The Portal talks to Michael Chisholm from the HSCHT about what the fund means for the future of self build in Scotland
22 May 2016
Earlier this year a new Scottish Government Loan Fund, overseen by The Highlands Small Communities Housing Trust (HSCHT), was introduced to help self builders in the Highlands to complete their projects as well as boost the number of new homes in the area.
22 May 2016
Earlier this year a new Scottish Government Loan Fund, overseen by The Highlands Small Communities Housing Trust (HSCHT), was introduced to help self builders in the Highlands to complete their projects as well as boost the number of new homes in the area.
The £4million revolving fund will enable families and individuals to borrow up to £150,000 in stage payments, in a similar manner to a self build mortgage – albeit with different conditions attached. The Self Build Portal talks to Michael Chisholm from HSCHT to find out more about the fund:
Can you give us a brief history of how the fund came about?
“In 2007/8, planning officers estimated that about 1,000 self-procured single builds happened in Highland region. In 2012/13, planners estimated about 320 self build projects took place. This massive reduction is expected to have equated to a loss of about £100,000,000 a year in terms of economic activity.
“We have been in discussion with The Scottish Government and others industry groups for some time about the lack of mortgage facilities and the difficulties in the market for self builders. Through these discussions it was recognised that there was a market failure and that without intervention there would continue to be a decline. Fortunately the Scottish Government managed to allocate some funding to address this and in 2014 announced the opportunity to administer a self build loan fund pilot and The HSCHT was successful its bid to the Scottish Government.”
Can you explain how the fund works?
“People are able to apply for up to £150,000. This money can be drawn down over the course of the project – at stages previously agreed during the application – and only requires to be repaid once the project is completed at a point where the applicant is able to access a traditional mortgage.
“When assessing an application, the agent (HSCHT) will look at the project costs and any shortfall in the cash flow required to reach completion stage, which provides the basis of how the loan amount offered is calculated.
The application processes is angled more towards individual applicants, however groups of self-builders will be considered.”
Since the launch on the 1st of April 2016, what developments have been made?
“There has been over 500 notes of interest since its launch, which we anticipate will result in a number of quality applications. However, there is definitely still capacity to help a large amount of people. There are clearly many people out there who have been waiting for such a scheme to come along, with many already having planning permission in place and their building plots ready, but have just not been able to progress with their project due to financing.
“Since the launch, we have received a number of applications that we are working through with the applicants in order to reach a point where they can be offered a loan. Successful applicants have now been issued loan agreements and we look forward to seeing how all of these individual projects turn out.”
How many applicants are you able to help at any one time?
“This depends on the amount of loan requested by applicants. This is a revolving fund, so as some projects are completed, and the loan provided to them is paid back, we will then be able to use this finance to assist another applicant. Through doing this, we hope to help as many people as possible to build their own homes.
“While it is a revolving fund, the amount requested, as well as the build programme of each individual project will determine how many people can be helped at once. We aim to time the projects in order to be able to maximise the amount of people the fund can help.”
Is finance the largest hurdle towards self building in the Highlands?
“While some people may come across hurdles in other aspects of their build projects, such as servicing, land or planning issues, the main issue appears to be the fact that the finance simply isn’t available to them. Over recent years, it has become increasingly obvious that there is a market failure regarding the funding of self build projects. This is demonstrated by the fact there has been an approximate 50% reduction in build projects in general throughout the region since 2007.
“This will be massively down to the fact that lenders just aren’t providing self build mortgages as easily as they used to. Over recent years many lenders have decided that there just isn’t the market out there for self build, and this decision has dramatically impacted those who are trying to finance their own build projects.”
If the scheme is seen as a success, does this mean that it will be rolled out throughout Scotland?
“I’ve been asked by various people if there is anything similar to the fund elsewhere in Scotland, so clearly the high demand for self build finance does extend throughout the country.
“The scheme has funding available for two years and I understand that the Scottish Government will assess this pilot before any decisions are made. I would like to think that the scheme could be rolled out wider and hopefully figures for this pilot will provide evidence for an expansion. Ideally what The Highland Self Build Loan Fund will do is give confidence back to the market by demonstrating that there is demand and provide evidence of the opportunities for lenders”
How will you monitor its success?
The Scottish Government has appropriate monitoring procedures in place. We are recording anonymously the data of all applications we receive, in order to provide a full overview of who is trying to obtain finance. We will be tracking the success of each individual project that we loan money to, reporting back to the Scottish Government on how things go. A selected few applicants will be asked to take part in an interview about how they found the whole process, and how the scheme could be improved.
“HSCHT will be keeping a register of all the people expressing interest in the fund. The analysis of the pilot will be used to inform future policy for self build support in Scotland, and to provide evidence of demand to high street lenders, hopefully eventually enticing them back to the market.”
For more information on the Highland Self Build Loan Fund, click here
