Home Building Fund

What is the Home Building Fund?

A £3 billion fund was set aside by the UK government to provide financial support to build more homes in England. Initially organised by the Homes and Communities Agency (HCA), which has since been replaced by Homes England, it provides small and medium-sized builders and larger developers with loans to finance their projects. These loans range from £250,000 to £250 million and can be taken out over short or long terms. The fund was introduced to encourage the building of a significant number of new homes in England to cater to the high demand for housing. The government’s aim is not only for homes to be built more quickly but for good communities to be established.

Types of Home Building Fund loans

To achieve their goal of encouraging faster progress and innovation in the types of homes built, the government provides loans in two ways. Development finance is offered to small and medium-sized home builders while infrastructure finance is offered to landowners, developers and master developers. We’ve detailed the two types of Home Building Fund loans below.

Levelling Up Home Building Fund

This fund provides development finance to small and medium-sized home builders that are struggling to obtain commercial finance. It can be used to build homes either for sale or rental purposes. Loans start at £250,000 but smaller ones are considered for housing solutions that demonstrate innovation. For example, custom builds or those using modern methods of construction (MMC). The loan term is generally up to 5 years and interest is payable on the loan. An arrangement fee is payable and you’re usually asked to provide security in the form of property assets. Under the Levelling Up Home Building Fund, innovative projects are supported and funding is provided for:

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

Other types of financial support are available via this fund due to funding partnerships that have been formed. For example:

• Invest & Fund approves applications that fall below the minimum Levelling Up Home Building Fund criteria of five homes. It provides construction loans that range between £400,000 and £2.5 million.
• The Housing Accelerator Fund provides financial support for small and medium-sized developers and home builders. Loans are available from £1 million to £10 million.
• Housing Growth Partnership offers equity capital for residential development projects.
• Barclays offers residential development debt funding to facilitate the faster building of more homes.

Joint ventures can also be formed with housing developers, local councils and other bodies for projects used to revive public spaces and regenerate town centres.

Home Building Fund — Infrastructure Loans

This fund provides infrastructure loans to enable development projects to get underway. Often, significant barriers stand in the way of viable housing sites being used. For example, hefty infrastructure costs have to be paid upfront and obligations have to be met under Section 106. The loans are offered to landowners, developers and master developers who are preparing land for development. Infrastructure and enabling costs are provided to unlock large sites and allow the infrastructure projects to progress quickly. Examples of what you may need this type of funding for include:

• Land preparation
• Enabling works
• Providing transport infrastructure both on and off-site
• Providing infrastructure as required by Section 106
• For placemaking purposes
• Providing community facilities
• Providing education facilities

Loans of up to £250 million are offered on a long-term basis, which is usually 20 years. An arrangement fee is payable and interest is charged on the loan.

Home Building Fund eligibility criteria

You can apply for a loan via the Home Building Fund as a small or medium-sized home builder, a developer, a landowner, a master developer or a private sector business, such as a housing association. To be eligible for either of the Home Building Fund loans:

• Your project must be financially viable
• Your project will either stall or be slow to progress without this funding
• The development site must be in England
• You must be a UK-registered corporate entity or a limited liability partnership (LLP)
• You need to have majority control of the site for development
• A clear path must be established for being granted planning consent

As well as the above criteria:

• To be eligible for the Levelling Up Home Building Fund, you must also be planning to build or refurbish at least five homes. At the point of your loan application, any refurbished units need to be uninhabitable.
• To be eligible for infrastructure finance via the Home Building Fund, your project must lead to the development of new housing.

Funding cannot be provided for projects that include new leasehold houses or leasehold flats where more than a peppercorn ground rent is charged.

Applying for the Home Building Fund

To apply for government funding for building homes, you can make an enquiry online to Homes England. You can also contact them by email, post or telephone. You need to confirm the amount of funding you require, what it will be used for, whether you already have a site and when you plan to start work on the site. As long as you meet the eligibility criteria, you’ll be assigned a transaction manager. Your business finances and development plans will be reviewed by Homes England before a funding decision is confirmed. Once their due diligence has been carried out, an agreement will be signed between you. You can then proceed with your project.

Applications that are prioritised

For both loan types, applications are prioritised that offer the most potential for early delivery and are the best value for money for taxpayers. Applications for the Levelling Up Home Building Fund are also prioritised if the projects support policy priorities. For example:

• The building of greener homes in favour of net zero carbon emissions
• To strengthen the developer market for small and medium-sized enterprises (SMEs)
• To provide innovation and diversification in the housing market

Applications for infrastructure finance are prioritised if they have local support and they support policy priorities. These include:

• Brownfield development
• Providing innovation and diversification in the housing market

Strengthening the developer market for small and medium-sized enterprises (SMEs)

The effect of the Home Building Fund on the housing market

With the aim of building more homes faster, the increased housing that has resulted from the fund has helped to counteract the housing crisis across England. Demand is much higher in some areas, though, and this can increase the property prices, affecting the affordability for many people. Securing a mortgage is already out of reach for some borrowers due to the current economic situation. For areas with a high demand for housing, builders have to be sure that the properties can be sold when they’re completed. If you’re planning to start a project in such an area, just bear in mind that the Home Building Fund loan has to be repaid at the end of the term. Consider how you will do this if you’re unable to sell the properties due to the housing market at that time.

Key Features of the Home Building Fund

In summary, the Home Building Fund’s key features are:

• Development finance is available to build homes for sale or rent
• Infrastructure finance is available for site preparation and to cover the infrastructure costs, allowing housing projects to progress
• Short and long-term loans are offered — typically 5 years for development finance and 20 years for infrastructure finance
• Loans range from £250,000 to £250 million
• Smaller loans are provided for innovative housing solutions
• Other types of financial support are available through funding partnerships

Get financial support for your project with the Home Building Fund

As a small or medium-sized home builder or an innovative developer, you may be struggling to finance your project using standard financing, such as a self-build mortgage, a new build mortgage or development finance. This is when the Home Building Fund can provide the loan you need to get started, even if you’re a new entrant in the market. Our mortgage brokers are ready to discuss your financial needs and advise you on the best solution for your situation.

Just give us a call on 01322 907 000 and we’ll answer any queries you have on the Home Building Fund and alternative types of finance available. If you prefer, send us an email at info@trinityfinance.co.uk or an enquiry via our contact form. One of our expert brokers will reply to you as quickly as possible with more information on your funding options. That way, you can make the right decision when it comes to getting your project off the ground.