The new partnership will commit £175m to provide loans and expert support for SME housebuilders to help them build more high quality, energy efficient homes throughout England.
Homes England will provide £46m of the total sum pledged.
The alliance will provide loans between £1m and £20m at up to a maximum of 85% LTC or 70% LTGDV to finance new SME development projects.
Homes funded must achieve a minimum EPC B rating and will benefit from increasing interest rate margin discounts as the energy efficiency of the homes rises above this, with A-rated properties receiving a 2% interest rate margin discount.
Before starting their developments, SMEs will also benefit from free of charge, expert advice from sustainability consultants McBains and Octopus Energy, with the former providing design guidance and practical steps to achieve an improved EPC.
The alliance aims to support the construction of up to 750 new homes, while also equipping SME housebuilders with knowledge and expertise around low-carbon construction, allowing them to build to higher environmental standards.
Housing minister Christopher Pincher said: “We are determined to ensure that our homes are fit for the future and improving energy efficiency is a key part of our ambitions to reach net zero emissions by 2050.
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“Our Future Homes Standard will ensure that from 2025 new homes produce at least 75% lower CO2 emissions and be future-proofed with low-carbon heating.
“This partnership will help reach our targets for cleaner, greener homes for future generations.”
Peter Denton, chief executive at Homes England, added: “This new partnership, the latest in a series of impactful lending alliances, will give smaller housebuilders both the funding and the knowledge needed to build more sustainable homes.
“The Greener Homes Alliance brings developers and lenders closer together, providing affordable finance, improving knowledge sharing and creating new paths to net zero.”
Benjamin Davis, CEO at Octopus Real Estate, commented: “Creating more energy efficient homes across the UK is vital if we’re to make progress towards net zero.
“Our joint venture with Homes England will help meet this increasingly urgent need to develop more sustainable homes.
“Given the public are more in tune than ever before about how energy efficient their homes are and, in turn, their own impact on the environment, the opportunity for developers building greener homes is huge.
“Octopus Real Estate is committed to our impact goals and the opportunity to work with the real estate sector, alongside institutional investors, to create choice for developers to future proof developments and drive the green acceleration of the property market.”
Andy Scott, head of residential development at Octopus Real Estate, stated: “Although green credentials may be an aspiration for most developers, sometimes access to funding, costs and education can stand in the way of these aspirations.
“The alliance will offer tangible discounts which can help fund the costs to support the delivery of green developments, plus access to advice and education, which will enable SME housebuilders to deliver future proof, energy efficient homes to be enjoyed for generations to come.
“The property market has an opportunity to play a meaningful role in tackling climate change, but we need to act now.
“We’re excited that we have the opportunity to start making an impact alongside Homes England and to think differently about how we build homes for future generations.”