DfE to offer builders £22m loans for new schools in housing estates

Housing developers will be handed loans of up to £22 million from the Department for Education to build new schools under a pilot scheme to speed up delivery of new places.

The move follows several Schools Week investigations into how the government’s flagship free schools programme has been thwarted over failed and delayed projects due to building and site issues.

The DfE will offer ‘Developer Loans for Schools’ of between £5 million to £22 million for around 10 projects – allowing new free schools to be built upfront in mixed-use developments.

Currently developers have to wait for homes to be built and sold before using the cash to build a school.

The low-interest loans will come from the DfE’s free schools budget and will be repayable once new homes are sold.

The government said the pilot will boost the viability of new housing estates, particularly for those led by small and medium develops where “cashflow is a significant issue”.

Education secretary Gavin Williamson said “in some cases, building schools and properties at the same time so they are ready for new communities can be challenging for housing developers”.

“That’s why we are launching these loans today, to help parents secure a good school place for their child at the same time as moving into a new family home.”

The pilot will run until 2021 in areas that meet specific criteria including having a demand for more good school places, an approved application to open a new free school, planning permission to build extra homes, is a value-for-money project, and the borrower must be a UK-registered company and own the site.

The new schools will be approved via the central DfE route – where the government decides which trust runs the school – or via the local authority “presumption route, where the provider is decided after a tender by the council.

The government said the incentive for developers is it will help plan mixed-use developments – which also deliver new community hubs including schools – more effectively.

The interest rate would vary by project and depend on a range of factors, but the intention is to keep it as “low as possible”. The loan can only be used to build schools, they added.

However there have been previous problems with approving new schools on housing estates before all the homes have been completed.

The Floreat academies trust pulled out of running a free school set to open in Wokingham because of “slower than projected growth of the housing development”.

The move allowed the government to find a new sponsor once pupil numbers “reached viability”, but Floreat ending up having to close.

The government published new guidance earlier this year aimed at helping councils squeeze more cash for schools out of housing developers.

Councils have the power to demand a financial or land contribution for schools from housing developers under the community infrastructure levy, which replaced old section 106 payments.

The DfE said the new loans will enable developers to build schools earlier than typically required under section 106 payments.

Schools Week revealed in September almost half of the new free schools in the past three years opened in a temporary home.

Government forecasts show 418,000 more secondary school pupils are expected by 2027.

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