The Help to Build could be transformational for helping more people to build their dream home, and it is expected to be launched this spring.
Having first been announced in the Spending Review in November 2020, the Help to Build scheme is part of a new £2.2 billion housing strategy. This also incorporates funding for small and medium housebuilders and for the release of public sector land, including for serviced plots for self and custom builders.
Since then information about the scheme has remained scarce, in spite of hopes from the self build sector that the Help to Build scheme would feature as part of chancellor Rishi Sunak's 2021 Budget outline.
However, with the government confirming in February that funding will begin this year, we take a look at what we know about Help to Build already, and what self builders could expect the scheme to look like.
What is Help to Build?
The Help to Build is expected to be an equity loan scheme, comparable to the Help to Buy, which will help custom and self builders finance their projects.
Help to Buy is unsuitable for self builders because it requires the equity loan to be paid on legal completion to the developer. This approach means that the scheme cannot be readily used for custom and self build which typically has multiple payments to different parties.
Help to Build is expected to work by payment of the loan to the mortgage lender occurring on practical completion of the self build. It is also expected to offer equity loans partially funded by the government to reduce the requirement of a large deposit to secure a self build mortgage.
What Could a Help to Build Scheme Look Like?
The National Custom and Self Build Association (NaCSBA) put forward a proposal for a Help to Build scheme back in 2019. The key difference to Help to Buy, NaCSBA notes, is that the payment made on completion of a build goes to the mortgage lender in the absence of a house builder.
In this example, self builders would secure a self build mortgage with a 5% deposit, with the mortgage lender providing 95% of funding for the project. On completion of the build, the government would provide 20% of the cost of the build to the lender, reducing the outstanding mortgage value to 75%.
It's worth noting that the value of a completed self build is usually more than the cost to build it, whereas when buying a new build property through Right to Buy, the property value is likely to fall.
Self Build Wales is an example of a contemporary self build loan scheme, worth considering in context of the proposed Help to Build scheme. This £210 million fund, unveiled in March last year, was heralded both as a ‘world first’ and the most comprehensive support scheme for the UK’s self build sector.
The scheme offers loans specifically on pre-agreed, ‘oven-ready’ self build plots. The loans cover 100% of the build cost and 75% of the plot cost, requiring a 25% deposit on the plot only to secure the loan.
The loans take into account the nature of a self build cycle, and are payable to the appointed builder in pre-agreed stages following an ongoing evaluation of the progress of the build.
The loans are also not required to be repaid until after completion of the build and obtaining a mortgage, helping to reduce living expenses for self builders who usually face parallel accommodation costs during the build process.
Repayments are made by either selling or mortgaging the property once the build is complete, but this can be deferred for up to two years as part of the scheme.
How Much Funding is Available from Help to Build?
In the Spending Review, the government pledged funding for the delivery of Help to Build, but it didn't specify how much would be reserved for the scheme.
Then in February, the government confirmed that funding will begin this year, and £150 million will be allocated across four years to support the scheme.
Once the scheme launches as expected this spring, then we will know more about how much the government will invest into the scheme.
What Does Help to Build Mean for Self Builders?
MP Richard Bacon, an ambassador of the Right to Build Task Force, says the scheme could be transformational in increasing access to the self build market.
Mr Bacon told Homebuilding & Renovating: "I lobbied very hard to get something on Help to Build into the December 2019 Conservative manifesto. We can’t have discrimination against people who want to build their own home, so we need to extend the Help to Buy programme to include self builders."
He added that it "could open up a range of opportunities" and provide financial assistance to a generation of aspiring self builders.
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