It is no secret that the UK is currently facing a chronic shortage of affordable housing, at a time when incomes are squeezed, and inflation has soared to 9%. The desperate need for further housing supply is evident across the entire country. Non-bank lenders can offer a solution by providing the flexible and tailored financing needed to deliver much-needed developments often neglected by traditional lenders.
Addressing the crisis
While there are indications that house prices may have started to slow in recent months, the steady rise of the property market has led to average UK house prices reaching £278,000, up £24,000 from the previous year. As the gap between salaries and property prices has widened, the cost-of-living crisis has added to the issue. New housing is urgently needed to ensure people aren’t priced out of their livelihoods.
At the same time, the construction industry is currently facing significant challenges with industry-wide supply-chain issues and labour shortages. The sector has continued to feel the impact of the UK’s withdrawal from the EU, with EU construction employees falling by 51% across the UK by 2021, leaving the sector with a significant lack of labour. Equally, widespread supply-chain issues and the impact of inflation has seen the price of materials rise by 10-15% over the past three months.
As a result of these challenges, there is a real need for fast and flexible financing across the sector to support the development of new properties and avoid further delays to the construction process. In order to truly address the UK’s housing crisis, it will be vital to look to non-bank lenders who can offer an alternative form of lending which provides the efficient and nimble process needed to quickly deliver new developments.
Focussing on flexibility
A previously dominant force, traditional lenders have increasingly tightened their risk appetite and eligibility criteria since the financial crisis of 2008. Moreover, bank lenders operate with standardised assessment processes which do not take the idiosyncratic nature of each development project into account. This comes at the detriment of comparatively smaller developments which are less likely to receive support from traditional lenders.
Yet, these smaller developments are a vital tool in combatting the housing crisis. Particularly in the buy-to-rent sector, the number of properties available has fallen by 50% at the same time as tenant demand has risen by 6%. With demand vastly outweighing supply, improving the provision of these smaller developments is vital.
As part of Triple Point’s Private Credit Division, the Property Lending team focuses on filling this financing gap by taking a more flexible approach. The team can offer tailormade solutions for smaller borrowers and look to smaller transactions, between £800,000 and £5 million, while still generating a robust return. As such, non-bank lenders, are able to support a vital element of the housing market and help meet the significant demand for these properties.
Where traditional bank lenders often involve cumbersome and lengthy processes that are less likely to result in funding, non-bank lenders are able to provide swift solutions. At Triple Point we provide a fast and efficient process with our lending team, coming to a decision within 24 hours of meeting with borrowers and evaluating development sites. Considering the pressures currently faced by the construction industry, this streamlined process is essential.
As the UK continues to face significant economic instability, and inflation is hitting household budgets, the need for new and affordable housing supply is clear. With traditional bank lenders often failing to offer the speed and efficiency required, private lenders are able to step in and fill the financing gap left behind. This fast and flexible financing will be the key to truly addressing the housing crisis.
*Andrew Stoneman is the head of development finance at Triple Point