Affordable Housing — 200 Units

A regional housebuilder had secured planning permission for a 200-unit mixed-tenure scheme on a strategic housing allocation site. The scheme comprised 130 affordable units (65%) across social rent, affordable rent, and shared ownership tenures, with the remaining 70 units for private sale. Total development costs across the entire scheme were approximately £38m, with a projected combined GDV of £44m.

The capital structure was unusually complex. The affordable element was to be forward funded by a registered provider (RP), with Homes England grant contributing to approximately 40% of the affordable unit costs. The private sales element needed separate development finance, but the two workstreams were interdependent — the RP's forward funding payments were phased against build milestones, and the cross-subsidy from private sales was needed to make the affordable delivery viable.

The developer had a strong track record in private residential but limited experience delivering affordable housing at this scale. Two lenders had already declined the application, citing the complexity of the capital structure and the interdependency between the private and affordable workstreams.

The core complexity was the interdependency between three separate funding streams: senior development finance for the private sales element, forward funding from the registered provider for the affordable units, and Homes England grant. Each had its own drawdown mechanics, security requirements, and conditions precedent — and all three needed to work together as a single coordinated cashflow.

The phasing of construction was critical. The affordable and private units were being built simultaneously across the site, but the RP's forward funding payments were tied to completion of affordable units, while the senior lender's drawdowns were tied to overall site progress. Any delay in the affordable construction programme would create a cashflow gap in the private workstream, and vice versa.

The Homes England grant conditions included specific requirements around build standards, energy performance, and accessibility that applied only to the affordable units — adding a further layer of specification complexity to the construction programme and cost plan.

We structured the deal as two parallel but coordinated facilities. The senior development finance of £28m covered the site infrastructure and the private sales element, with drawdowns tied to a single monitoring surveyor's certification covering the entire site. The RP's forward funding agreement — covering approximately £14m of affordable unit costs — was structured with milestone payments that fed directly into the senior facility's cashflow model, effectively reducing the peak debt exposure as affordable units were completed and paid for.

We produced a comprehensive master appraisal and cashflow model that integrated all three funding streams — senior debt, RP forward funding, and Homes England grant — presenting the full picture to the lender in a way that gave them complete confidence in the capital structure. The model showed exactly how the interdependencies worked and where the cashflow pinch points would occur. We also negotiated a flexibility mechanism that allowed the construction phasing to be adjusted by up to 8 weeks without triggering a breach of the senior facility terms.

To address the developer's limited affordable housing track record, we appointed a specialist affordable housing consultant to the project team and structured a performance bond arrangement that gave the RP confidence in delivery. The quality of our presentation and strategy secured a blended interest rate of 6.5% per annum — reflecting the de-risked nature of a scheme where 65% of the units were effectively pre-sold.

The scheme completed in 27 months — 3 months ahead of the original 30-month programme. All 130 affordable units were handed over to the registered provider on practical completion, with Homes England grant fully drawn and all milestone payments received on schedule. The 70 private units sold within 14 months of the first completions, achieving an average of 6% above original appraisal values.

Total finance costs across the senior facility were approximately £1.82m at the blended rate of 6.5% per annum — significantly below market average for a scheme of this complexity, reflecting the de-risked capital structure. All 200 units are now occupied, with the affordable element fully let through the registered provider's allocation process. The developer has since been selected for two further strategic housing sites by the same local authority, based on the successful delivery of this scheme.