Five reasons to back housebuilding in 2026

Manu Dinamani, Director of Structured Finance recently spoke with the Intermediary to discuss backing housebuilding in 2026, and why confidence is slowly returning to the sector.

Despite a challenging 2025 for developers, Manu highlights that policy stability, targeted funding and renewed support from the government are creating a more favourable environment. From streamlined planning routes to new financial mechanisms, the conditions are gradually shifting in the right direction. Manu also discussed the growing importance of diversification across residential asset classes, from Build to Rent and co living, to Purpose Built Student Accommodation and SFH (Single Family Housing) Rentals, and the role innovative funding models will play in unlocking stalled sites.

It’s an encouraging perspective and a reminder that a bit of cautious optimism can really help the sector move forward with confidence.

There is no denying that 2025 was a challenging year. The industry has been facing a perfect storm for some time: softening yields, increased costs of borrowing, and rises in build costs. Even well capitalised investors have struggled to deploy funds. Although structural headwinds persist, the outlook is starting to improve, and the sector has entered 2026 on a cautiously optimistic note. 

Greater stability in policy, planning and innovation are already creating a more favourable environment. Stable policy backdrop While the run up to the 2025 Autumn Budget was dominated by negative speculation, market response was muted. If anything, the certainty provided by the Budget has removed the risk of unknown variables, which has helped to instil a degree of confidence. The " Mansion Tax" generated no shortage of column inches, but its practical impact on housebuilding will be limited. 

The majority of new homes delivered across the country will fall well below the threshold, meaning it is unlikely to materially affect housing delivery. While the Budget didn't deliver everything the sector might have hoped for, it avoided major shocks, providing a stable platform for continued investment. In October, the sector welcomed the new housing support package introduced in partnership with the Mayor of London. 

The measures included targeted reforms to unlock stalled residential schemes and accelerate affordable housing delivery. As part of the reforms, the Mayor can now review schemes of 50 or more homes where boroughs are minded to refuse, including development on greenbelt and Metropolitan Open Land (MOL). One of the most impactful changes is the time - limited planning route that removes the requirement for upfront viability testing on schemes delivering a high proportion of affordable housing. Additionally, schemes that reach first-floor construction by March 2030 are exempt from Late Stage Review (LSR) , eliminating a key source of future cash flow uncertainty.

Targeted financial support The £322m Developer Investment Fund and the £16bn National Housing Bank programme are also welcome, building on the success of the Londoner's Land Fund. I would anticipate that co-investment structures, guarantees, or mezzanine instruments will be needed to de-risk participation and attract institutional capital at scale. Additional financial support for investors and developers includes temporary borough - level Community Infrastructure Levy (CIL) relief of up to 50% for schemes delivering 20% or more affordable housing on brownfield land, with higher relief available for greater affordable provision. 

Sector diversification 

The living sector is becoming increasingly diversified. While traditional single-family homes will remain central to housebuilding targets, diversification across residential asset classes provide scalable opportunities with differentiated risk profiles. Build to Rent (BTR) co-living, purpose-built student accommodation (PBSA) and senior housing all address different housing needs. Co-living offers a more affordable alternative to BTR, while PBSA frees up house shares for families and provides students with high-quality accommodation. 

The exclusion of co-living and PBSA from some of the planning reforms represents a missed opportunity . However, I have every confidence that these sectors will come to play an even greater role in the UK's housing ecosystem. Innovative funding models Innovation in the capital stack could be a key route to unlocking stalled sites. Blended finance models and partnership-led approaches will be critical to unlocking schemes that would otherwise remain stalled. The sector has increasingly been calling for Government guarantees or other targeted intervention to stimulate a slower sales market and boost confidence amongst investors. On the whole, I am genuinely optimistic about the outlook for this year. 

At Close Brothers our deep understanding of the underlying real estate and development process - recognising the nuances of micro location, the impact of unit mix and product design, and the importance of a partnership - led approach to funding - puts us in a strong position to help unlock funding in 2026 and beyond. I strongly believe that by working closely with developers and stakeholders, and by leveraging collective expertise, we can help deliver not just homes, but resilient, investable communities.

Connect with Manu Dinamani on LinkedIn.