The Intermediary – February 2026 - Flipbook - Page 8
SPECIALIST FINANCE
In focus
Five reasons to back
housebuilding
in 2026
T
here is no denying that
2025 was a challenging
year. The industry
has been facing a
perfect storm for
some time: soening
yields, increased costs of borrowing,
and rises in build costs. Even wellcapitalised investors have struggled to
deploy funds.
Although structural headwinds
persist, the outlook is starting to
improve, and the sector has entered
2026 on a cautiously optimistic note.
Greater stability in policy, planning
and innovation are already creating a
more favourable environment.
Stable policy backdrop
While the run up to the 2025 Autumn
Budget was dominated by negative
speculation, market response was
muted. If anything, the certainty
provided by the Budget has removed
the risk of unknown variables,
which has helped to instil a degree
of confidence.
The “Mansion Tax” generated no
shortage of column inches, but its
practical impact on housebuilding
will be limited. The majority of new
homes delivered across the country
will fall well below the threshold,
meaning it is unlikely to materially
affect housing delivery. While the
Budget didn’t deliver everything the
sector might have hoped for, it avoided
major shocks, providing a stable
platform for continued investment.
In October, the sector welcomed
the new housing support package
introduced in partnership with the
Mayor of London. The measures
included targeted reforms to unlock
stalled residential schemes and
accelerate affordable housing delivery.
As part of the reforms, the Mayor can
now review schemes of 50 or more
6
The Intermediary | February 2026
MANU DINAMANI
is director of structured
finance at Close Brothers
Property Finance
homes where boroughs are minded
to refuse, including development on
greenbelt and Metropolitan Open
Land (MOL).
One of the most impactful changes
is the time-limited planning route that
removes the requirement for upfront
viability testing on schemes delivering
a high proportion of affordable
housing. Additionally, schemes that
reach first-floor construction by
March 2030 are exempt from LateStage Review (LSR), eliminating a key
source of future cash flow uncertainty.
Targeted financial support
The £322m Developer Investment
Fund and the £16bn National
Housing Bank programme are also
welcome, building on the success
of the Londoner’s Land Fund. I
would anticipate that co-investment
structures, guarantees, or mezzanine
instruments will be needed to de-risk
participation and aract institutional
capital at scale.
Additional financial support
for investors and developers
includes temporary borough-level
Community Infrastructure Levy
(CIL) relief of up to 50% for schemes
delivering 20% or more affordable
housing on brownfield land, with
higher relief available for greater
affordable provision.
Sector diversification
The living sector is becoming
increasingly diversified. While
traditional single-family homes will
remain central to housebuilding
targets, diversification across
residential asset classes provide
scalable opportunities with
differentiated risk profiles.
Build to Rent (BTR), co-living,
purpose-built student accommodation
(PBSA) and senior housing all
address different housing needs.
Co-living offers a more affordable
alternative to BTR, while PBSA
frees up house shares for families
and provides students with
high-quality accommodation.
The exclusion of co-living and PBSA
from some of the planning reforms
represents a missed opportunity.
However, I have every confidence
that these sectors will come to play an
even greater role in the UK’s housing
ecosystem.
Innovative funding models
Innovation in the capital stack could
be a key route to unlocking stalled
sites. Blended finance models and
partnership-led approaches will be
critical to unlocking schemes that
would otherwise remain stalled. The
sector has increasingly been calling
for Government guarantees or other
targeted intervention to stimulate
a slower sales market and boost
confidence amongst investors.
On the whole, I am genuinely
optimistic about the outlook for this
year. At Close Brothers our deep
understanding of the underlying
real estate and development process
– recognising the nuances of microlocation, the impact of unit mix and
product design, and the importance of
a partnership-led approach to funding
– puts us in a strong position to help
unlock funding in 2026 and beyond.
I strongly believe that by working
closely with developers and
stakeholders, and by leveraging
collective expertise, we can help
deliver not just homes, but resilient,
investable communities. ●
