New bank launches under Homes England with £16bn investment and 500,000-home target

This change was first reported by Inside Housing the day before the Spending Review.

Angela Rayner, deputy prime minister and housing secretary, said: “Our foot is firmly on the accelerator when it comes to making sure a generation is no longer locked out of homeownership – or ensuring children don’t have to grow up in unsuitable temporary accommodation, and instead have the safe and secure home they deserve.”

The new bank will deploy some of the £2.5bn in low-interest loans announced in the Spending Review to support building social and affordable homes. The government sees the bank’s role as a consistent partner to the private sector, ushering in the stability and certainty that housing developers and investors need.

Rachel Reeves, the chancellor, said: “As part of our Plan for Change, the new National Housing Bank will unlock £53bn of additional private investment, giving more working people the security of homeownership and investing in Britain’s renewal.”

The redesignation of Homes England is linked to a decision in the Budget in October to reclassify government debt to include financial assets as well as liabilities. At the time, Peter Freeman, then-chair of Homes England, described it as “probably the most important thing in the Budget”.

The bank will target a range of sites – including larger ones that struggle to get upfront lending, given their risk and complexity – using a combination of equity investment, loans and guarantees to leverage global institutional capital into UK housing. This is intended to reduce risk at the early stages of development.

It will also support small and medium-sized enterprise (SME) lending by establishing additional alliances with private sector partners to leverage capital and expertise. This will include providing revolving credit facilities to help SMEs to grow and build their housing pipelines more quickly.

In April, Homes England and investor Octopus Real Estate said they would lend £150m to SME house builders.

This built on a January announced that Home England had nearly doubled the funding available for SME house builders in its alliance with lending platform Invest & Fund.

Pat Ritchie, chair of Homes England, said the establishment of the bank will “build on the agency’s expertise at providing a wide range of finance to partners and places to unlock the delivery of new housing and mixed-use schemes”.

She added: “The National Housing Bank also responds to calls from the housing sector, mayors and local leaders to increase the scale of available public and private finance for housing and regeneration, provide a broader range of flexible debt, equity and guarantee products, and enable more timely decision-making.”

The government will also work with the mayor of London to establish the City Hall Developer Investment Fund, and support housing regeneration around London Euston, to help deliver the capital’s ambition to build around 80,000 homes per year.

In Greater Manchester, the Housing Investment Loan Fund will be extended to deliver thousands of new homes over the next 10 years.

Additionally, a programme of investment, including £5bn of grant funding for infrastructure and land from the new National Housing Delivery Fund, will complement capital investment from the National Housing Bank.

Priya Nair, chief executive of The Housing Finance Corporation, said: “We look forward to using our extensive experience to help the government as they look to unlock £53bn of private investment to create 500,000 homes. As our recent transaction shows, there is appetite for institutional investors to engage with the sector."

This comes ahead of the government’s 10 Year Infrastructure Strategy to be published on Wednesday, which will set out a £725bn plan to rebuild the UK over the coming decade.