How the Government's home building fund is helping builders to deliver new homes
Obtaining the finance to allow small and medium- sized (SME) house builders to build the homes the country desperately needs is still a major challenge. Since 2008, many FMB members have reverted to contract work due to the high equity requirements of high street banks or the unaffordability of lending products offered by secondary lenders.
Against this background and persistent lobbying from the FMB, the Government introduced the Home Building Fund (£4.5 billion) in October 2016. £2.5 billion from the fund is being used to offer flexible financial support to SME builders in England to enable them to deliver new homes or prepare sites for development, to help achieve the Government’s target to provide 300,000 new homes annually.
Certain criteria must be met for a site to be considered for the Fund, delivered by Homes England, including:
- Demonstrating that the scheme could not be built out or delivered as quickly using other forms of finance
- Sites must be in England and the entity requesting funding must own the site and be a UK-registered private sector company
- A minimum of five homes must be built
- The minimum loan size is £250,000
- A clear route to planning consent must be visible
One FMB company to have benefited from this Fund is Enjoy Homes Ltd, founded by Dave Bentley and Duncan Fuller. As Dave explains:
“We got the opportunity to purchase a small plot of land with outline planning for three pairs of semi-detached houses. This prime plot is surrounded by mature trees on three sides, with no through traffic or footpath. The layout allowed for very large gardens. We couldn’t let this opportunity pass by. Due to my knowledge of the Home Building Fund, we applied for finance for the project.
"We were assigned a Transaction Manager, Lewis McNicholas, who was very efficient in steering us through the numerous stages required to access finance. Once the proposal received credit approval a valuer and monitoring surveyor visited the site to confirm that it represented suitable security, the cost and sales value assumptions were reasonable, and sales rates were achievable. All legal documentation was also completed during this time and once this was done, we were assigned a Portfolio Manager, Sheena Zwicky-Ross, and a Monitoring Surveyor, who were very helpful throughout the whole process of the monthly cash draw-downs,” Dave said.
"The project is now completed with all the houses sold and the loan is fully repaid. The process, from initial conversation to the ability to draw down funding, took approximately six months. Without the help of Homes England this development would not have been possible.”
Nigel Barclay, Head of SME Finance at Homes England, believes the Fund will help increase opportunities for SME firms. He said:
“The number of active SME developers has fallen significantly over the last 30 years and the Fund can provide valuable assistance to help firms overcome barriers to accessing finance to progress projects.”
Lewis McNicholas, Transaction Manager at Homes England, confirmed the Fund has been a great success to date:
“The Fund has been well received in the market and it’s really fulfilling to see developers like Enjoy Homes being able to flourish and produce high-quality homes with our support,” he said.
Since its launch the Fund has provided loans of £1.1 billion, which has supported the development of more than 55,000 new homes. Nationally, the Fund is expected to support the commencement of up to 10,000 new homes.
For more information on the Home Building Fund, visit their website.
