Capital grants and loans for CLH

Capital funding to support community-led housing initiatives can be come from many different sources. It usually covers the cost of buying land or buildings and all the costs associated with constructing or renovating homes.

Although there is not yet a co-ordinated funding system for the whole sector, across all geographical areas and for all types of project, the availability of capital funding is now much more extensive than it has been in the past with a number of new public, private and not-for-profit sector funders now offering financial support.

Sources of capital grants and loans currently include the following:

Capital grants

  • The Government’s Community Housing Fund has provided £180 million of mainly capital investment specifically for community-led housing from 2016/17 – 2019/20. The first tranche of £60 million was released to 148 local authorities in December 2016. A further £120 million was announced by the Housing Minister in November 2017 for the following two years. At February 2020, an announcement on an extension of the Community Housing Fund for subsequent years is not expected before March 2020. Guidance on how this Fund is being distributed can be found in Section 1.3 of the Toolkit
  • Homes England (formerly the Homes and Communities Agency) has a Shared Ownership and Affordable Homes Programme 2016-2021 with £6.1 billion of capital funding for affordable homes in England. A further £2 billion was added in the November 2017 budget
  • Homes England is keen to provide funding for community-led housing schemes that include affordable rent or low cost home ownership proposals, with flexible grant support of up to 50% of capital costs, provided direct to Registered Providers or through Investment Partners. Community-led groups do not need to be Registered Providers to access this funding for low cost home ownership initiatives, but do if they require funding for affordable rent. They can work in partnership with registered housing associations or investment partners to access this funding indirectly. Homes England capital funding can be matched with Community Housing Fund grant
  • The Greater London Authority has its own community housing fund of £38m which covers capital funding and runs until March 2023 
  • The Greater London Authority also administers its own Affordable Housing Programme in London. Its Innovation Fund may be used to provide capital grants for community-led housing schemes, although access to it is currently restricted to Registered Providers
  • Local authorities in England can make capital grants available in several other ways; including Right to Buy receipts, the New Homes Bonus and Section 106 commuted sums, provided they work within the Prudential Code limits.
  • The Welsh Government’s Housing and Regeneration Funding Framework provides capital grants for affordable rent and low cost home ownership schemes. The funding is allocated through local authorities and may be accessed by registered providers
  • Power to Change has a Community Business Fund  which provide capital grants of between £50,000 and £300,000 for a range of community businesses, which include  community-led housing projects 

Capital loans

  • In addition to their capital grants programme, Homes England has a £3 billion Home Building Fund that provides loans for innovative projects, including community-led housing
  • Local authorities can and do make capital loans for community-led housing schemes in the same ways they can provide capital grants – through Right to Buy receipts, the New Homes Bonus and Section 106 Commuted sums. They can also provide loans by setting up a Revolving Loan Fund. Potentially, stock holding authorities can use their borrowing powers to provide low-cost loan facilities. These can be recycled back into the sector on repayment. All these loan mechanisms must be made in accordance with each authority’s Prudential Code Borrowing limits
  • The Greater London Authority’s Innovation Fund can provide capital loans to community-led housing schemes, without the need for Registered Provider status
  • A range of social lenders, including Ecology Building Society, Charity Bank, Triodos Bank and Unity Trust Bank, are more familiar with the community-led housing sector than most high street lenders and are willing to lend to schemes with viable business plans. One relatively new High Street bank, Handelsbanken, has now lent on a number of community-led housing schemes
  • Housing associations developing a community-led housing scheme in partnership with a local community or on its behalf, are able to access their own sources of loan finance, often from major financial institutions and are usually able to draw down large scale funds at preferential interest rates and loan terms
  • The CLT Social Investment Fund managed by CAF Venturesome provides capital loans of up to £400,000 for community land trusts in England and Wales
  • The Resonance Affordable Homes Rental Fund lends up to 100% of the capital costs to community land trusts and other community-led organisations that are creating affordable homes
  • Big Society Capital’s £15m community-led housing loan facility is allocated through Resonance to increase available development capital for larger community-led affordable housing projects at the post-planning stage (UK-wide)
  • Big Issue Invest London Housing Fund  in partnership with the Greater London Authority is investing £10 million as loan finance to create 300 affordable homes in London over 10 years; projects supported will include those that are community-led
  • The Community Land Trust Network is currently working on proposals for a Mortgage Brokering Service, to help groups find the right type of capital loans for their projects

Capital funding raised by Community Led Housing organisations themselves

  • Some community-led housing organisations use their existing assets as collateral for loans
  • Some community-led organisations benefit from philanthropic donations
  • Significant funding can be raised through community share issues or crowd fundingSchemes in Wooler, Northumberland and Leeds have raised £125,000 and £360,000 respectively through this mechanism
  • Some members of community-led housing groups sell their current home or assets to join a scheme. Many cohousing schemes part fund their capital costs in this way
  • In some community-led housing schemes members contribute their labour to reduce costs, through ‘sweat equity’. They can be prospective home-owners in a custom-build scheme or people in self-help housing projects who help renovate empty homes
  • Some community-led housing schemes involve the sale of a proportion of completed homes at full market value, using the income to cross-subsidise affordable homes for rent or shared ownership

Relevant Resources

Community Led Homes Funding Guidance


Last updated in March 2020