Tuesday 23 August 2016 7:33 am

Government to launch £5bn fund to help small developers solve the housing crisis before the Autumn Statement

The government will unveil a fund worth up to £5bn aimed at helping to solve the housing crisis in the weeks leading up to the Autumn Statement, City A.M. understands.

The Home Building Fund, aimed at small and medium-sized developers, was announced as part of the Queen’s Speech in May, but has since languished at the bottom of the Department for Communities and Local Government’s (DCLG) in-tray as the outcome of the EU referendum and subsequent ministerial reshuffles took precedence.

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Home Building Fund

When it was first announced, the government said the Home Building Fund would be worth £3bn, focusing on long-term loans to unlock a pipeline of 160,000 and 200,000 homes, as well as providing funding for small developments and custom builds.

However, it is thought a sum of up to £5bn will be allocated to boosting small builders ahead of this year’s Autumn Statement, due to take place in December.

Property Week reported yesterday the fund is likely to back developers across the spectrum, including the much-vaunted Build to Rent sector, although the lion’s share will go towards small firms.

It will be distributed via the government’s Homes and Communities Agency (HCA), and is expected to work as an extension of the £525m Builders Finance Fund, which was launched in April 2014.

Developers in mind

"[The new scheme] has been designed with small developers in mind, in that it's easy to access finance without having planning approval in place – which is usually the downfall of such schemes," a source familiar with the matter said.

"In order to access funding you need planning permission but if you have planning permission you can usually access funding, which is a bit chicken and egg."

“With Brexit on the way it’s going to be more important to have certainty,” said Alex Michelin, the co-founder of Finchatton, a small developer focused on Prime Central London.

“For some smaller developers, getting funding has become so much harder. With the Financial Conduct Authority’s new rules and prudential requirements banks have on property lending, they sort of don’t want to do it. It’s not really profitable for them.

“[The fund will] enable those sites which probably wouldn’t be developed to actually be developed and make sense again.”

Red tape woes

“It’s no coincidence that as the risk, cost and complexity associated with securing planning permission and building homes has rocketed over the last 25 years, the number of small and medium sized house builders has collapsed,” added a spokesperson for the Home Builders Federation.

“Today there are 80 per cent fewer small and medium sized enterprises in the industry than in 1988 and prospective new entrants are confronted with a planning system that does nothing to encourage entrepreneurialism. Measures and support schemes to support smaller firms and new entrants can help to inject new dynamism into the sector and help build on the huge increases in housing supply delivered by existing companies over the last two years”

Neither the HCA nor DCLG provided comment.