A key source of funding for SME developers

According to recent analysis conducted by Knight Frank, as a result of Covid19 and the knock-on impact of the government lockdown, the UK is set for a historic decline in housing delivery. Indeed, the research shows that the current lockdown will result in 56,000 fewer homes being delivered this year, a 35% decline [1]. We believe this opens up an opportunity for experienced small and medium (SME) property developers like you, and it also means that peer-to-peer property lenders like ourselves will become a key ally in the national housebuilding effort by helping you build the houses the country needs.

In a nutshell, the decline in housing delivery means that the UK’s housing shortage, already a high-profile issue that has been described by successive governments as the nation’s most urgent and complex challenge and solving it as “the biggest domestic policy challenge of our generation”, will become an even greater concern over the next few years. A commonly cited figure in current debate around the UK’s housing requirements estimates that 300,000 houses need to be built annually by the mid-2020s – 100,000 of which need to be affordable [2]. Even before the Covid19 crisis, the housebuilding targets were not being met. According to NHBC data, only 160,470 homes were built in England in 2017/18 (Figure 1). The Knight Frank report suggests that this is now set to deteriorate. This evidence, paired with huge public borrowing that will see an astonishing deterioration in public finances, suggests there will be renewed and indeed increased pressure for the Government to consider new and innovative sources of funding, including peer-to-peer property lending, to tackle the housing shortage. Boris Johnson’s drive to make housing a priority following his election last year has been welcome news. Yet his policies have focused on traditional funding methods, ignoring new, innovative sources of funding such as peer-to-peer lending. With the number of houses needed being so high and the housing shortage in all likelihood being exacerbated, we believe that all avenues must be explored.

For borrowers like you, we believe this is good news and will likely open and broaden new funding channels. We believe alternative funding channels will become ‘less alternative’ and more part of the mainstream funding ecosystem. This is also because peer-to-peer property lending platforms like us are able to demonstrate and exercise a higher level of flexibility towards borrowers. Our small scale and friendly approach enable us to take a one-on-one approach towards lending, as opposed to the more ‘tick-the-box’ exercise at traditional lenders. After all, we are not banks and therefore do not carry high levels of bureaucracy associated with bank lending. Due to the nimbler size of our operation, we are able to build direct relationships with borrowers and understand their project. We believe this personal approach will be key.

Figure 1: Homes needed vs homes built