11 Apr 2018

CrowditBuildit brings on first equity-based crowdfunded homes

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CrowditBuildit brings on first equity-based crowdfunded homes

CrowditBuildit is bringing on its first six homes, having used an equity-based crowdfunding model to financing the project.

The company was set up in 2015 as the result of research project with Sheffield University, supported by Sheffield City Council, a Custom Build Vanguard authority.

CrowditBuildit  offers a flexible approach to Custom Build in that it acts as a developer, securing land and contractors, while offering ranges of engagement for purchasers.

Early-stage involvement enables individuals to get involved with finding land and starting projects, as well as core design decisions – giving individuals or communities a high level of engagement and customisation.

Pre-construction involvement allows people and groups to engage with existing projects, much as they can with a conventional Custom Build or serviced-plot model. In this instance, customers come on board with land in place.

Customers can opt into properties at a below market rate at this stage to build in affordability, with a palette of options to customise their properties.

Pre-completion involvement allows customers to purchase homes as they near completion, similar to an open-market offering, with limited customisation options.

CrowditBuildit ’s equity-based crowdfunding model can be used for the development finance for projects. This relies on members of the public financing the project to completion, with the process regulated by the FCA with approval under the Financial Services and Markets Act (FSMA) 2000.

For this process, the equity, or value, in the development is used to securitise the investments made by the ‘investor crowd’. Monies raised then fund the project, before being returned and replaced with mortgages.

The idea pivots on the value of the assets increasing as work commences, and so offering returns on the investment. However, as with any investment there is risk involved.

Crowdfunded custom build homes

The test for the model came in Merton Lane, a six-home site made of three semi-detached first-time buyer homes, which Sheffield City Council helped source the Brownfield land for from their own holdings.

Merton LAne

Merton Road by CrowditBuildit

Three of these properties were brought on as Custom Builds with early engagers and the rest brought to open-market. Between them, 16 investors raised nearly £500,000 for the project to go ahead, and the open-market properties are for sale at £120,000.

Fundamental to the trial was the belief that one of the barriers to house building post the recession was access to finance, which crowdfunding could solve.

In addition, the project has been brought on as a form of action research – with learnings from the process embedded into future practice. The mixed route of Custom Build and Open Market enabled CrowditBuildit to test its model more fully.

One noticeable element is that the model has demonstrated that it can successfully be used to bring on affordable homes, which CrowditBuildit  hopes other councils will embrace.

A Sheffield City Council spokesperson said: “We are keeping a keen eye on the development as this does seem to be a very innovative way of helping lower income/first time buyers onto the property ladder.”

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