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What's this new home building fund?

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It's no secret that the United Kingdom needs more homes to be built however two of the biggest barriers to achieving the 1,000,000 new homes target by 2020 is firstly, the time it takes for local authorities to issue planning decisions and subsequent Section 106 agreements and secondly, obtaining the finance - particularly for small builders and innovative schemes. So to counteract the finance issue, the Homes & Communities Agency (HCA) has launched the Home Building Fund which is a £3 billion fund from the Government to aid property developers in increasing the number of new homes being built in England

The Home Building Fund is a flexible source of funding administered by the HCA on behalf of the Government that provides:

Development Finance

Loan funding to meet the development costs of building homes for sale or rent.

Infrastructure Finance

Loan funding for site preparation and the infrastructure needed to enable housing to progress and to prepare land for development.

The purpose of the fund is to encourage innovation, both in the kind of homes that are built and the way they are delivered. Financing is available to support these projects which could include community led housing projects, serviced plots for custom and self-builders, off-site manufacturing, new entrants to the market and groups of small firms working in consortia to deliver larger sites.

A range of non-financial support is also available for larger infrastructure schemes to help overcome barriers to schemes progressing more quickly. 

How does the Home Building Fund work?

The lending works exactly as you'd expect, it requires appropriate security and loans are secured against property assets. The key features are as follows:

* Loans of £250,000 to £250 million are available with smaller loans considered for innovative housing solutions and serviced plots for custom builders.

* Typical terms are up to 5 years for development finance, and up to 20 years for infrastructure loans.

* Interest is payable at transparent, pre-agreed variable rates (expect an arrangement fee to be charged as well). 

* Sales income can be recycled to minimize the loan request.

* Subordinated lending will be considered.

* Finance is available to draw down up to March 2021.

* Eligible costs will be discussed with each applicant and depend on the type of funding requested.

The Fund provides loan finance with other forms of financial support considered. The HCA is an investor in the Housing Growth Partnership which provides equity capital directly for residential development projects - www.housinggrowth.com.  

Who can apply?

Finance is available to all private sector organizations involved in delivering new homes and the provision of enabled sites ready for residential led schemes. The fund has a few core eligibility criteria as follows:

* Applicants will need to demonstrate that without this funding the scheme would not progress as quickly, or at all

* Developments must be in England

* The borrower must be a private sector entity which has majority control of the site

* The development project must build a minimum of 5 homes 

* The borrower must be a UK registered corporate entity

* Infrastructure projects must ultimately lead to the development of new housing

* The minimum investment the Fund will make is £250,000, except in the case of innovative housing solutions and serviced plots for custom builders 

At the point at which a loan offer is made, applicants are normally required to have a controlling interest in the land and a clear route to achieving planning consent. The HCA has responsibility for managing the Fund and its lending decisions are final.

As it's a Government-backed initiative, it's likely to be more beneficial for projects that reflect wider Government priorities such as the best value for money for the tax payer, the greatest potential for early delivery, clear local support, projects that support policy priorities such as Housing Zones, brownfield development and diversification and innovation in the housing market as well as starter homes, estate regeneration, garden villages and towns and making use of available public sector land. 

If you wish to apply the first step is to contact the HCA which you can do so by telephoning 0300 1234 500. You will be sent the link to an application form to complete for the project you require funding for. If you prefer sending them an email voila... homebuildingfund@hca.gsi.gov.uk. 

We hope you've found this blog both informative and helpful. If you'd like some further advice or perhaps you want to learn more about what we do here at Estateducation, please get in touch or simply add a comment below, we'd love to help.

Thanks for reading, 

The Estateducation Team. 

 

 

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