Property Development Funding Opportunities For UK Businesses

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What Is Property Development Funding?

Property development funding, such as grants and loans can help businesses who want to carry out residential or commercial property development or renovation activities. A funding injection can help developers carry out their activities faster or undertake larger projects than if they were relying on their existing financial resources. More often than not these property development funds come from a Government sources for major building developments or from local authorities, where in many cases they have an interest in getting older housing up to standard and also promoting development on stalled sites to improve local housing stock.

Who Are the Main Funding Providers?

Grant Providers

Local authorities make up the bulk of grant providers for property development activity where they can identify specific needs within their communities, including providing incentives for renovating empty homes or making adjustments to properties. Because of the highly profitable nature of the housing and commercial property sector, grant offerings tend to be for smaller, targeted and specialist projects or for regenerating local areas. There are some larger national grants available from Homes England for developing brownfield sites. In other cases loans are offered instead and this is outlined below.

Loan Providers

For property developers looking to carry out large new-build or big renovation projects, it is more common for a larger loan sum to be offered, either at a competitive interest rate or in some cases interest free. Some of the large government backed property development loans come from providers such as Homes England, the Department for Levelling Up, Housing and Communities, the Development Bank of Wales. 

There is also regional funding available from providers such as the Greater Manchester Combined Authority, West Midlands Combined Authority and other smaller local authorities who again have identified the specific building needs in their area.

There are many cases where loans are offered by these Government and local authority providers where previously a property developer has been turned down for funding by a private commercial lender, such as a bank or they have not been offered a sufficiently large enough amount to get a project to completion. 

The reason loans are offered far more commonly than grants for this funding purpose, is that providers know that property developers are more than likely to recoup all costs for building once the property has been built, either during the sales process or the ability to secure traditional finance against the property itself. In effect the project has essentially been de-risked once the building has been completed. 

By getting property developers to repay loans, it also means that funds can run for longer and therefore benefit additional construction projects on a national scale, or local area over a number of years. This type of fund is typically known as evergreen funding. 

What Can You Get Funds For?

Businesses may seek grants or loans to pay towards a range of different property development activities, which are briefly outlined below.

• Building Residential Properties – Get funding towards building new housing and apartment development projects

• Residential Property Renovation – Get funding to upgrade old or empty housing or convert premises to be suitable for residential living

• Building Commercial Properties – Get funding towards building commercial premises, such as retail, office, factory or warehousing space

• Commercial Property Renovation – Get funding to upgrade old or empty commercial premises to be repurposed for new business activities. Specific types include shop front improvement and heritage building repair works

• Property Safety – Get funding to ensure properties have the appropriate fire safety measures or help reduce flood risk

• Stalled Site Development – Get funding to kickstart a property development activity that has previously been halted due to ongoing issues

What Grants Are On Offer?

As grant funding for property development tends to be highly localised and typically provided by local authorities, what is on offer varies greatly depending on the amount of funding available for property development activities and where planning officers have identified a need for urgent grant funding. As previously mentioned, there are a few national grant schemes available that focus on things like brownfield sites.

Here are some examples of the current grant funding types available:

• Adaptation Grants – these are typically grants provided to landlords or developers so that they may renovate a property to meet the needs of their tenants, either through providing disabled facilities or other improvements to older properties that do not meet a certain standard.

• Conversion Grants – These are used to turn long term unoccupied properties of a certain type into another type so that they may get brought back into use and aid regeneration. This includes activities, such as converting shops into flats.

• Brownfield Development Grants – Homes England in particular offers a grant that helps property developers do construction projects on brownfield land sites that have previously been identified as more risky from a commercial point of view by traditional lenders. 

• Empty Property Grants – Grants to renovate homes and commercial properties to bring them back into use after being unoccupied for a long period of time

• Landlord Grants – Grants specifically aimed at landlords in order to provide improvements to the homes of their tenants that they may previously have struggled to meet the full costs for. It can include modernisation projects, installation of safety measures, improvements to energy efficiency or changes to HMOs (House in Multiple Occupation)

• Transforming Town Centre Grants – Funding that identifies a specific run-down area of a town or city centre and provides funding to renovate housing and commercial properties in that area as part of a regeneration initiative

How Much Grant Funding For Project Costs Is Typically Available? 

