Co-investment tackles the housing crisis

A development partnership has adopted a new funding model to unlock the potential of a residential development site in County Durham.

Durham-based Homes by Carlton has secured £400,000 of funding for a pioneering development of quality family homes in Chilton, near Bishop Auckland.

Growth Capital Ventures, “GCV”, an FCA authorised fintech firm structured the fundraising for the development, using a co-investment model to attract £200,000 from a corporate investor with the balance coming from private individual investors through GCV’s online investment platform, GrowthFunders.

Professional and retail investors can use the GrowthFunders website to learn about carefully vetted businesses and residential development projects and then invest from £100 upwards. In the Chilton development, investors bought shares in the Special Purpose Vehicle (SPV) Carlton SPV 1 Chilton Limited set up specifically to develop the high quality housing scheme. The project is targeting a 1.5 times return (50%) on money for investors within a two-year timeframe.

The developer, Homes by Carlton, is building 14 three and four bedroom homes on the site and these will include three CoreHaus homes, which are built using a modular core which allows homes to be built up to 50% quicker than traditional construction methods allow.

Leading national procurement organisation and social enterprise Fusion21 has invested in CoreHaus

Fusion21’s chief executive, Dave Neilson said: “We’re delighted to be working with Carlton and supporting the development of much needed high quality homes in the area, whilst launching sustainable CoreHaus homes on this site.

“Modular housing provides many benefits including quality of build, speed of build and a reduction in construction waste. The scheme will deliver positive social and economic impact – benefiting the local supply chain and creating a variety of jobs and apprenticeship opportunities. The Homes by Carlton team have been responsible for the development of high quality housing schemes throughout the North East and Yorkshire.

Norm Peterson, co-founder of GCV and Homes by Carlton said: “We’re delighted to be bringing the Carlton brand back into the North East. We are focusing on smaller schemes where we can design and build homes with quality materials and an attention to detail that makes Carlton different.

“The innovative co-investment model has been well received, with investors keen to back this residential development scheme and share in the development profits. It’s a different way of financing a development scheme and we have more opportunities in the pipeline.”

The UK government is keen to support smaller regional housebuilders. A succession of initiatives have been announced to help SME builders secure access to development finance, which has been in short supply since 2008.

The Housing white paper which was released in February 2017 pointed to the dramatic fall in the proportion of houses built by small and medium-sized housebuilders - a fall of 40% between 2008 and 2015.

In the Budget, the Government provided details of a £15bn housebuilding support package, with £1.5bn of this made available to SME builders through the Home Building Fund. As the larger developers cannot meet the demand for more homes it is important that smaller regional house builders come back into the market offering different types of bespoke homes to match market needs, adding choice and quality to the new housing market.

“Sadly the 2008 financial crash saw the withdrawal of too many quality independent builders who thoroughly understood their local markets,’’ added Peterson. “It is increasingly being recognised that the crisis will only be resolved when these house builders are able to return to the market.

“However, they cannot do that unless they can secure funding for developments and this has been difficult over the past few years. We are starting to see more development finance options becoming available which is great news but we need to support innovative funding solutions to unlock opportunities.”