There are many loan schemes for UK property developers, but one funding avenue that is often overlooked is grants. Grants will sometimes only cover part of the project cost, but any support helps given the current challenging conditions, such as social housing contractors shutting down and regulatory changes like the new infrastructure levy.
According to grant management software provider, Flexigrant, grants play an essential role in improving the economy during difficult times, and funders should give out more grants during a recession.
In this article, we’ll explore whether it’s worth looking into grant funding, and some of the current government grants available for UK property developers and landlords.
What Grants Can Property Developers Apply for?
The intention behind many funding opportunities is to help developers benefit the communities they operate in, building housing that’s sustainable for the long-term. Some grants also focus on supporting renewable energy and other green initiatives. Below are a few programmes currently available.
The Affordable Homes Programme
Funding such as the Affordable Homes Programme 2021-2026 involves grants to support the development of affordable housing (for sale, social rent or affordable rent) in order to tackle the housing crisis. Homes England have provided the funding.
The total available (including funds already awarded) is £7.39 billion, the goal being to build 130,000 new affordable homes by March 2026. To be eligible, the applicant must align with the AHP’s strategy and the priorities of the housing authority in-question. They must also be either:
- A qualified investment partner of Homes England
- Working with an organisation that is a qualified investment partner
- In a consortium where the lead organisation is a qualified investment partner
The funding can also be used to develop supported housing, traveller pitches, and rural housing (in settlements with less than 3,000 residents), and to bring empty homes back into use.
Disabled Facilities Grants
These grants are available for housing that’s in development and does not have adequate disabled facilities. In some cases, this means improving designs, while in others, upgraded facilities will need installing in properties that are already being built. Some of the upgrades that may be carried out include installing accessible toilets, ramps, lifts, and widening doors.
Councils provide these grants and the amount of funds offered varies depending on the work that’s required. However, developers can only apply for these grants if they will be the landlord for a disabled person; if they intend to sell the property before any tenants move in, they will not be eligible.
Environmentally Sustainable Development
With an increasing emphasis on environmental sustainability, grants are available for property developers who prioritise decarbonisation.
EV Infrastructure and Chargepoint Grants
One example is the electric vehicle chargepoint grant, which social housing providers as well as commercial landlords can apply for. The funding can be used to install EV chargepoints and related infrastructure in rental and leasehold properties.
In fact, this grant comes in two forms:
- EV chargepoint grant: This option is suitable when the premises already has the supporting infrastructure for EV chargepoints and the points themselves simply need installing. Applicants can receive up to 200 grants per year for residential properties and an additional 100 for commercial properties. Each grant supplies either £350 or 75% of the cost of installing a socket – whichever figure is lower.
- EV infrastructure grant: This supports the development of the infrastructure needed (such as wiring) to install chargepoints at a property. Up to £30,000 or 75% of the total cost (whichever is lower) is available; the amount received also depends on the number of parking spaces that will be included. Developers can get up to 30 of these grants per year.
The Boiler Upgrade Scheme
Another one for developers that are also landlords, the Boiler Upgrade Scheme seeks to decarbonise homes and some types of non-domestic properties in England and Wales. Landlords use the funds to remove fossil fuel-dependent boilers and replace them with ground source heat pumps, biomass boilers and other low-carbon systems. Funding of up to £6,000 is provided for each replacement.
The Energy Company Obligation (ECO) grant programme has been running since 2013 and will continue until 2026. So far, 2.3 million homes have been upgraded with more eco-friendly heating or insulation solutions. However, not all landlords can apply – it is reserved for areas of fuel poverty, among several other criteria.
Infrastructure Development Grants
Some grants are tailored to support the construction of essential infrastructure including roads and utilities. Developers involved in both large-scale and smaller projects can benefit from these grants which enhance accessibility and connectivity, making their developments more attractive.
Infrastructure grants are sometimes accessed through local authorities such as the community infrastructure grantsprovided by Swale borough council, which is backed up the UK Shared Prosperity Fund and the Rural Economic Prosperity Fund. (This particular grant is restricted to certain types of not for profit organisations, but is just one example from one local authority.)
Grant Vs. Loans
Grants for property development offer several advantages over loans, beyond the obvious fact that they do not have to be repaid. Some of these advantages include:
- Stimulating development in specific areas: Offering grants in certain areas helps to encourage growth in underdeveloped or economically disadvantaged regions.
- Encouraging innovation: Grants that are designed to support sustainable and eco-friendly building practices can incentivise developers to explore new technologies and methods, leading to progress in the industry as a whole.
- Alignment with public interests: Grants can be tailored to align with public policy objectives, such as affordable housing, community development, or improving infrastructure. In this way, they serve as a tool to achieve broader societal goals.
- Faster implementation: Loans often involve a lengthy approval process. Grants, especially those offered through government programs, can have a more streamlined application process and faster implementation, helping developers to start their projects sooner.
- Lower financial risk: When a grant of significant value is available, developers can take on more ambitious projects with less risk. This may lead to the development of innovative
projects that might otherwise be too risky for private investment.
As mentioned, support from grants is especially valuable during times of economic uncertainty or tight profit margins. In some cases, by securing grants, developers may also increase the viability of their projects, making them more attractive to lenders.
Participation in grant-supported initiatives may also enhance a developer’s reputation as a socially responsible and community-oriented organisation which can lead to better relationships with local authorities.
On the other hand, grants are generally more competitive and harder to obtain than loans, and there are often strict eligibility criteria, reporting requirements, and compliance standards that developers must adhere to.
All in all, if the resources are available to see the application through, grants are a worthwhile option to consider.
Grants are a much-needed source of funding in the current UK property market, ranging from sizeable funds like the Affordable Housing Programme to smaller grants suitable for developers that are also landlords.
Many government grants focus on sustainability such as the EV infrastructure grants and the Boiler Upgrade Scheme. Other option include disabled facilities grants and infrastructure grants accessed through local authorities.
Due to the difficulties developers are facing at the moment, even a small amount of funding can make a difference. So, should more developers apply for grants? We think so.
At SDS, we provide a range of software and consulting solutions to help you maximise the development, sale and management of affordable homes. To learn more about how we can assist you, contact us today.