Every single scheme is different, for some lower cost renovation grants it is possible to get up to 100% of the development project costs covered. Other higher costing projects can see businesses expected to provide a contribution of funding from other sources. These type of matched grants range from 40% of costs covered by the grant up to about 80% of the project costs covered. In many cases this is to ensure that the grant applicant is financially solvent and serious about completion of the project and willing to take on some of the financial risk themselves. It also means that by receiving partial/matched funding, a developer might be able to take on a higher cost project than they would have done without the grant. 

From the current set of grants available in the UK for Property Development, a total amount awarded as a grant ranges from under £1,000 for small minor adaptation grants up to £300,000 for a larger scale property development project.

What Loans Are On Offer?

If businesses cannot readily access a grant in their sector or region that fits their needs, then the alternative is to take on property development loans, which can typically be accessed from the Government, local authorities or from a lender backed by the British Business Bank and may provide a low interest option.

Here are some examples of the current loan funding types available:

• Empty Property Loans – Similar to the grants, loans to renovate homes and commercial properties to bring them back into use after being unoccupied for a long period of time

• Commercial Property Loans – A loan to carry out a major property development or redevelopment for commercial premises

• Home Building Loans – Loans to build single or multiple dwellings, up to large scale residential development projects

• Stalled Sites Loans – Loans to get a property development project that has previously halted due to unforeseen issues or financial constraints back into action

• Home Improvement Loans – Funding for landlords or developers to renovate existing properties to raise them to a high standard of accommodation 

How Much Loan Funding For Project Costs Is Typically Available? 

Every single loan term will be different, based on the circumstances of the applicant and the criteria of the lender themselves. However, it is more typical of the case with loans that 100% of property development costs can be covered if the lender thinks that the business in question will have the ability to repay the loan. Otherwise, a partial amount will be offered at a value that the lender deems is affordable to repay and a developer will need to find funding from other sources to fully cover the project costs.

Note: It is acceptable in many larger property development activities to cover costs by using a combination of multiple sources, including both loans and grants, or loans from more than one provider where they’ve agreed to share the risk of offering up the money.

From the current set of loans available in the UK for Property Development, a total amount awarded as a loan from a single provider ranges from £5,000 and under for projects renovating a single dwelling and bringing it back into use, up to £250 million for some of the large scale housing development projects.

Who Can Apply?

Even the vast majority of the larger national property development schemes, such as from Homes England and the Development Bank of Wales are fully scalable in terms of applications for developments of all sizes and can offer funding as low as £250,000 versus the maximum of £250 million.

How Do You Apply? 

As the criteria and requirements of property development funding is complex and varies on individual needs, most grant and loan providers in this area often invite those interested to submit an initial enquiry and then have a discussion based on needs, rather than provide a generic application form online to fill out and submit straight away. 

Prospective applicants can compare different funding provider options and filter based on their own needs by reading details of what each scheme will fund, what geographic location is covered and the eligibility criteria to apply. 

Once both an applicant and funding provider are satisfied that their needs match up, a more formal application process is issued and the usual financial due diligence checks are carried out and funding is either awarded or a decision not to fund comes with an explanation, so that businesses can take on board feedback against future applications. 

When Do You Apply?

In most cases of funding applications there is usually a deadline that businesses must adhere to so that limited funding can be processed and applicants can then be considered to be awarded funding.

However, for property development grants and loans, this is not typically the case. Funding has been made available to build and improve properties in local areas and the UK on a longer term basis and that means that these funds stay open far longer than others, in many cases for years. This means that applications can be made for this type of funding on an ongoing basis, as long as the fund states it is open for applications.

When it comes to the actual stage in the development project process for a business, with the exception of stalled sites funding, you would typically apply for the funding before any development work has taken place. The reason for this is because most funding providers will only pay for work completed that has been approved by them and not work that has already been completed.

Want the Full Set of Property Development Funding Schemes?

If you want the full set of UK Property Development Grants and Loans available, you can use our Grants Matcher, or if you want to save yourself the time and effort then tell us about your project funding needs and let us do the work for you.

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