What are the financial markets doing to support developers in sourcing the funding they need to help the UK housing crisis?

It’s no secret there is a material shortfall in housing across the UK, or that government plans to achieve the development of 300,000 new homes every year by the mid-2020's are now highly unlikely to be met.

This is for a number of reasons, and like any missed target, solving it is going to require a multitude of actions.

Building social housing, improvements in planning, government funding and incentives are always welcome in this respect, but housing shortages cannot be considered a public sector issue alone. 

Ultimately, it’s going to be up to private developers with funding from the now wide range of private lenders available to support them in getting things moving.

So, what are the financial markets doing to help reset the balance and support as many developers as possible in sourcing the funding they need to support the UK housing crisis in the process?

Putting the well documented issues with planning aside for a moment, currently, one of the most significant challenges facing property developers is that the cost of developing has increased materially in a very short space of time and their projected profit margins don’t appropriately reflect the level of risk they’re taking with their capital.

Ultimately, if a developer isn’t confident in making a return reflective of that risk, there’s less chance of them starting a development at all.

What can the government do to help?

While I see the shortage of housing in the UK as a fantastic opportunity for the private sector, there are undoubtedly things the government could do to help incentivise property development.

Making more land available for redevelopment and further incentivising the redevelopment of brownfield sites, releasing some less valuable and attractive greenfield sites for development, offering grants or tax breaks for certain developments or conversions alongside shortening, simplifying and reducing the cost of the planning process, could all help.

If we’re serious about getting SME developers developing again, then collectively the UK government and devolved nations are going to have to seriously consider how they best incentivise them to do so.

We regularly hear a skills shortage across the building and construction sector can create challenges on timing and delivery for developers.

Whether you voted for Brexit or not, it’s here to stay, and we need greater emphasis on key trades via apprenticeships and training programmes to help build a pool of skilled labour for the future.

The idea academia is the route to all success seems to have usurped the desire from many young people to learn a trade, but we know greater investment in this area will be key to future success.

The role of the private sector

There is also a responsibility from the private sector to play its part too.

Commercial finance experts like Hodge, support professional property developers and investors across England, Wales, and Scotland and are working hard to expand the lending options we make available as well as raising awareness of who we are and how we can help. 

From our perspective, we have committed to this effort by enhancing our development finance offering to provide additional flexibility and to support property developers as much as possible. 

Over the past two years we’ve consistently improved our criteria to meet the evolving needs of developers as they continue to navigate a turbulent housing market, and we will continue to do so as we move further into 2024.

We’ve made changes too our product range and provided additional lending options as we recognise many developers are often caught between a rock and a hard place.

As reliant as we are on the UK and devolved governments to do more, we all need to work together to get the UK housing market moving again as soon possible.

The challenge to build, refurb and create new homes for all who need them is one we’re committed to at Hodge, and believe we all need to play our part to achieve this to avoid further future stagnation.

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