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How housing providers can use MMC homes for loan security

The use of modern methods of construction is increasing among housing associations. But using these properties as loan security is not straightforward, writes Catherine Wilson

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The use of modern methods of construction is increasing among housing associations. But using these properties as loan security is not straightforward, writes Catherine Wilson #UKhousing

There has been significant progress in recent weeks regarding the use of homes built using modern methods of construction (MMC) as loan security. Does this mean greater financial capacity is being unlocked in housing associations? Potentially. So, what is going on here and what valuation pointers are there for housing providers keen to increase the number of MMC homes they build?

First, some quick background. Although there has been significant interest in the potential of MMC homes to allow more affordable homes to be built more quickly and cost-effectively, the total number of MMC homes built each year remains relatively low.

According to a report last year by the Housing, Communities and Local Government Select Committee of MPs, there are around 15,000 factory-built homes completed in the UK each year. This is around 7-8% of the roughly 200,000 homes that are built annual in the UK, according to the most recent UK statistics. Also, although Homes England has committed to monitoring the proportion of MMC homes that are built through its various programmes in England, it is unclear how many affordable homes are built each year using MMC.

“Post-pandemic social distancing restrictions seem likely only to accelerate the trend to more controlled environments for construction, such as in MMC facilities”

What is clear, however, is that housing associations are keen to increase the number of MMC homes they build. A quick search through Inside Housing reveals several deals in the past 12-18 months involving MMC manufacturers and housing associations such as L&Q, Places for People and Stonewater.

They join housing associations such as Swan and Accord, which already operate MMC factories. Post-pandemic social distancing restrictions seem likely only to accelerate the trend to more controlled environments for construction, such as in MMC facilities.

The number and hence the proportion of MMC homes owned by housing providers seems set to increase. So, what does this mean for refinancing valuations and MMC homes as loan security?

At present, very few new build MMC homes are included in portfolios for loan security. This is because they simply have not needed to be before now. In common with housing providers, lenders have been working with advisors, manufacturers and warranty providers to understand more about the build quality and longevity of MMC properties. This is to inform their lending criteria against such homes.


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The recent announcement that the government’s MMC Working Group has facilitated an agreement for a standard assessment of MMC homes is welcome news. The hope that this will allow greater lender support for MMC properties seems to be becoming reality, with last week’s move by The Housing Finance Corporation (THFC) that it will now accept MMC homes as loan security. This follows the introduction in July of a new streamlined MMC warranty by the National House Building Council.

From our perspective as valuers, we draw on the work done by Savills colleagues into MMC homes and their long-term performance. Also, we note from other sectors – student and private rented housing – that there is already a strong resale market for MMC properties. Subject to conducting research into loan security portfolios containing MMC homes, we are confident that such portfolios can potentially be valued at market value (MV-T).

Here are some pointers for housing providers on what information we ideally need to be able to conduct valuations of MMC homes:

  • Manufacturer’s warranty
  • Maintenance schedule
  • NHBC Cover / NHBC Accepts – standard of product or other Insurance
  • BOPAS – assurance
  • Installation advice – approved contractor

Where this information is available this will greatly enhance our ability to offer an accurate valuation on behalf of a lender. If this level of information is not possible, this could lead to a deeper discount being applied to a portfolio.

The bottom line is: the greater the level of detailed information available on MMC homes, the greater the confidence we can have in them as valuers, addressing any lender concerns. In time, as MMC becomes more accepted, MMC homes will be able to play their full part in boosting affordable housing delivery.

Catherine Wilson, director, valuation team, Savills Affordable Housing

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