Levelling Up Home Building Fund

What is the Levelling Up Home Building Fund?

This government-backed initiative is provided by Homes England. Focusing on funding new affordable housing in England, Homes England offers financial support to small and medium-sized home builders and innovative developers. This support is in the form of development finance starting from £250,000. The aim is to build more homes faster with a view to creating good communities and being innovative when it comes to the housing solutions that require funding.

What can the funds be used for?

The funds can be used to build or refurbish homes for sale or rent. Innovation is encouraged in the types of homes built and how they are delivered. As examples, funds might be needed for:

• New entrants in the market
• Off-site manufacturing
• Community-led housing projects
• Serviced plots for self and custom builders
• Small companies that wish to work together to develop larger sites

The financial support provided under the Levelling Up Home Building Fund is to cover the development costs of your project. If you need help with the infrastructure and enabling costs, however, you can apply for an infrastructure loan. This is available via the Home Building Fund and will enable you to get your development project underway.

How does the Levelling Up Home Building Fund work?

Development finance is offered from £250,000 with loans typically ranging between £2 million and £5 million. No upper borrowing limit has been set for extensive projects. Smaller loans are also considered if your project demonstrates an innovative housing solution. This can include a custom build, for example, or the use of modern methods of construction (MMC). The development finance loan is usually taken out for a term of up to 5 years. Security is required for the loan and this is usually in the form of property assets. Subordinated lending is also considered. Any income generated by selling the homes can be used to minimise your loan request.

The costs involved

An arrangement fee is payable and interest is charged on the loan at a commercial rate. This variable commercial rate is determined by the base rate with an added margin. The margin is set according to different criteria, which include the nature of the investment, your creditworthiness and the collateral offered.

Eligibility criteria for the Levelling Up Home Building Fund

The Levelling Up Home Building Fund is available to you as a small or medium-sized enterprise (SME) or an innovative developer or house builder. You can apply for a development finance loan via this scheme if you meet the following criteria:

• You are a UK-registered corporate entity or a limited liability partnership (LLP).
• The development site is in England.
• Your project is financially viable.
• Without this funding, your project would either be slow to progress or completely stall.
• You plan to build or refurbish a minimum of five homes. It’s important to note that any refurbished units must be uninhabitable at the point you make your loan application.

You also usually need to have majority control of the site for development and a clear path to gaining planning consent.

You won’t be eligible for funding if your project includes:

• New leasehold houses
• Leasehold flats where more than a peppercorn ground rent is charged

It should be noted that the eligibility criteria may change if updates are made to reflect different government priorities.

How to apply for the Levelling Up Home Building Fund

When you’re ready to apply for the Levelling Up Home Building Fund, you can complete the online enquiry form or contact Homes England by email, post or telephone. A member of their investments team will assist you with your application if you meet the criteria. This needs to include details of your development plans as well as your business finances. Once you’ve submitted your application, you’ll be allocated a dedicated transaction manager. You will receive the funding decision along with the confirmed price. Homes England will carry out their due diligence and then sign the agreement. Once this has been done, you can proceed with your project. When your project has been completed and the homes have been built for sale or rent, you then repay the loan.

Prioritised applications

As the Levelling Up Home Building Fund is a government-backed initiative, a broad range of government priorities are reflected. This means that applications are prioritised based on:

• A higher potential for early delivery
• The best value for money for taxpayers
• Projects that help to maintain policy priorities

For the latter, examples of these projects can include:

• The provision of innovation and diversification in the housing market
• Building greener homes in support of net zero carbon emissions

The reinforcement of the developer market for SMEs

Other forms of funding available via Homes England

Homes England has formed funding partnerships to offer alternative forms of financial support. These include the Housing Accelerator Fund, Invest & Fund, Housing Growth Partnership and an investment partnership with Barclays.

• The Housing Accelerator Fund. This is a 5-year alliance between United Trust Bank and Homes England. It offers financial support for small and medium-sized home builders and developers with loans ranging from £1 million to £10 million. The maximum loan amount offered is up to 70% of the gross development value (GDV).
• Invest & Fund. Applications falling below the minimum criteria of five homes required by the Levelling Up Home Building Fund will be approved by Invest & Fund. Construction loans ranging between £400,000 and £2.5 million will be provided.
• Housing Growth Partnership. As an equity investor, Housing Growth Partnership offers equity capital for residential development projects. These include family homes, rental properties, student accommodation, retirement homes, apartments and more.
• Residential development debt funding is offered to enable the building of more homes at a faster pace.

Get your project underway with the right financial solution

If you’re struggling to gain the finance you need for your project as a small or medium-sized home builder or an innovative developer, the Levelling Up Home Building Fund may be the solution you’re looking for. To ensure that you choose the right type of financing for your project, our mortgage brokers are ready to discuss your project plans and financial needs in depth. Just give us a call on 01322 907 000 for expert advice.

Once they’ve ascertained your financial situation, the nature and complexity of the project and your loan requirements, our brokers will be in a better position to advise you on the best funding solution. This may be a self-build, new-build or commercial mortgage, for example. Alternatively, your project needs may require a bridging loan or development finance. For the latter option, our qualified brokers will compare the criteria and terms of the Levelling Up Home Building Fund with other development finance options to ascertain the best funding route for you to take.

At Trinity Finance, we also offer other financial products related to property that you may be interested in. For example, we can arrange your buildings and contents insurance, including specialist insurance, such as new-build or HMO insurance. For more information, send an email to us at info@trinityfinance.co.uk or an enquiry via our contact form. One of our mortgage and protection brokers will reply to you as quickly as possible with further details on the range of financial services we provide.