Lenders need convincing about the quality of prefabricated ‘modular’ homes constructed offsite.
The majority of mortgage lenders are yet to be convinced about whether they should lend on prefabricated ‘modular’ homes constructed offsite.
In November the Building Societies Association championed the construction method, while the government’s upcoming white paper is expected to set out plans to boost the sector.
But if anecdotal evidence is anything to go by a number of lenders have their reservations.
Matthew Wyles, executive director of Castle Trust, said: “I think I’d rather spend 12 months building something that’s going be able to stand for 100 years rather than something that after 10 years will be uninhabitable.
“We have seen rubbish put up in the 1960s in the form of council blocks that is now all having to come down.
“My personal view is the issue isn’t speed of construction for the market; its access to the right sites and planning consent.”
He added: “I’d like to challenge how many of these good people who come up with these prefabricated schemes want to live in these properties themselves or want their children to live in them.
“Offsite construction is about speed, and quality and durability should come ahead of speed.”
Simon Read, managing director of Magellan Homeloans, said: “The challenge is whether they’re going to be standing in 25 years; and until you’ve gone through 25 years you just don’t know.
“Workmanship is an issue because it’s all well and good saying it’s created in a workshop and fitted on site but if the person on site doesn’t put the right amount of screws in, or insulate or put the cladding on right you end up with a house that rots on the inside and you don’t know it’s happened until it falls down.”
He added: “We have talked to surveyors who said the problem with timber frames is if they’re not done right and you get a fire it’s gone in two years.
“That’s frightening; that’s what our asset is based on.”
In February 2016 Legal & General announced that it had launched a modular housing business which has the capacity to build 3,000 homes per year – but from the evidence it seems they face a challenge in making the new homes mortgageable.
L&G is inviting lenders to its factory in Leeds in a bid to start convincing them.
Other lenders are taking a ‘wait and see’ approach, including LendInvest’s chief commercial officer Mathew Tooth who said he is monitoring the sector closely before making any such move.
Some building societies look at it on a case-by-case basis, including The Family Building Society, based in Epsom.
Keith Barber, its director of business development, said: “What we look for is to be satisfied is the quality of the build and the longevity of the property.
“That’s something we place on our valuers’ shoulders.
“They fall outside of our lending quality currently but we do look at them on a case-by-case basis because it’s a relatively small part of the UK market at the moment.”
Others including West Yorkshire-based Ecology Building Society, lend on them as a standard and are enthusiastic to boot.
A spokesman for the society said: “We welcome the recent resurgence of interest in modern methods of construction including modular and off-site as we believe that these approaches offer the opportunity to design and build highly energy efficient and quality homes that deliver lower costs and less waste.”
He added: “Given our commitment to sustainability, we’ve always supported innovative materials and techniques such as SIPS (structural insulated panels), straw bale panels and I-beams and encouraged high standards of sustainable construction such as Passivhaus.”
However if the housebuilding method is to make a dent to the government’s target of building one million homes in this parliament what’s required is lending on scale.
David Hollingworth, director of communications at London & Country, reckoned this ‘pain period’ is something that’s inevitable when anything brand new is introduced.
“Hopefully providers of the newer prefab housing are able to demonstrate that the longevity of the construction is comparable with modern construction methods,” he said.
“That’s crucial. Everybody would agree that building quickly and having more affordable housing is what the market needs.
“That’s only any use if the lender was able to provide a mortgage. If there’s a real hesitancy around the construction type what might sound like a great idea becomes not so practical.
“You need a dialogue. This is where people like L&G are trying to make it off a scale where established builders are using construction to pre agreed standards so lenders can be comfortable to use them as security.”
Sarah Wilde, mortgage policy adviser at the BSA, spoke of the challenges of convincing lenders to get behind modern methods of construction, including offsite.
She said: “It has the capacity to increase both supply and quality, but there are some challenges for the housing industry as a whole to overcome if it is to get to critical mass.
“These include build type information, warranties, construction life, marketability and consumer demand.
“All of these feed into the ability and willingness of mortgage lenders to lend and insurers to insure.”
She added: “Supply is an issue for the residential housing market and if it to be solved we need to consider some innovative solutions.
“We see the growth of modern methods of construction as one such solution.”
