Calls for government to promote lending to SME housebuilders

Calls for government to promote lending to SME housebuilders
As well as promoting development finance, the government should explore a scheme that guarantees loans to SME builders

The latest research from the Intermediary Mortgage Lenders Association has found that the majority of mortgage lenders and brokers believe that greater government support for lending to SME housebuilders would help fix the UK’s lack of housing supply.

IMLA found that 61% of lenders and 57% of brokers believe that government support for development finance would improve the lack of housing supply.
 
In the run-up to the general election on 8th June 2017, IMLA is urging policymakers to support lending to small and medium-sized housebuilders. Successive governments have failed to address the supply-side issues challenging the UK housing market, despite an array of different initiatives. IMLA was critical of the government’s recent Housing White Paper, which was published in February 2017, on the basis that while it rightly highlighted the lack of housing supply it failed to offer significant substantive solutions. Data from the Department of Communities and Local Government reveals that new house completions were down 1% in the year to December 2016 compared to the previous twelve months.
 
SME housebuilders have said that obtaining finance is one of the principal challenges they face when it comes to delivering new homes. According to a report from the National House Building Council Foundation (NHBC), ‘Small house builders and developers: Current challenges to growth’, the availability of development finance is the biggest concern of 20% of SME builders and developers, and the second biggest concern of a further 18%. According to the report, these concerns relate to the cost of finance, the availability of finance, and unfavourable loan-to-asset ratios. Furthermore, some builders suggest they have a poor relationship with lenders – although this is reported to be improving.  
 
IMLA’s research among lenders found that they view a higher risk of builder default as the biggest challenge when it comes to providing development finance, with 44% of lenders identifying this as a key problem. This is followed by a lack of builder appetite for traditional models of debt due to a preference for mezzanine finance, which 35% of lenders identified as a key issue.


In IMLA’s view, there is a clear need for the government to support the growth of development finance as a means of addressing the housing crisis. Given lenders’ fears of SME-builder default, a government-backed guarantee of loans to SME builders is one policy that should be explored, which will give both lenders greater confidence. Furthermore, the government should also examine giving further support for lending to SME builders through loans via the British Business Bank.
 
Peter Williams, IMLA’s Executive Director, commented: “IMLA’s research reveals that the mortgage industry clearly feels that supporting development finance lending to SME builders and developers would help increase in housing output. Successive governments have struggled to meet housebuilding targets, and the lack of solutions offered by the incumbent government in its Housing White Paper shows there is a need for new ideas. IMLA is therefore calling on policymakers to explore how they can boost development finance lending.
 
There are several ways through which this can be achieved. As well as promoting development finance, the government should explore a scheme that guarantees loans to SME builders. Our research reveals that lenders view the biggest obstacle they face in development finance is a higher risk of builder default. At the same time, builders report that accessing finance is an obstacle to increasing their output. By launching a guarantee scheme, or boosting lending to developers via the British Business Bank, policymakers could increase the flow of development finance and improve output in the sector.”

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IrisJ.
IrisJ. 19 Jul 2017

Great advice, but may I also add that when buying an already built home, make sure you do all of the proper inspections. Most importantly pest inspection because people tend to get surprised when they

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IrisJ.
IrisJ. 17 Jul 2017

The third point is, in my opinion, the most important one. People have become too inconsiderate and careless when it comes to rented properties. If a landlord wants to protect their property, regular visits...

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cornishalan
cornishalan 10 Jul 2017

Added to the cost of purchasing these village properties are the above average maintenance costs. Particularly where the property is a listed building or requires specialist building skills such as thatching...

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Jo Mullett
Jo Mullett 07 Jul 2017

Here in Swansea, known as the Japanese knotweed capital of the UK, it never fails to amazes me that people have no idea of the potential problems this invasive non-native plant can cause when buying or...

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NathanG
NathanG 05 Jul 2017

McDonalds, for example, have been purchasing their real estate on prime locations for years. If something happens to the company they'll have invaluable assets that will be able to save them. We might

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Jonah
Jonah 04 Jul 2017

Graham: surprised to see you cite the "extra tax liability" as capping out at ?560. It doesn't - the extra tax is exponential, as it is levied on the income (i.e the inflating level of rental income you...

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Dianne Griffen
Dianne Griffen 29 Jun 2017

Be very wary of anyone bringing you deals that they have ?found? and want to ?sell on to you? or ?joint venture? with you on ? you need a proper legal contract for this, involve a RICs surveyor to confirm...

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jason hadzikostas
jason hadzikostas 28 Jun 2017

The most important thing is a budget. Students have to manage their spendings in food, house maintenance, books and many other things. According to me, student Studios are the perfect option for them as...

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SecomTech
SecomTech 22 Jun 2017

AT Last...This was discussed years ago and there was a move towards landlords registering their bad tenants on a database..(can't remember where) It seems a logical step though our leaders will probably...

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Bertrand
Bertrand 02 Jun 2017

How about the Welsh Govt introducing a scheme to protect landlords against "rogue" tenants who are then taken to court for criminal damage to the properties they trash. Pretty unlikely I suspect and politically...

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AmberMorris
AmberMorris 25 May 2017

"Please don't pick a novelty tune-playing doorbell. They're not 'fun'. They're stupid." Laughed a lot to this. It's actually true, though.

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Oliver Conway
Oliver Conway 18 May 2017

Making a neat inventory is a good idea, but if the seller is not willing to provide it, can the buyer demand it?

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