01 Oct New Development Funding Partnership Between Government and Barclays
The UK government has announced a new initiative to promote residential property development. A new 10 figure loan will be made available to property developers in order to stimulate construction growth. This is being done to meet the 300,000 new houses currently needed annually to meet growing housing demand. This new development funding is likely to kick-start a much-needed boost to the construction industry.
In partnership with Barclays, this development initiative will help to fund senior and mezzanine loans for suitable developers. The funding will assist up to 80% of the cost and 70% of value. The announcement is welcomed as demand continues to outstrip supply.
Aside from being a proactive step in closing the widening housing shortage, it also provides economic opportunity for smaller builders. Smaller developers will now be able to access this area of the building economy, relieving both the need for affordable housing as well as providing a boost for the construction industry.
This funding forms part of the housing delivery fund, which is managed by Homes England, the delivery agency set up by the government in January 2018. This agency has now replaced the Homes and Communities agency.
By making as much as £100 million available to property developers, the property market will now open up, encouraging greater growth and faster delivery. Even smaller developers that can demonstrate the experience and expertise with an established track record will now be able to enter the market.
New Development Funding Opportunity
Housing minister James Brokenshire is quoted as saying, “This is a fantastic opportunity to not only get more homes built but also to promote new and innovative approaches to construction and design that exist across the housing market.
According to John McFarlane, Barclays CEO, this is exactly what is needed to build good quality homes across the UK. Providing the right kind of finance shows firms in the house building industry. They can, therefore, see that there is in fact funding for these kinds of projects.
Government targets currently indicate that homes need to be built at a rate of 300,000 a year. This is necessary to meet the national needs by the mid-2020s. This is based on current figures available for the growing demand.
The traditional buy-to-let homes in the private rented sector can no longer meet the needs or sustain the demand in the UK-wide rental sector. Additionally, this demand is widely driven by younger tenants, experiencing living need in prime city centre locations.
Barclays’ partnership into the new development funding scheme comes after their July announcement of an increase from £50 000 to £100 000 in unsecured loans to construction industry firms.
Two-thirds of homes are currently built by only ten major house builders in the UK, according to the housing ministry. This fund will, therefore, open the market to eligible builders that are much smaller, increasing the housing stock as well as fuelling the industry.