The National House Building Council (NHBC) has suffered losses in its modular house building guarantee scheme due to the failure of a number of companies in the sector.
Richard Smith, head of standards, innovation and research at the trade body, revealed the damage to the House of Lords built environment committee last week.
It featured in a discussion on mortgages, insurance and guarantees for buildings delivered using modern construction methods (MMC).
Conservative Matthew Carrington asked if the “massive” rate of insolvency in the field has caused problems. “If something goes wrong with a warranty, the warranty provider has to get a construction company to come in and make it right, and if the manufacturer has failed a system project, other manufacturers may not have the same skills or willingness to go in there and fix things at a price that makes sense for the warranty provider?”
Smith, who is also a chartered inspector, replied that the NHBC guarantee exists in part for this purpose.
“We have our Buildmark policy and we have insolvency cover for that. We have activated that cover in some circumstances and have continued to help the end user, whether it’s a social housing provider or a consumer, to get the property they’ve paid for in accordance with our policy.
“We’ve had some losses because we’re going through this process, but that’s what the policy is there.”
A number of high-profile MMC contractors have gone bust in recent years, including Caledonian Modular, Ilke Homes, Eco Modular Buildings and Mid Group, while L&G Modular Homes has been liquidated after years of heavy losses.
No company was named during the hearing.
When he asked him Construction news after the session on how much the scheme had paid out due to the collapse of the MMC companies, Smith said he could not say as individual claims are not broken out on the NHBC’s balance sheet.
Smith was pressed by cross-party colleague Richard Best on whether the number of insolvencies in the MMC sector was significant, or to be expected in an emerging market. In response, Smith highlighted some other issues that have occurred.
“We still want to support the industry with MMC. We recognize that this is part of a process to change the way we build to be more sustainable, to build faster and more efficiently,” he said.
He noted that there had been supply chain issues and that with modular production, “you can’t slow it down and speed it up compared to a traditional site.”
“We’ve had some issues where, for example, volumetric buildings are built in a factory and then stored externally for a while because they can’t get to the site in time. This does represent a risk for us […] We are still committed to MMC, but we want it to be the right quality,” he said.
Smith said later CN: “As the UK’s leading independent provider of new home warranty and insurance, NHBC is committed to building confidence in the quality of its construction. MMC is an important contributor to net zero, and we want to enable MMC manufacturers to deliver high-quality homes that work for consumers to help ease the housing shortage.”
He said the NHBC was committed to helping its progression and that all building systems that have achieved its Buildmark have achieved approval from NHBC Accepts, its “comprehensive review service for innovative building systems “.
Matthew Jupp, director of mortgage policy at financial services trade association UK Finance, told the committee that the number of modular businesses that had gone under was “sad”.
“We were delighted to see some of these companies develop and become a more regular, normal and larger part of our real estate market.
“There was a lot of excitement when they were first created [with] lots of factory visits and places to see them in development […] I think the fact that it hasn’t really taken off is generally seen as a sad thing.”
During the discussion, Smith also asked for clarity on MMC’s methods in the approved documents accompanying the building codes.
He said that as an approved inspection body it would be useful to allow it to measure compliance with approved guidelines.
The call echoes the one made by the National Council of Fire Chiefs a year ago, and repeated by the Firefighters Union and several others since then.
