Government launches £3 billion 'Home Building Fund' to help small independent family firms - DAC Beachcroft

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Government launches £3 billion 'Home Building Fund' to help small independent family firms

Published On: 5 October 2016

The Chancellor, Philip Hammond, and Communities Secretary, Sajid Javid, have announced new measures to build more houses in the form of the Home Building Fund (HBF). Under the plans, the Government has agreed a £3 billion investment to help small independent family firms to build 25,000 new homes by 2020 - and up to 225,000 in the longer term.

The new Fund is managed by the Homes and Communities Agency (HCA) on behalf of the Government. The HCA is the national housing, land and regeneration agency in England. The HCA also runs several other funding streams to support building, including the £525m Builders Finance Fund, the £1bn Large Sites Infrastructure Programme and Build to Rent.

The HBF provides loan funding in the form of:

Development Finance - This is to meet the development costs of building homes for sale or rent; and

Infrastructure Finance - This is for site preparation and the infrastructure needed to enable housing to progress. 

There is also a range of non-financial support, which will be made available for larger infrastructure schemes to help overcome barriers that might be faced. However, it is not yet clear what "range of non-financial support" shall be on offer and what "barriers" are envisaged that need to be overcome.

Key features of the new HBF are:   

  • Loans ranging from £250,000 to £250 million in value;
  • Typical terms are up to five years for development finance and up to twenty years for infrastructure loans;
  • Interest payable at pre-agreed variable rates;
  • Sales income can be recycled to minimise the loan request;
  • Finance available to draw down up to 31 March 2021; and
  • Eligible costs to be discussed with each applicant.  

In addition, a separate £2 billion loan fund will pay for a further 15,000 new homes by 2020 on surplus public sector land. In January 2016, the Government published details of 600 acres of surplus public sector land as part of its drive to deliver tens of thousands of new homes and boost local growth. At the beginning of the year, the HCA had more than 80 public land sites for sale and hoped to bring a further 40 more sites to market throughout the year. 

As with all Government initiatives relating to the housing sector, it remains to be seen whether the HBF is taken up by housebuilders and what the practical implications of securing a loan are. While this is a welcome source of funding for those smaller housebuilders, their larger counterparts already have access to funds.