West Midlands developers need extra £15bn to meet Government housing targets - Urban Exposure

West Midlands developers need extra £15bn to meet Government housing targets

News

House-builders in the West Midlands will need to find an additional £15 billion if they are to increase output to hit the Government’s house-building targets, according to new research.

The funding gap figure was revealed in a study by leading UK residential development financier and asset manager, Urban Exposure Plc. Earlier this year, Chancellor Phillip Hammond announced a new target of building 215,000 homes in the region by 2030/1, meaning an additional 9,827 homes per annum will need to be built – on top of the average of 6,711 homes currently constructed each year[1].

With house prices in the region averaging £188,516[2] and developers traditionally needing to borrow 55% of the sale value of the home they are building, Urban Exposure’s calculations show that over £100,000 of development finance will be required for each new home. This means that local developers will need close to an additional £1 billion of development finance each year, or £13bn in total, to hit house-building targets by 2030/1. If modest house price growth[3] is factored into this calculation, the figure rises to over £15 billion.

Urban Exposure is committed to addressing this funding gap in the development finance market, and more broadly the housing shortfall, by helping developers – in particular smaller and medium-sized house-builders – to access the necessary finance. The lack of finance for smaller developers was identified as a central barrier to increasing output in the Housing Manifesto for the West Midlands that Urban Exposure developed alongside the Federation of Master Builders, which was unveiled in November 2018.

Randeesh Sandhu, CEO of Urban Exposure, commented:

“We are fully behind the Government’s ambitions to see more homes built in the West Midlands and the developers we talk to are similarly motivated to increase their output levels. Our research shows that this is easier said than done however.

 

“The SME house-builders who have been tasked with building the new homes that the West Midlands and wider UK require will need to find over £15 billion of extra financing over the next 13 years. Where does the Government think this finance will come from? Chancellor Philip Hammond may have pledged £350m of support for house-builders to help them build 215,000 new homes by 2030/1, but this is just a drop in the ocean by comparison.

 

“In order to address this lack of development finance, we need a wider pool of lenders, with greater diversity in both the size and type of developers available. This will help to create a more resilient house-building market in the West Midlands.

 

“We will continue to engage with the new Combined Authority and local councils to encourage focus on supporting smaller builders, to ensure that they are assisted in accessing the finance they need. Unless we can build a solid locally-based house-building sector, we will always struggle to accelerate the house-building process.

 

“We recognise that much more needs to be done for the West Midlands region to hit its house-building targets, but we are pleased to be playing our part in supporting the entrepreneurial SME community, by providing financing where it is otherwise unavailable and in taking advantage of the significant growth potential of the West Midlands.”

 

Press enquiries to:

MHP Communications

Charlie Barker / Patrick Hanrahan / Sophia Samaras

+44 (0) 203 128 8100

UrbanExposure@mhpc.com

 

Notes to Editors:

[1] Average housing build figure (2008-2016) – https://www.gov.uk/government/news/more-support-to-boost-house-building-momentum

[2] https://www.nationwide.co.uk/about/house-price-index/download-data#xtab:regional-quarterly-series-all-properties-data-available-from-1973-onwards

[3] House price growth of 2.1% per annum