National Housing Bank offers hope for chronic shortage of homes: Mark Manning
The Government recently announced it will establish a National Housing Bank as a subsidiary of Homes England, which is says will unlock investment, turbo charge housebuilding and tackle the UK’s chronic housing shortage.
It will act as a central financing institution, offering low interest loans and guarantees to private developers, housing associations and local councils across the UK, which will enable them to get the finance they need to build – particularly for more complex developments where traditional banks are reluctant to invest.
The new bank will initially benefit from £16bn of public investment, which the Government says will help to build around 500,000 new homes and unlock over £50bn of private investment.
On paper, it’s a bold step, and with housing affordability at historic lows and home ownership out of reach for many, this new institution has the potential to become a central force in helping to make development easier and alleviate the country’s housing shortage.
One of the most promising aspects of the plan is its potential to revive the small developer sector, which has been in long-term decline due to rising land costs, planning delays and restricted access to finance.
By providing smaller developers with a range of debt, equity and guarantee products, it will help them to build more homes more quickly, which is essential to their survival. It will also level the playing field between big and small developers, and allow smaller ones to get projects off the ground that have previously been unviable.
With rents rising and first-time buyers increasingly being locked out of the property market, one of the core goals of the National Housing Bank is to make housing more accessible for all, and it will provide low interest finance options to developers and local authorities building affordable and below market-value homes.
This is something that has often been financially impossible for developers to do previously, so if more of these homes can be built via financial support from the National Housing Bank, it will alleviate the pressure at the bottom end of the market and also help to rebalance the rental market.
It will also boost construction of new homes in areas where land values are high and increased borrowing costs have stalled development.
The new bank may also help to stabilise the housing market by smoothing out the price rises and falls it often experiences. With a long-term mandate, it’s been designed to keep investment flowing even when the market slows, so if successful, this could increase housing supply sustainably, relieving pressure on both prices and rents.
However, there are some potential pitfalls, including concerns about duplication with other existing bodies, delays in the bank’s setup, and whether it will have enough independence and funding to make a real impact.
How it will be funded and attract private investment are also things that are still not fully clear, and its success will depend on this. I’d also like to see how investment from the bank will be spread across the UK, as it needs to be managed fairly to ensure all areas that need new homes benefit.
So, although the National Housing Bank represents a significant step in the UK’s effort to fix a broken housing system and could become a key driver in speeding up the building of new homes, its success will depend on how it is delivered.
Mark Manning is managing director of Manning Stainton estate agents.