Custom Build Homes (CBH) welcomes the new “Help to Build” Equity Loan Scheme (‘Help to Build’) announced by the Government today (26 November 2021) to support the diversification of the new homes sector and create additional housebuilding through the commissioning of custom and self-build homes. The scheme, which will be made be available across England, will enable more people to access mortgage finance to build or customise their own homes.
The Prospectus, published today, sets out the detailed design of Help to Build which, when launched officially, will stimulate the supply of opportunities for custom and self-build housing and begin delivering against pent up demand from younger homebuyers and those on modest incomes.
The scheme is being initially rolled out for four years with a funding allocation of £150 million, administered by Homes England.
The scheme has been in design for some time; indeed, it was first announced in the November 2020 Spending Review and has remained an important Manifesto commitment of the present Conservative Government.
The scheme has been designed in a similar way to the hugely successful new build product “Help to Buy”. It works by the Government committing to providing homebuyers with an equity loan equivalent to 20% of their agreed land and build costs. The funds are paid to the mortgage lender on completion of the build and homebuyers have a period of 5 years to repay the loan (without interest), as is the case with Help to Buy. In return for this commitment, mortgage lenders have agreed to fund custom and self-build projects with only 5% of land and build costs being required as a mortgage deposit. This is a stark improvement on the average deposit currently for a custom home, which sits at 15%, therefore it is likely to attract many new homebuyers to the sector, including first-time buyers.
CBH projects that £150 million could fund up to 2000 new custom or self-built homes, and while the funding is welcomed, it hopes the Government will continue to invest in the scheme if take-up is good because the statutory demand for custom and self-build housing already sits above 60,000 in England. The law dictates this number of units be supplied through the planning system within three years, under the Self-Build & Custom Housebuilding Act 2015, and much of the demand for this type of housing is made up of younger homebuyers seeking an alternative to volume built new homes.
Another factor that may constrain take-up is that the scheme does not cover any consultancy costs associated with a self-build project, such as those required for architecture, planning and engineering. These costs can be significant and will remain a barrier to entry for many who would otherwise be able to access the scheme. This will place an emphasis on the emerging custom build housing sector to bring to market sufficient opportunities to ensure the scheme is fully subscribed and can attract further Government investment to keep pace with increasing consumer demand for choice. This burden to deliver custom build opportunities will be felt by custom build Enablers, who Homes England now have a recommendation to support following The Bacon Review into the delivery of custom and self-build homes, earlier this year.
Tom Connor, CEO at CBH said:
“CBH is working hard to develop customisable housing products that breakdown the barrier of bespoke architecture and design, making it possible for more people to live in a custom home. While “Help to Build” is not a silver bullet for delivery in the sector, it’s another big sign that custom and self-build has the Government’s attention and that it is making good on its pledge to support delivery on behalf of the huge consumer audience that’s assembling.”
Full details of the scheme can be found here.