Build now, pay later

Document type
Paper
Corporate author(s)
Great Britain. Dept. for Communities and Local Government
Publisher
Dept. for Communities and Local Government
Date of publication
1 December 2011
Subject(s)
Housing and Homelessness, Community Development and Regeneration
Collection
Social welfare
Material type
Reports

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The Government is committed to bringing forward public land with capacity to deliver up to 100,000 homes over the Spending Review period, and support as many as 200,000 construction and related jobs during development. Tackling the sustained shortfall in housing development is a Government priority and a key objective of the Growth Review. The amount of previously-developed land owned by the public sector is more than twice the size of Leicester. The Prime Minister announced his intention to extend the use of Build Now, Pay Later to as much surplus public land as possible, where there is market demand, it presents good value for money and is affordable. This commitment is also set out in the Government’s Housing Strategy for England. The aim is to stimulate development activity and incentivise developers to commence development early by deferring payment to match the developer’s cash flow.

In the current economic and financial climate some developers are unable to commit their limited capital resources to upfront full payments of land value and this continues to be reflected in developers’ responses to some major public land redevelopment opportunities. The rationale for using Build Now, Pay Later is that it allows the developer to better manage development cash flow as land is not an upfront payment and, depending on the approach, can also allow some sharing of the risk on sales values between landowner and developer.

Build Now, Pay Later is not appropriate for all sites and will tend to be more beneficial on larger more complicated sites which will require significant capital investment to unlock. These sites may require significant infrastructure, expensive remediation or other major development costs. There may also be planning uncertainty, and where development revenues are likely to be spread over several future years. The use of Build Now, Pay Later should be tested on a site by site basis to ensure value for money and affordability. The most comprehensive way to evidence this is to compare bids on Build Now, Pay Later terms against the traditional upfront payment with overage.

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