The National Housing Bank isn’t just for the big players

Headline announcements understandably focus on large-scale deployments and eye-catching aggregate figures. Does this emphasis signal major developers are given priority in the deployment of the NHB’s initial £16bn of financial capacity, or can SME developers and house builders reasonably expect to benefit from the bank’s interventions?

This question goes to the heart of how the NHB has been designed to operate, and whether its structure meaningfully addresses the long-standing financial constraints smaller builders face.

The NHB is not Homes England by another name. Without stating the obvious, the bank is not simply a continuation of the government’s housing and regeneration agency under a different label. While it is a subsidiary, its role and funding model are materially different.

The NHB has £10.5bn of investment capital, deployed through loans, equity investments and other forms of recoverable finance; and £5.5bn of contingent liability capacity, primarily used to issue government-backed housing guarantees.

“SMEs continue to play a critical role in delivering smaller sites, regenerating constrained locations and maintaining a diverse and resilient housebuilding sector”

The distinction is critical: the NHB operates as a bank, not a grant-giving body. Its purpose is to lend, invest and underwrite risk, recycling capital over time rather than distributing one-off subsidies. That model is particularly relevant to SMEs, for whom access to patient, repeatable development finance (rather than grant dependency) has historically been a key constraint.

The government has been clear that the NHB’s role is to help unlock hundreds of thousands of homes and to support delivery of 1.5 million new homes during this parliament. To achieve that ambition, the NHB is expected to work alongside private capital, using its balance sheet to mobilise additional investment and to recycle capital as schemes progress, refinance or complete.

That objective cannot be achieved by major plc house builders alone. SMEs continue to play a critical role in delivering smaller sites, regenerating constrained locations and maintaining a diverse and resilient housebuilding sector across England. According to analysis produced by property services firm Savills, just 20% of new homes in 2025 were attributable to smaller house builders, with their share reducing by a third since 2021.

The NHB has been designed with a broad financial toolkit that is explicitly available to SME developers and not restricted to large platforms or volume house builders.

First, the NHB offers direct development lending, addressing a recognised market failure for smaller house builders that struggle to secure bank finance on acceptable terms. These loans are intended to support site acquisition, infrastructure delivery and construction funding where commercial lenders remain risk averse.

Second, the NHB can deploy housing guarantees, reducing lender risk and enabling private funders to extend credit to SMEs on improved terms. For smaller developers and contractors, this can materially change the viability of schemes that would otherwise sit marginally below funding thresholds.

Third, the NHB can make equity investments in housing platforms and delivery vehicles. While not targeted at individual one-off schemes, these structures can support SME growth, repeat delivery and access to pipeline finance.

Finally, the NHB’s capital-recycling model means that repayments from early SME projects can be reused to support subsequent schemes, creating a long-term, stable source of development finance rather than short-lived funding rounds. This capital is a recycling feature rather than capital expenditure, and appears to demonstrate that the NHB operates in a bank-like way, but it is not a bank; it is a not-for-profit development finance vehicle using public capital to correct housing market failures.

Taken together, these tools are designed to complement, not replace, private finance and to enable SMEs to participate fully in national housing delivery.

“Government statements are unambiguous that direct lending to SME house builders is a core function of the NHB”

The parliamentary breakdown of the NHB’s initial allocation reinforces this SME-inclusive approach.

While £2.5bn is earmarked for low-interest lending to social and affordable housing providers (and intended to sit alongside grant funding), the remainder is expressly intended to support SME development lending, equity investments in housing and delivery platforms, and infrastructure-heavy and complex regeneration schemes where smaller developers often play a leading role.

Government statements are unambiguous that direct lending to SME house builders is a core function of the NHB, aimed squarely at closing the long-standing finance gap that has constrained SME delivery.

The NHB’s housing guarantee function is expressly available to SME developers. By de-risking projects for commercial lenders, the bank makes lending to smaller builders more viable and more scalable.

In addition, the NHB can deploy finance indirectly through lending alliances and blended finance structures, expanding the range of products available to SMEs and supporting schemes that conventional lenders would otherwise decline. This approach is designed to tackle the structural risk aversion within the lending market that has historically held SMEs back.

The National Housing Bank has been deliberately structured to reduce finance barriers for SME developers and contractors, de-risk development and expand housing supply across England.

It has its limitations. It is not intended to bridge the viability gap (grant funding is better placed to do this), but rather reduce the cost of capital. However, given the escalating costs of development (which are set to increase with changes in regulatory frameworks over the next 12 months), we have seen numerous client schemes stall or fail due to the viability gap simply being too wide to bridge.

It has also been noted that the funding gap is not the only blocker to housing supply. Other major reasons include planning certainty, infrastructure funding, delivery capacity and land access, to name just a few barriers. The transfer of financial risk to the public balance sheet assists, the delivery risk remains unresolved. The narrow remit of the NHB does not readily lend itself to a positive outcome in all situations.

Its combination of flexible development lending, government-backed guarantees and recyclable patient capital provides dedicated support that helps smaller house builders unlock sites, accelerate delivery and grow sustainably.

SME participation is therefore a core component of the NHB’s delivery model and of achieving the government’s housing objectives.

Neil Biswas, partner, Boodle Hatfield