Don't delay in accessing the £3bn Home Building Fund

In October the government announced that it has set aside a £3bn fund to help small house builders finance developments in a move to speed up delivery and promote new approaches to housebuilding.

Since this time the HCA has received unprecedented levels of interest from thousands of house builders and housing associations from across the country with over £200million worth of funding already allocated.

Although funding will be available until March 2021, with such high demand we're encouraging clients to consider whether they want to apply now. Our summary below will provide you with more information on eligibility and process to help you decide.

Who is eligible?

The fund is open to small house builders, community builders, custom builders and regeneration specialists. The HCA has confirmed that housing associations can bid for the fund with the eligibility criteria being the same for both private house builders and housing associations.

Funding is available for community led housing projects, serviced plots for custom and self-builders, off-site manufacturing, new entrants to the market and groups of small builders working in consortia to deliver larger sites.

The fund has the following core eligibility criteria:

• Developments must be in England
• Applicants will need to demonstrate that without the funding the scheme would not progress or would not progress as quickly, or at all
• The borrower must be a private sector entity which has majority control of the site (although this includes housing associations)
• Development projects must comprise of 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)

Which schemes are prioritised?

The HCA is prioritising schemes which will provide the maximum amount of housing for the funding provided. Small and medium organisations are also being prioritised and the focus of the HCA is very much on those who can provide workable schemes which are deliverable.

Who administers the fund?

The fund is being administered by the Homes and Communities Agency (HCA), also known as Homes England, which has set up various Home Building Fund teams across the country.

Applicants can apply to the HCA online or by email, phone or post. To lodge an initial enquiry the following questions will need to be answered:

• What will the funding be used for?
• How much funding do you require?
• Do you have a site?
• When do you plan to start on site?
• Is there anything else you would like to tell the HCA (option)?

Once an initial enquiry has been made, applicants will be allocated a transaction manager. Homes England will review development plans and business finances when considering an application.

Repayment Terms

Homes England has stressed that it is taking a responsible approach to funding to ensure that borrowers will not be overstretched and that funded schemes are financially viable.

The interest charged will have two elements, a base rate and a margin. The Base Rate is the prevailing European Communities Base Rate for the UK (variable) and the margin offered will depend on the creditworthiness of the applicant, nature of the investment and collateral offered.

Typical repayment periods are up to 5 years for development finance and up to 20 years for infrastructure loans.

Security

Security can be provided by any of the following:

• First ranking legal charge over the property
• Debentures over companies
• Non-property relates security such as capital guarantees from a suitable parent company

Further Details

In a recent spending review Rishi Sunak revealed a £7.1 billion national home building fund to help tackle the housing crisis. However, further clarity is needed in the wake of this spending review as to whether the recent stamp duty holiday will be extended. 

For help and information on the Home Building Fund, how it might affect the housing market and how it might affect you, contact Joanna Upton at Foot Anstey via email [email protected] or on 02380 172207. You can also find information from the Home Building Fund Enquiries Team at the HCA on 0300 1234 500 or visit www.gov.co.uk/homebuildingfund