Government announces loan scheme to help housebuilders pay for schools 'up front'

The government is to trial a scheme offering loans to developers to help them pay "up front" for new schools required to support housing growth, claiming that, along with providing new education facilities, the move will help "boost the viability of new housing estates".

New schools: loans intended to boost delivery
New schools: loans intended to boost delivery

In a statement, the Department for Education (DfE) has announced that housebuilders will be offered loans, at interest, from central government to fund the construction of schools in a bid to "incentivise developers to build more properties in the areas most in need – including on sites that have stood empty for a long period of time".

According to the statement, up to £20 million per school will be allocated under the Developer Loans for Schools programme, which has been launched in partnership with the Ministry of Housing, Communities and Local Government.

The department said that housing developers "are already expected to contribute to the costs of new schools to help meet the need arising from new housing, but can struggle to raise the funds to get schools ready in time for families moving to new developments".

The department added that, along with providing much-needed new schools, the scheme would also "boost the viability of new housing estates, particularly those led by small and medium sized developers where cashflow is a significant issue".

The new fund "means new school places are financed and delivered up-front – rather than builders having to wait for new homes to be built and sold before having the money to build the development," the department said.

The department said the programme will be trialled in 10 pilots up until 2021, and has invited bids from developers interested in taking part.

The areas covered by the pilot must meet specific criteria, the DfE said, including "planning permission to build extra homes" and "an approved application to open a new free school before the loan changes hands".

Housing Minister Esther McVey said: "It’s only right that infrastructure is delivered up front – including thousands of new school places – which supports existing communities and the new homes which we need building."

The announcement follows the publication earlier this year by the DfE of non-statutory guidance for education authorities on seeking developer contributions to fund new school places made necessary by development.

The guidance followed on from March revisions to national Planning Practice Guidance (PPG), which for the first time included paragraphs about funding school places through developer contributions from section 106 planning gain agreements.

More details on the scheme can be found here. 

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