Development is a hot topic at the moment, in no small part due to the new government’s ambitious targets for housebuilding.
And that interest in building new homes has caught the eye of finance brokers across the country, who are increasingly interested in adding development finance to the range of options they offer their clients.
This desire to work with greater numbers of developers and play a part in boosting housing production was clear in our latest Development Masterclass. It’s the third masterclass HTB has held, and the second in London, with the event aimed at bringing together a mix of brokers ranging from some with experience of development to experts who want to build their knowledge of specific areas.
Why brokers are excited about development
There are few big factors behind brokers wanting to do more in the development space.
Brokers want to expand their knowledge. The top brokers always have an eye on diversification, wanting to tap into complementary areas that will support their business for the long haul. Like providing protection advice to clients, they also want to be able to steer clients looking to move into development.
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Another big driver for brokers is the state of the development world itself. We know that the government wants to see a much faster rate of housebuilding and has promised the changes necessary to make that happen.
This is already translating into brokers seeing more clients who have an eye on development projects and are feeling more confident about pursuing deals that they might have previously held off from.
The increased appetite from developers means brokers must arm themselves with the knowledge and skills needed to deliver the highest possible service to those clients – not just for the upcoming projects, but further builds they may take on in the years to come.
Building more homes
It’s worth reflecting on what’s necessary to scale up housebuilding. Simply introducing higher targets won’t do it.
For decades, experts have advocated for reform of the planning system, to simplify the process and make it easier to obtain planning consent.
Yet, in recent years, the system has arguably become even worse, with local authority planning departments bearing the brunt of both austerity and post-Covid working patterns. It means that applications take an age to be determined, and housebuilding lags behind target.
Radical reform and likely additional funding are going to be necessary to address these pressure points and ensure that the developers brokers are seeing will be able to push on with their projects in a timely manner.
What do brokers need?
Brokers are a phenomenal resource for any developer, and indeed, property lender, or at least they should be. I’ve always believed that broker feedback should be a central tenet of what a lender does, using that dialogue to understand where product and process changes can deliver tangible improvements for their clients.
That feedback must extend beyond the products and include what brokers need in order to reach their potential, to help them build the businesses they are aiming for.
Brokers are clear that they want to do more in development, but it is a complex area and notoriously difficult to navigate. Across the industry, we need to recognise that more must be done to provide brokers with the support needed to boost their development finance skills.
After all, the success of development cases can hinge on the finance involved. We need more brokers who are comfortable not just with the initial build funding, but supporting the exit plans, such as a development exit product or a traditional buy-to-let (BTL) mortgage.
I’m optimistic about the future for development finance. If the government can get planning reforms right, and brokers continue to embrace the sector in greater numbers, positive times will lie ahead for development.
