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United Trust Bank (UTB) and Homes England have announced that they will launch a £250m fund to support small and medium sized builders. This five-year alliance will provide support for small and medium sized house builders and developers, with the aim of taking the pressure off the UK housing market.

It will offer loans of between £1m and £10m to small and medium-sized builders. The loan terms will run for up to 24 months and will be offered at up to 70% Loan to Gross Development Value and a maximum Loan to Total Development Cost of 87.5%.

The new fund, which has been called the Housing Accelerator Fund, aims to help diversify the UK housing market by enabling a wider range of businesses to access funds. Applications opened in February 2021. 

Companies who wish to apply for funding from the Housing Accelerator Fund are required to contact UTB directly.

By giving SMEs easier access to finance, the Housing Accelerator Fund aims to provide a realistic solution to the UK’s housing crisis by enabling more construction companies to actively work in the market. This will provide desperately needed homes which will be built across the UK over the course of the next five years.

In order to apply for funding from the fund, builders businesses must meet the following criteria:

  • All companies applying for this scheme are required to be UK registered companies or limited liability partnerships
  • They must be established firms with demonstrable experience in the construction sector
  • Companies must be able to provide evidence of having completed at least three construction projects of a similar kind and magnitude
  • Any firms applying for funding from the scheme are required to foot 10% of the total development costs, and they are not allowed to simultaneously hold any other secured debt arrangements
  • All loans will be assessed on a fully funded cost to complete basis and borrowers are required to inject their funds into the project at the outset

Homes constructed with funding awarded by the Housing Accelerator must meet the following specifications:

  • They must be built in the areas of the UK that have the greatest affordability pressure on housing needs
  • The scheme must offer the greatest societal benefit relative to the amount of money invested
  • The maximum selling price per single unit has been capped at £800,000 and the average selling price at less than £800psf
  • All homes constructed with the assistance of the Housing Accelerator Fund must also be offered on a freehold basis
  • Loans will not be awarded to projects looking to build houses to be sold on a leasehold basis, or to flats that will be sold leasehold
  • An exception for blocks of flats will be made for peppercorn ground rent, but no other exceptions will be considered

Once the homes funded by the Housing Accelerator Fund have been completed, prospective landlords will want to make sure that they stay good as new for as long as possible so investment in robust tenant referencing, quality inventory and check out reports and structured property management is going to be key.

In summary, the Housing Accelerator Fund looks likely to be a win-win solution for the UK’s construction industry, enabling more small and medium enterprises to gain access to funding while taking pressure off the UK’s already overstretched housing market.

By giving buyers greater choice as to when and where to buy their next home; stepping on the property ladder is set to become a lot easier.

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