Accelerating Housing Delivery Through Risk Capital Approaches
20.05.2026 - 02:53
Mandala’s latest research, prepared with CBRE, aims to understand the benefits of shifting public-sector subsidies from grant dependence to risk capital co-investment. Risk capital is the deployment of sub-market loans to housing developments and has been applied in Greater Manchester to halve the effective public cost of subsidisation. As England grapples with a viability crisis, risk capital can provide an effective policy solution. This report models the deployment of £8.5bn from the National Housing Bank as risk capital across England. The report finds that deploying this capital within existing fiscal rules could unlock 94,000–104,000 additional homes by 2031, depending on the deployment strategy. This could crowd in £22bn in private investment, generate £5.6–£5.8bn in cumulative GDP growth, and support 71,000–73,000 jobs across England while recovering public capital with interest.
England’s housing crisis is rooted in a breakdown of development viability. Costs have risen sharply while prices have stagnated. Housebuilding has become commercially unviable across the country. Construction material costs have risen 39% since 2021, driven by cement, concrete and plastic products. Financing costs remain elevated following the 2023 interest rate peak of 5.25%. House prices, meanwhile, have grown just 8% since 2022 and have been flat since 2023. As a result, new dwelling starts have fallen 36% from their 2022 peak.
The government has worked to boost housebuilding through planning reform; however, this alone cannot close the delivery gap. The December 2024 NPPF restored mandatory housing targets, defined 'grey belt' land for release, and required Green Belt reviews where housing needs cannot be met. The OBR assessed these reforms as the largest positive GDP impact ever assigned to a zero-cost policy, forecasting an additional 170,000 homes by 2029-30. However, total delivery is still projected at only 1.26 million homes by 2030, leaving a 240,000-home shortfall against the government's 1.5 million target. Further support is needed to accelerate development.
Risk capital can provide this further support. Unlike traditional grants, where the Exchequer bears both the cost of principal and interest, under a risk capital model, the principal is repaid with interest (subject to policy aims) and can be recycled into future projects without additional borrowing. In Greater Manchester, under the Good Growth Fund, risk capital has halved the effective public cost per home. The Fund has since committed £350m in its first wave, enabling 3,000 homes and 2 million sq ft of employment space.
This report models the deployment of £8.5bn from the National Housing Bank as risk capital across England. The £8.5bn can be deployed in two ways: directed to city-region Mayors, unlocking 94,000–104,000 homes by 2031; or allocated agnostically, wherever viability gaps are smallest, unlocking up to 123,000–198,000 homes.
This intervention will drive investment and generate significant economic returns. Deploying £8.5bn in risk capital to city-region Mayors at a 4.4% return, crowds in £21.6bn in private investment, supports 71,000 jobs across England by 2031, and generates £5.6bn in cumulative GDP uplift. Accepting a 0% return reduces the average public cost per unit and further lifts delivery, private investment, and employment.
Read the full report here.
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