Digital disruption has worked its way through the bedrock of untold industries, from Netflix’s transformation of cable and blockbuster video to Uber’s influence over the ways we move. In contrast, the property market has remained relatively immune to such tectonic shifts. Yet Roxana Mohammadian-Molina, Chief Strategy Officer at specialist tech-powered development finance lender Blend Network, argues that old challenges in the housing market command innovative solutions and require thinking out of the box. She maintains that FinTech, a permanent technological revolution that is changing the way we do finance, is a key part of the overarching solution to tackling the under-supply of housing in Britain.
Estimates have put the number of new homes needed in England at up to 345,000 per year, accounting for new household formation and a backlog of existing need for suitable housing. The 2015 Government set out an ambition to deliver 1 million net additions to the housing stock by 2020, and the Conservative Government elected in 2017 had a manifesto pledge to meet the 2015 commitment and to deliver half a million more by the end of 2022. The Autumn Budget 2017 set out an ambition “to put England on track to deliver 300,000 new homes a year” by the mid-2020s. But even before the pandemic hit, housebuilding targets were running way behind the Government’s ambitious targets. Between April 2019 and March 2020, around 244,000 homes were built in England – the highest number since 1987 and around 1% higher than the previous year but is still lower than the estimated need[i]. But then, the pandemic hit. According to a study by Savills and Shelter published in mid-2020[ii], over 300,000 planned new homes may remain on the drawing board over the next five years as a result of the pandemic, the equivalent to the Government’s annual target of new homes.
Is there a solution to fixing our broken housing market? If so, what is it? It is often hard to put ones finger on a single solution for such large gargantuan challenges, but I strongly believe that a big part of the solution to tackling the housing crisis may be closer to home than we realize, in the FinTech sector where Britain already plays a leadership role on a global scale. The reason is simple: one of the key hurdles to building more homes is the inability for many SME property developers and small construction companies to unlock much-needed funding to build more homes[iii], and FinTech has demonstrated to be an effective solution to help those smaller developers access funding. The use of technological solutions by incumbent financial institutions and specialist non-bank lenders has proved able to deliver better, faster, and more effective financial outcomes to customers, especially SMEs. FinTech platform financing, although still small, is growing fast. According to the Bank for International Settlements (BIS), transaction volumes globally more than doubled from $145bn in 2015 to $304.5bn in 2018[iv].
I strongly believe that financial services, especially agile and nimble incumbents leveraging the power of technology and FinTech have a critical role to play in helping tackle the housing crisis by helping deploy the financing that is needed to help build more much-needed homes.
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[i] Source: https://bit.ly/3GE2RYt
[ii] Source: https://bit.ly/3A79NuZ
[iii] Source: Home Builders Federation, “Reversing the decline of small housebuilders: Reinvigorating entrepreneurialism and building more homes”. Available at https://bit.ly/3IcwuRd
[iv] Source: Bank for International Settlements, “Regulating FinTech financing: digital banks and FinTech platforms”. Available at https://bit.ly/3AbJ3cQ