Barclays has teamed up with the UK government to provide £1 billion (€1.12 billion) of development finance, in a bid to increase the pace and volume of housing provision across England.
The bank is providing £875 million and Homes England, the government’s national housing agency, will contribute £125 million to support small- and medium-sized businesses to develop homes for rent or sale including social housing, retirement living and the private rented sector.
Through the so-called Housing Delivery Fund, Barclays will provide loans ranging from £5 million to £100 million, with a term of up to five years. Leverage for development schemes will be up to 80 percent loan-to-cost and 70 percent loan-to-value.
At this leverage, typical market pricing ranges from 5 to 10 percent, Real Estate Capital understands. Loans provided through this fund are expected to be priced “towards the bottom of that range or possibly slightly cheaper”, Dennis Watson, head of real estate at Barclays told Real Estate Capital.
The fund, expected to be deployed within two-and-a-half years, will back developers and house builders able to demonstrate the necessary experience and track record to undertake and complete their proposed project. Another key priority of the initiative will be to support innovation in the model of delivery such as brownfield land and urban regeneration projects.
“This is not something for first-time builders or semi-professionals; it’s for proper, established SME developers and builders who need capital to grow,” Watson said.
“We need to be working with developers who are able to attest that, through the position of this finance, they are delivering more homes than they otherwise would. That would be through bringing forward schemes which could not get started without this finance; or through looking at different methods of construction and innovation in their schemes.”
Lending will be provided with the aim of putting greater emphasis on diversifying the housing market, as currently almost two-thirds of homes are built by just 10 companies, Barclays said.
The agreement with Barclays forms part of the government’s wider commitment to increase the pace of housing delivery in England. Ministers have been clear about their ambition to achieve 300,000 new homes a year by the mid-2020s, which follows 217,000 homes built last year – the biggest increase in housing supply in England for almost a decade.
“There is a vital need to build more good-quality homes across the country,” said John McFarlane, Barclays’ chairman. “This £1 billion fund is about helping to do exactly that by showing firms in the business of house building that the right finance is available for projects that help meet this urgent need.”