In this week's blog, we touch on our deepening lending alliance with the government agency Homes England, which recently reinforced its commitment to supporting small and medium-sized enterprise (SME) developers as part of the ongoing plan to deliver 1.5 million new homes over the next five years. Homes England is the government’s housing and regeneration agency, which believes that quality homes in well-designed places are key to improving people’s lives.
Avid readers of our blogs may recall that we have been discussing this matter through these pieces for some time, as we believe that small and medium-sized enterprise (SME) homebuilders play a critical role in tackling the UK's housing crisis. Historically, SME builders provided a significant proportion of new homes; however, their contribution has sharply declined in recent decades, primarily due to limited access to land, financing challenges, and complex planning regulations. We understand that revitalising this sector will unlock untapped potential and accelerate housing delivery; on this point, we share a common goal and belief with our governmental counterpart.
SME homebuilders are typically more agile and innovative than large developers, enabling them to tackle smaller, overlooked plots of land unsuitable for large-scale projects. These smaller parcels, often scattered across urban and suburban areas, collectively represent a substantial opportunity for housing growth. By developing these sites, SMEs can contribute to incremental yet impactful increases in housing supply.
Moreover, SMEs can foster greater competition in the construction industry, driving efficiencies and diversity in design. Their localised expertise allows them to create housing tailored to communities' specific needs, promoting sustainable and context-sensitive development. They will play a critical role in solving the broader issue.
The public and private sectors agree that the facts are stark. The UK is facing a persistent housing crisis marked by a chronic shortage of affordable homes, rising rents, and increasing house prices that outstrip wage growth. Addressing this crisis demands a collaborative approach, with public and private sector lending entities pooling resources and expertise to deliver innovative and sustainable solutions. Such partnerships can unlock capital, streamline development processes, and ensure the creation of housing that meets the diverse needs of communities.
Collaboration among these sectors can address funding gaps by utilising public funds to mitigate the risk of private investment. Our expanded partnership will now offer development loans of up to £4 million, with a maximum of 70% Gross Development Value and 85% Loan-to-Cost. The partnership is projected to facilitate the construction of 600 new homes, building on the 107 homes already supported through the original lending alliance.
This ongoing support complements Homes England's existing direct lending offer, which provides development funding to housebuilders constructing five or more homes per year and follows the £700 million extension to the current Home Building Fund for SME developers announced by the government last December. This extension will facilitate the delivery of up to 12,000 additional homes.
Marcus Ralling, Chief Investments Officer at Homes England, said:
Small and medium housebuilders play a vital and essential role in driving the delivery of new homes where they are needed most. This refinancing demonstrates our ongoing commitment to supporting the small builders that are crucial to building a diverse and resilient housing sector. By nearly doubling the Fund and extending its availability, we're providing sustained, long-term support to help SME developers grow and deliver more homes at pace.
Robert Burgess, Chairman at Invest & Fund, said:
Invest & Fund is delighted to be working with Homes England to support SME developers and ensure that they have access to vital funding to deliver much-needed new homes across the country.
The UK housing crisis is a complex challenge that demands innovative, collaborative solutions. By harnessing the strengths of public and private sector lending institutions, the UK can mobilise the necessary capital, expertise, and policy support to deliver affordable, sustainable housing. Initiatives that merge public guarantees, private investment, and streamlined processes have the potential to revolutionise the housing landscape and offer long-term solutions to this urgent issue.
Invest & Fund has returned over £200 million of capital and interest to lenders with zero losses, showing the rigour that governs our business.
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