The Builders Finance Fund, recently announced by Housing Minister Kris Hopkins, will help build a total of 15,000 homes nationwide.
Each new residential property will also support 15,000 jobs in the construction industry and sustain hundreds of businesses that supply building materials to developers.
All of the £525 million fund has been earmarked for ‘shovel-ready’ sites, housing between 15 and 250 homes, which already have their plans in place and the backing of people in the local area but need a bit of help to get development moving.
The government wants smaller housing schemes to play a bigger role in boosting the supply of new homes.
Mr Hopkins claims the collapse of the unsustainable housing boom in 2008 had devastated the construction industry, leading to the loss of 250,000 jobs and a falling market share for smaller builders.
But the sector is now beginning to enjoy a revival, and the Builders Finance Fund is one way of ensuring the recovery sticks.
All developers can apply for a slice of the cash, although the focus on smaller schemes will benefit smaller companies who sometimes struggle financially when it comes to getting projects off the ground.
Funding will be awarded on the basis that it will be repaid, with the cash being released over two years from 2015 to 2016 through to 2016 to 2017.
Simon Kibblewhite, National Head of Development and Planning at Strutt & Parker, comments: “This new fund is a good idea as smaller builders and developers haven’t been able to contribute much to housing growth in the last few years due to lack of credit.
"If we are going to get anywhere need the Government’s target 200,000 new homes a year, there will need to be a huge increase in the number built by SMEs, bearing in mind the top three major housebuilders currently produce around 35,000 per year between them.”
Support through the Builders Finance Fund will be on top of £1 billion that has been made available to unlock 250,000 homes on large-scale developments with over 1,500 units.
A £50 million Local Growth Fund is also being targeted at kick-starting stalled housing projects of between 250 and 1,499 homes.
Bidding for the Builders Finance Fund will begin on May 14. Both of the other schemes are currently open for the bids.
Housing minister Kris Hopkins said the £23 billion scheme, announced on Monday, is a key component of the coalition’s long-term economic plan.
The residential development scheme will see the quickest rate of affordable house construction for two decades, support 165,000 housing jobs and sustain thousands of British companies, ministers say.
As from Monday, housing associations, councils, and house builders can now bid for state funding that, when combined with private investment, will deliver the ambitious programme between 2015-2018.
Mr Hopkins explained the reason behind putting in more private sector finance than in earlier programmes, saying this will help the scheme achieve a better deal for taxpayers and every home built under the programme will support a person’s job.
That means 165,000 job opportunities over a three-year period throughout the country, many of them for young people.
In addition, the construction initiative will offer a boost to thousands of small businesses that supply building materials to developers, from timber traders to tile makers.
Nearly a million independent companies are involved in the construction sector, representing one in five (20%) all small and medium-sized firms.
Companies that supply building products have an annual turnover of over £50 billion, which contributes 4.5% to the UK’s Gross Domestic Product (GDP).
Mr Hopkins also pointed out that home building is enjoying its greatest growth rate for seven years.
The minister added that construction orders are growing at the quickest level for a decade.
But he stressed that it is now vital that local authorities provided additional land for new properties, as the surge of home building continues to grow.
Mr Hopkins said that home construction is an “essential part” of the Coalition government’s long-term economic plan.
He said: “That’s why we have designed an ambitious new scheme to build affordable homes at the fastest rate for 20 years.”
The programme will support 165,000 jobs in construction, sustain thousands of small businesses and provide properties where tomorrow's generations can live and raise families of their own, Mr Hopkins added.
He said the "worst housing shortage for a generation" was making it hard for people to get onto the property ladder, and that more must be done to ensure Britain has affordable homes.
The Labour leader added that his party will give new powers to councils if they win the next general election, including the power to override "home-blocking" neighbouring councils and "land-hoarding developers", in a bid to drive up the number of new residential developments.
Mr Miliband said: "A Labour government would give a 'right to grow' to councils so that they can't simply be blocked all the time by neighbouring councils, but can actually expand.
"A Labour government is determined to reach the objective of building 200,000 homes a year by 2020 so that we can meet the needs of so many people across the country who find they can't afford a home to rent or to buy."
A Housing Commission is due to examine the Labour party's plans in detail. The commission, led by former BBC Trust chairman Sir Michael Lyons, was announced at Labour's conference in September.
Four Labour-controlled local authorities - Stevenage, Oxford, Luton and York - are earmarked to become the first 'Right to Grow' councils, with the potential to build 40,000 new homes in each area.
The Housing Commission will focus on the details of the scheme but also try to identify sites for new developments that might be underwritten by Government guarantees.
It has also been tasked with finding a way to simplify the rules relating to the Housing Revenue Account. This could give councils more powers to decide how to spend public money, and might improve the way communities profit from the granting of planning permissions.
Mr Miliband would not be drawn on whether Labour plans to make any changes to home buying taxation. However, he argued that properties would become cheaper if there was a rise in the supply of homes.
He also criticised the “profits for our four biggest housing developers [which] are going through the roof. But there are large amounts of land - enough to build more than a million homes - earmarked for houses which have not been built.”
Read more about Strutt & Parker's residential development services.
Planning approvals for new homes in England in the second quarter were 49% higher than a year ago, according to the latest House Builders Federation (HBF) Housing Pipeline report.
There was a decline between the first and second quarters of this year, but a total of 77,686 permissions granted in the first six months of the year represents a 26% year-on-year increase.
The moving annual total reached a low point of 117,067 in the 12 months to quarter three of 2011, with the current total some 34% higher at 156,608.
Amid various reports of renewed activity in the residential property market, observers may be taking encouragement from the suggestion that more new houses will be built as increasing numbers of people embark on a property search.
HBF executive chairman Stewart Baseley describes the overall trend in planning permissions for residential property as "very positive".
He believes the improving figures are due to both improving sentiment among house builders and the positive aspects of the new planning system.
"With Help to Buy forging ahead strongly and developers looking to increase output, we need to see the increase sustained," he commented.
But despite the warm welcome for the latest planning figures, some industry insiders have expressed concern about the planning conditions attached to many permissions that act as an obstacle to construction work getting underway.
When they grant planning permission, local authorities set "planning conditions", which can include "pre-commencement" conditions that need to be met before work starts.
There have been increasing reports from builders of such conditions being put in place – in some cases these conditions can amount to 100 separate items – meaning it can take several years after permission is granted to actually start work on site.
Mr Baseley said the HBF is "increasingly concerned" about this state of affairs, coming at a time when developers are wanting to build what are much-needed new homes.
“Local Authorities must ensure planning conditions are not overly onerous or unrealistic otherwise, despite the success of Help to Buy, the much-needed increase in housing supply will be held back."
For more information, contact one of our planning experts.
A joint venture of Linden Homes and Wates Developments has bought the site, a former research and development facility in Welwyn for a figure in the region of £39m. Strutt & Parker advised on a formal tender sales strategy.
Land Improvement Holdings acquired the 47 acre site in 2011 from Glaxo Smith Kline. Twenty nine acres had previously contained vacant research and development facilities totaling 439,000 sq ft. The unused buildings have now been demolished, the site remediated and new infrastructure built, and the site is now primed and ready for up to 196 consented new homes to be built alongside the historic 1846 country house that is the site’s focal point.
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