The Housing Minister has had a busy month. As well as announcing plans to release £10bn of public land for new homes and launching the FirstBuy scheme, Grant Shapps has kicked his self-build initiative into a new gear.
Following his pledge in January that the government would “put its money where its mouth is” for self build, Shapps has written to mortgage lenders to ask for their support in growing the sector.
In a bold move, he has urged lenders to provide the money to make sure his efforts to get more people building their own homes succeed.
As he prepares to launch his action plan next month, Shapps acknowledged the role that lenders can play and their pursuit of “high quality, low risk business”.
He wants lenders to offer practical funding products for what he calls “an attractive customer for lenders” and to take advantage of risk protection products, including indemnity insurance and build out cover.
Despite the coalition government coming under criticism for its policy u-turns recently, Shapps’ self-build crusade has remained constant.
Given the level of publicity it has had, few could argue that the government is not serious about the self-build sector.
That said, although Shapps has the power to change policies for land release, building regulations and the planning process, he only has the power to influence lenders when it comes to self-build finance.
Now, we await their response.
All that aside, it was refreshing to see self-build lending billed as high quality and low risk.
For far too long, the sector has suffered a misplaced reputation as being high risk. In our experience, this simply is not the case.
The housing market has changed, and, just as the government is supporting new housing procurement models, such as self build, lenders need to consider new funding models and products, to help serve the needs of a shifting housing market.
Not only is this necessary to create more stability in the market, but it makes good business sense for lenders to branch out into other areas of lending.
Take building societies as an example. With their reputation largely untarnished, they have seized an opportunity out of the economic crisis to grow their businesses and compete with banks by diversifying their lending.
Mutual societies have been attracted into the self-build market in recent years, not only because it is a good cultural fit for their business model and values, but because they have benefited from offering profitable products to a growing sector.
The self-build finance sector has certainly come a long way in the last decade.
With annual lending of around £2bn and set to grow with government support, lenders are running out of excuses to not join the market and play their part in the new revolution of homebuilding.
Rachel Pyne is financial services director at BuildStore
