consumers, manufacturers and lenders are all aligned in their aim of embracing MMC to create sufficient demand in the market to grow the approach. Without this alignment and subsequent demand there is no clear catalyst to drive the change needed. Will the Government provide that catalyst and be the ringmaster? If the answer is yes, how and when?