Funding Property Development in England and Wales

In May 2019, the then Housing Minister Kit Malthouse said the Government had a target of building 222,000 new homes. This was more than had been built in all but one of the last 31 years. It’s development accelerator Homes England continued to provide assistance to help build properties faster.

A large part of the assistance by Homes England which is directed towards small and medium-sized developers is The Home Building Fund. The Fund provides a Development Finance Loan to meet the development costs of building homes and an Infrastructure Finance Loan funding for site preparation.

How does it work?

The Home Building Fund seeks to make a difference as its lending will require appropriate security, typically against property assets, and can be provided on either a short or long-term basis. It may be able to unlock developments that would not otherwise happen.

The Fund offers development finance loans of over £250,000, typically for a period of up to five years. Whilst the Infrastructure Finance is available before 31 March 2021, loans for Development Finance can be drawn down until 31 March 2023. The Fund provides loan finance which can work alongside other forms of financial support, so subordinated lending will be considered.

Regional funding

The developments must be in England, though other areas within the United Kingdom have similar support schemes. The Wales Property Fund can provide two-year loans of up to £4m for residential and mixed-use developments only in Wales.

Within the North East of England, seven local authorities have combined to work together to secure a £10m Fund operated by FW Capital to offer development funding to local SME housebuilders. Similar to the scheme in Wales, two-year loans are available. However, in the North East, Property Fund, loans are limited to £1m to fund development costs.

Within other English regions, there may be additional support. So, it’s wise to speak to your Corporate Finance adviser to understand the financing options available to fund property development.

Read more in Issue 14 of our newsletter Real Estate Matters.

Read Real Estate Matters Issue 14

If you would like any advice, please get in touch with a member of our Construction and Real Estate team.