Finance · 18 May 2017

Government urged to fix housing crisis with more building loans for small firms

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The government has set a target of one million new homes by the end of 2020

Policy makers have been told to deliver more building loans for small construction firms, after a trade organisation declared existing strategies had failed to fix Britain’s housing crisis.

New research from the Intermediary Mortgage Lenders Association (IMLA), a trade body representing the interests of the mortgage market, revealed 61 per cent of UK mortgage lenders believed greater finance opportunities for smaller house builders would be act as a vital solution to the country’s housing shortage.

A Home Building Fund was announced by government in its housing white paper in February 2017, giving small firms and property developers access to building loans from a £3bn fund.

The scheme was part of a move to “diversify” the market and use smaller firms to grow the country’s housing output.

In a statement, IMLA director Peter Williams said a “lack of solutions” offered in the white paper meant new ideas were needed.

“IMLA is therefore calling on policy makers to explore how they can boost development finance lending,” he said.

Williams said access to building loans remained the single biggest obstacle for small house builders. Key challenges cited by construction owners included poor relationships with lenders and builders and the general cost and availability of finance.

“By launching a guarantee scheme, policy makers could increase the flow of development finance and improve output in the sector,” Williams added.

To help meet house-building target set by the Department for Communities and Local Government (DCLG) – a million new homes by the end of 2020 – the IMLA encouraged the delivery of loans through the government-backed British Business Bank (BBB).

Writing for Business Advice in February, Paul Goodman, chairman of the National Association of Commercial Finance Brokers (NACFB), said the housing white paper was merely “retreading old ground”.

Goodman suggested a central problem in the provision of building loans was that nine in ten small firms approached a high street bank for finance.

Despite barriers to finance and escalating labour and material costs, Britain’s small building firms have experienced rising workloads in 2017. According to the Federation of Master Builders (FMB), construction owners saw demand increase at the fastest rate since the Brexit in June 2016.

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ABOUT THE EXPERT

Simon Caldwell is a reporter for Business Advice. He has a BA in politics and communications from the University of Liverpool, and previously worked as a content editor in the ecommerce industry.

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