Homes England commits to further MMC funding

Homes England has committed to providing more cash to get the construction industry to adopt modern methods of construction (MMC), despite its recent financial losses in the sector.

On Thursday (11 December), the quango published its new strategic plan and investment strategy covering the next five years, outlining details of how it will channel subsidies for housing and infrastructure through the new National Housing Bank (NHB) announced by the government earlier this year.

It said that the NHB, which will allocate most Homes England funding, would begin operations from April 2026, subject to Treasury approval.

In a section on innovation, the strategy said that some of the cash will be directed towards MMC to help tackle low productivity and skills shortages in the construction sector.

It said: “…the built environment sector still faces entrenched barriers: low productivity; skills shortages; a lack of diversity among developers; inefficient methods of construction; and under-investment in innovative and sustainable building practices.

“We recognise that we have a role to play in working with partners to address these barriers. As such, we will use our investment, programmes and partnerships to accelerate innovation; diversify the market; promote sustainability; and drive the adoption of both modern methods of construction and emerging technologies across the housing and regeneration sector.”

In recent years, Homes England has incurred significant financial losses on some of its investments in MMC schemes, particularly from the collapse of several high-profile modular building companies.

However, the agency has defended these losses as an expected part of its role to innovate and take risks that the private market will not.

The most substantial recent loss came from the collapse of modular housebuilder Ilke Homes.

Homes England is set to lose most of the £68.7m it invested in the firm, with initial estimates suggesting a recovery of only £1m, later revised to a potential £4.3m, and most recently to just over £126,000.

In an April 2024 interview with Construction News, Homes England’s then-chief executive Peter Denton defended the investment, saying: “We lost £60m. I don’t enjoy that, but we took a risk in the full knowledge that there was a risk of loss.”

The housing agency also lost £3m of £27m invested into House by Urban Splash, which collapsed in 2022, and is also owed £9.2m by a subsidiary of Stewart Milne Group.

In 2024, a House of Lords committee report criticised the government’s investment in MMC as “undirected and nonstrategic”.

The committee’s chair, Lord Moylan, said he was “unpersuaded that Homes England knew what it was doing” when investing in Ilke Homes and Urban Splash, saying that the criticism was not for losing money, but for a perceived lack of due diligence and strategy.

Elsewhere, the Homes England strategy document said that the NHB’s remit will allow it to “partner with long-term investors and parts of the housing and regeneration sector that have traditionally been underserved or have experienced challenges, including SMEs and partners delivering complex large-scale mixed-use regeneration schemes.”

Source: Construction News