Homes England aims to grow institutional investment fund to £1bn to build 5,000 new homes
Homes England and asset manager Newstead Capital have announced the launch of a loan fund to help small and medium sized (SME) housebuilders access development finance.
The fund, which is hoped to eventually reach £1bn, has been described by Homes England as the “first ever to allow institutional investors to provide debt via private markets to SME housebuilders”. The aim is to create a new asset class for institutions to invest in SMEs.
Homes England, alongside the Greater Manchester Pension Fund and clients of listed wealth manager Mattioli Woods have committed £80m to the initial close of the fund.
The intention is grow the fund to £300m through an initial capital raise and deliver £1bn of funding over the fund’s lifetime.
Access to traditional finance has been long been cited as a key barrier to getting more SMEs into housebuilding. Brian Berry, chief executive of the Federation of Master Builders, told Housing Today in July that “Finance is a big issue. Small builders often don’t get the terms that larger builders get.”
The new fund will also incorporate environmental, social and governance metrics, with Homes England saying it will encourage energy efficiency in new homes by taking this into account at the underwriting stage.
See also>> Making SME house builders great again
Peter Denton, chief executive of Homes England, said introducing new sources of institutional capital to support SME housebuilders is a “priority” for the funding body.
He said: “This partnership is our latest intervention to offer SME housebuilders a route to finance that may otherwise be unavailable through traditional means.
“Our cornerstone investment in this fund signals government support for accessible and competitive finance to meet the needs of SME developers across the country.
Simon Champ, chief executive of Newstead Capital, said: “This is an exciting step for Newstead. Our fund is the first of its kind. We are providing a conduit for long term institutional investors to gain access to a market which until now has been out of reach.”
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Housing Today believes the government should not back away from its manifesto pledge of building 300,000 new homes a year by the middle of the decade. We badly need more homes and a lack of supply is a major factor in creating problems of affordability for both buyers and renters.
Over the next few months, Housing Today will be exploring potential solutions to help us ramp up housebuilding to 300,000. These are likely to, include different ways of working, funding asks of government and policy ideas that could boost housebuilding.
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