Lenders need 'assurance' over modular homes, CML says

Modular housing is increasingly in vogue with decision-makers as a way to tackle the housing crisis, but there are concerns that mortgage lenders could be dissuaded from lending against such properties.

If lenders’ appetite proves limited, it could stymie the moves of house builders to bring forward factory-built schemes.

Central government is increasingly pushing modular homes as one solution to the housing crisis. In its Housing White Paper in February, it announced that it would examine how the planning system impacts on modern methods of construction, and how schemes including the Affordable Homes Programme and the Accelerated Construction programme favour offsite developments.

A spokesperson for CML told Inside Housing: “Like everyone else in the housing world, we’re really interested in the potential for offsite manufacturing to deliver – potentially – a flow of good quality, affordable new build housing at a predictable price and produced over a predictable timescale.

“That said, lenders also need to be guided by valuers… on appropriate valuation mechanisms, and to be assured about the structural integrity, longevity and adequacy for mortgage purposes of any properties of non-traditional construction.

“We are taking an active interest in the development of this market – but it is, of course, a matter for individual lenders to determine their lending criteria.”

According to Richard Petty, lead director of residential advisory at JLL, potential sticking points for lenders considering offsite manufacturing include the life span of the properties delivered, long-term maintenance arrangements, and what the future costs of maintenance and repair might be.

There are nonetheless several potential upside risks associated with modular homes, such as the prospect of greater quality control.

Robert Grundy, head of housing at Savills, said: “There’s always a degree of uncertainty when these things are introduced.

“There are possible upsides, such as good design and consistency of product, but the key thing is that the system being used has been properly tested, particularly with regard to its life span.”

While offsite construction has been a relatively fringe part of residential construction in recent years, several high profile projects including Legal and General’s factory and a consortium backed by a state-owned Chinese construction firm are expected to deliver their first homes this year.