Indeed, it is no secret that the UK suffers from a deep malfunctioning of its housing market whereby there are too few homes available and those available homes are far too costly, especially for first-time buyers trying to get their feet on the property ladder.
Of course, successive governments have promised to tackle the housing crisis, some have proposed concrete measures to do so and as recently as 2017, Theresa May declared her ‘personal mission’ to solve the UK’s housing crisis by turbo-charging new homes’ delivery. During Philip Hammonds’ Budget in November 2017, the Government announced its target to build 300,000 new homes a year, but that target has never been met.
With just over 170,000 new homes having been completed in the year ending June 2019 and with construction having taken a big hit during the pandemic, the Government is currently very far from reaching its target. Therefore, it was with great disappointment that we received Mr Sunak’s lack of housing supply strategy during his awaited Spring Budget earlier this month.
According to a report by the UK Collaborative Centre for Housing Evidence – along with several other reports – increasing supply is the answer if we are serious about tackling the housing crisis.
Yet we also know that lack of funding, especially among SME property developers and small construction companies, is a key reason for failing to build more homes.
According to a report by the Home Builders Federation titled “Reversing the decline of small housebuilders: Reinvigorating entrepreneurialism and building more homes”, today only 12% of new build homes are built by small builders, down from 40% in 1988. This report states that availability and terms of financing for residential development has become extremely difficult for small housebuilding companies over the past decade or so as lenders have drastically changed their attitudes to the sector since the 2008/09 Global Financial Crisis.
Public-private partnerships needed
At a time when Covid19 has put unprecedented pressure on public finances, how do we build more homes?
We believe the key revolves around public-private partnerships strategy to deploy targeted funding to property developers. P2P property lending platforms are already helping plug the funding gap by connecting private lenders looking for yield (retail, high net worth, institutional and family offices) to borrowers who need funding to build more homes.
Due to their nimble size and flexibility, alternative lenders and P2P property lending platforms have demonstrated they can be a strong Government ally to channel funding to SME property developers. Over the past year, traditional lenders’ obligation to administer the Coronavirus Business Interruption Loan Scheme (CBILS) represented a distraction that sucked up resources at traditional lending institutions, thus leaving them under-resourced to deal with non-Covid19 related lending.
Meanwhile, alternative lenders stepped in to support property developers, showing they can and must be part of the solution to the UK’s housing crisis.
Collaboration between Homes England and alternative lenders
One concrete and effective way for the Government and alternative lenders to work together is via agencies such as Homes England who have a mandate to lend to property developers but would benefit from partnering with alternative lenders with robust origination arms.
For example, at Blend Network not only do we have strong feet on the ground across the UK regions and able to access property developers in need of funding, but we also have an experienced underwriting team who assess deals and deploy funds according to set criteria. We would thus welcome working alongside organisations such as Homes England to deploy more funds.
