Natwest announces £250m loan fund to help RPs buy section 106 homes

Natwest has announced the launch of a new £250m loan fund to help housing associations acquire section 106 homes from housebuilders.

The bank said the fund will match the £250m the government is setting aside from its £2.5bn low cost loans programme for section 106 purchases, meaning £500m is available in total. Natwest said the £500m would support the acquisition of around 2,500 section 106 homes.

The Natwest loans will be available to providers who successfully apply for funding to buy section 106 homes through the government’s low-cost loans programme, allowing them to “double their capacity”.

A Natwest spokesperson said the loans from the bank would be available at “discounted margins and fees” but has not specified what these are or how they compare to the nominal 0.1% interest rate on the government loans.

Under Section 106 agreements, developers agree to fulfil obligations, such as a percentage of affordable homes in the development, as a condition of planning approval. The system has in recent years accounted for around 40% of affordable housing delivery in the UK.

However, it relies on housebuilders being able to find buyers within the registered provider sector. In recent years, demand has declined due to the weakened financial position of the social housing sector, as well as criticisms over the alleged quality of section 106 homes as many RPs focus more on ‘land-led’ delivery. This has led to a slowdown in supply with housebuilders needing to be confident of a purchaser for their homes.

In December 2024, Homes England launched a clearing service to help connect buyers and sellers of section 106 homes.

Neil Jefferson, chief executive of the Home Builders Federation said: “Without registered providers to take on these homes, we’re seeing overall housing supply slow or halt entirely. Moves to unblock the market and encourage RPs to acquire homes already subsidised by private subsidy are very welcome and will help to boost the supply of both Affordable and private homes.”

Kate Henderson, chief executive of the National Housing Federation said: “Section 106 is fundamental to ensuring affordable housing remains at the heart of mixed communities across the country. This product is strongly welcome and will support housing associations to continue investing in section 106 homes, as part of the sector’s ambition to deliver a generational boost to social and affordable housing.”