National Housing Bank top team on prioritising build-to-rent and Heylo administrations

Mr Vernon, a former member of the British Property Federation’s policy committee and the government’s Montague Review of the private rented sector, says that build-to-rent is crucial to the National Housing Bank’s goal of speeding up housebuilding. 

The lease-up of a BTR development is “significantly faster” than the absorption rate of build for sale, he says. If the bank can introduce build-to-rent into multi-tenure site delivery, then “we’re going to build out those sites faster than we would if we were only building build-for-sale and affordable”.

He adds: “When you think about what we’re trying to achieve, which is permanently increase the rate of housing output… I think it’s got a really important role to play, and that’s why it’s a priority.”

Amy Rees, chief executive of Homes England, says there is growing demand for new private rented homes in cities.

“I think it is also just the way society is moving, that there will be an appetite from some people that this is the way they would like to live and work and be in big cities in particular,” she says.

“We are now a permanent institution, meaning our ability to do this over much longer periods at a very different scale has now come to life”

The National Housing Bank’s focus on BTR suggests Homes England is lifting its gaze from purely affordable housing, but Mr Vernon says: “It’s definitely not either/or – it’s definitely both.”

“We’ve got to turn all the taps on full. So it’s not one versus the other,” he adds.

Asked about the National Housing Bank’s focus on debt, equity and guarantees, Ms Rees says: “I don’t think this means grant is less important… We’re hoping that you can spread grant a bit further by using things like guarantees as well. Because, of course, there is a limit to how much grant we can get.”

Homes England has provided debt, equity and guarantees “for a long time”, she says, but this was done through “pots of money with a defined ending, in a framework that was set for spending departments, not for people trying to do complex financial transactions”.

“We are now a permanent institution, meaning our ability to do this over much longer periods at a very different scale has now come to life,” she says.

Mr Vernon adds: “If there’s a viability gap, for example the high cost of initial infrastructure… grant is the solution to that problem, and grant is limited.

“The bank’s products are really about helping to deliver faster and more when that viability problem has been largely solved.”

The bank aims to use its public funding to unlock an additional £53bn of private investment over the next 10 years.

“There are challenges in the market, not just in the UK, but internationally,” says Mr Vernon. “It’s important to remember that there are certain features in the UK market that are attractive to international investors – we should remember that. Stable government, for example, being one.

“There is a significant interest and demand for investment in housing. And I think if we’re talking about long-term investment, then we’re really talking about build-to-rent, for example, [and] affordable housing.

“It’s really about trying to help deliver the investment products that meet the requirements of those funders.”

The risk profile of investors will change, Ms Rees says. “I mean, it may even be changing now. We’ll have to see what happens in the Middle East.

Providing a “permanent institution that you know will be there and can change and pivot, perhaps bring forward new products” if the risk changes, is also “hugely important”, she says, “not just for actually doing the things, but also for giving people confidence in the market”.

Earlier this month, Inside Housing Living broke the news that four subsidiaries of shared ownership specialist Heylo Housing Group had entered administration. Is there a lesson here for the wider for-profit affordable housing sector?

“It’s important to remember that there are certain features in the UK market that are attractive to international investors”

Ms Rees says “we’re not going to comment on individual providers and individual situations”, but “we very much take our lead” from the Regulator of Social Housing.

She cites rules in the Social and Affordable Homes Programme about whether someone can bid for an ‘SP-plus’ strategic partner status, which hinge on the judgements a registered provider has received from the regulator.

“There is a lot of regulation in the world, that also goes along with the Homes England schemes,” she says. “And more broadly, if there is learning – and again, I think it is too soon to tell – we will work with government, in particular, because… a lot of the policy provision, regulations… are really set by government as opposed to by us directly.”

Homes England’s previous Affordable Homes Programme, which ran from 2021 to 2026, was rocked by construction cost inflation and higher borrowing costs after Russia’s invasion of Ukraine in 2022. With energy costs set to rise due to the impact of the Iran war, is the sector facing a similar situation?

“The honest answer is we don’t know,” Ms Rees says. “Some of it will depend, I guess, on if this de-escalates, how quickly; how it ends as well.”

Homes England now has “quite a lot of experience” of downturns, she says, including the Covid pandemic and the 2008 financial crisis. 

“What we are trying to do now is plan for all eventualities,” she says. “We are more important when it’s countercyclical, so what we must be… is fleet of foot and ready to respond to whatever those challenges are. But the honest answer is, we don’t know what they are at the moment.”