Non-Bank Lenders and the key to solving the UK’s housing crisis
By Andrew Stoneman, Head of Development Finance, Triple Point
The housing crisis is one of the defining domestic challenges in the UK. Poor policymaking, a lack of capital investment, and most recently unparalleled disruption caused by supply-chain issues has led to a significant lack of affordable housing.
The latest UK House Price Index, published by the ONS in November, revealed that there is no sign of the housing crisis waning anytime soon. Average house prices have risen by 9.5% over the year, reaching £294,559 in September 2022.
The only clear way out of this crisis is through the development of new housing built using flexible credit facilities. Yet the current system based around traditional bank lenders is failing.
The short falls of traditional lending models
Applying for finance from these types of lenders can consist of a long decision-making process, wasting valuable time and rigid loan conditions lacking the flexibility required to support developers amidst a variety of unpredictable forces. The last few years have taught us nothing if not that speed and agility are essential when operating in uncertain economic conditions.
During times like these there is always a risk of unavoidable delays to the construction process caused by issues in financing. Where traditional banks struggle, often constrained by bureaucracy, non-bank lenders can more easily provide the support property developers need.
They are more open to discussing with borrowers about extending or supporting the terms of their loan repayment and providing them with short-term flexible financial relief to realise their projects’ long-term potential.
Targeting Smaller Projects
Tighter regulation and increased capital requirements have limited the capacity and appetite for traditional banks to offer loans. This is especially true of small housing developments, which may not appeal to traditional lenders looking to make a large return on their investment.
However, this financing gap must be filled so that developers receive the support they need no matter the size of their project. Non-bank lenders can afford to look at smaller transactions, up to £5 million, and still make a healthy return.
This allows lenders such as Triple Point to provide support for a large proportion of the property development market that usually does not receive traditional bank financing. Funding these smaller-scale projects is a vital part of mitigating the nationwide lack of housing supply.
The UK needs 230,000 new homes to match current demands within the rental sector. The crisis in the rental sector cannot be ignored, and non-bank lenders will therefore need to play a larger role in helping smaller projects meet the rising demand for rental properties.
Looking forward to the future
As macroeconomic conditions remain uncertain and the hangover from Covid and the war in Ukraine add to significant disruptions across supply chains, it is clear that the UK’s ability to address the housing crisis will continue to be affected by the willingness of lenders to adapt to changing market conditions.
Triple Point’s Property Lending team supports experienced property developers and housebuilders with bridging and residential loans from £1m to £5m. The experienced team considers loans for new builds, conversions for the refurbishment of residential development projects. So far, the seven-strong team has financed c.567 properties and is part of 94 live agreements.
If the sector is to work towards solving the UK’s housing crisis, this will mean fast and flexible loans being made available to property developers, no matter their size. Non-bank lenders are in a unique position to provide this filling the gap left behind by traditional retail banks.