Homes England launches new SME loan fund

Homes England and asset manager Newstead Capital have announced the launch of a development finance fund for SME housebuilders.

The Newstead SME Real Estate Lending Fund (RELF) was formed to help meet Homes England’s mission to accelerate change in the housing market by bringing in new sources of institutional capital. Homes England claim that it will enable the construction of over 5,000 efficient and affordable new homes across the country.

The fund will offer small and medium sized housebuilders development loans of between £5 and £10 million. Typically lasting 18 months, the loans will be recycled by the fund upon repayment.

Chief Executive of Homes England, Peter Denton has described access to finance for SME housebuilders as a ‘priority’. He remarked: “This partnership [with Newstead Capital] is our latest intervention to offer SME housebuilders a route to finance that may otherwise be unavailable through traditional means.

“We look forward to working with our new partners and welcome further institutional capital to help grow this fund and give SME housebuilders the helping hand they need to get more quality homes built in our regions.”

The Federation of Master Builders (FMB) has said that lack of funding is a ‘major barrier’ for small housebuilders, with 29% of its members reporting it has prevented them from building homes.

FMB Chief Executive Brian Berry reacted to the news with cautious optimism saying: “It’s good to see that more and more financial institutions are seeing SME builders as a positive investment.

“But government must match these efforts from the private sector by reforming the biggest barrier, the complex planning system.” 

With an initial £80 million committed to the fund by Homes England and Greater Manchester Pension Fund, it is intended that the fund will grow to £300 million and deliver £1 billion of funding over the fund’s lifetime.

The accessibility and deliverability of the fund remains to be seen, but the announcement may offer reassurance to England’s SME housebuilders in the face of an uncertain economy.