In 2025, the line between traditional private housing and affordable delivery has blurred. Developers are increasingly building mixed-tenure schemes — combining private sale, shared ownership, and affordable units within a single project — to align with planning requirements, diversify exit risk, and improve funding access.

For lenders, this hybrid model represents both opportunity and complexity. While diversified tenure provides resilience against market fluctuations, it also introduces valuation challenges, contractual interdependencies, and multiple exit timelines. Understanding how to model, present, and fund these schemes has become essential for developers seeking efficient leverage.

At Willow Private Finance, we specialise in structuring development finance for multi-tenure projects across the UK. From large regeneration sites to smaller infill schemes with Section 106 obligations, our role is to translate mixed-tenure complexity into a clear funding strategy lenders can underwrite.

For background reading, see Phased Development Finance in 2025: How Lenders View Multi-Stage Builds and Later Living and Retirement Development Finance in 2025.

Market Context in 2025

The UK housing market continues to face an acute affordability gap. With interest rates stabilising but property prices remaining elevated, demand for intermediate tenures — particularly shared ownership and affordable rent — has grown rapidly.

Government initiatives, combined with local authority pressure to integrate affordable housing within private developments, have pushed mixed-tenure delivery to the forefront. Developers are no longer viewing these requirements as constraints but as tools for de-risking exposure and accessing broader funding channels.

For lenders, mixed-tenure schemes now represent a mainstream asset class. Private banks, challenger lenders, and institutional funds have each developed distinct approaches. Mainstream banks tend to finance balanced schemes with predictable sales absorption, while private and mezzanine lenders are more active in regeneration or complex land-assembly contexts where affordable and shared ownership ratios are higher.

In 2025, the success of a mixed-tenure finance application depends less on the headline loan-to-cost ratio and more on the clarity of the tenure mix, phasing, and exit strategy.

How Mixed-Tenure Development Finance Works

The structure of mixed-tenure funding must reconcile different value streams and timelines within a single facility. Lenders view each tenure as a separate risk profile, with its own revenue certainty, timing, and valuation method.

For private sale units, lenders assess absorption rates, pricing benchmarks, and margin buffers. These units typically represent the profit engine of the scheme. For shared ownership, lenders focus on the contracted terms with registered providers or housing associations — whether the units are pre-sold under a forward agreement or retained for later disposal.

Affordable units, especially those under Section 106, are usually valued and funded differently. Their GDV is based on discounted cashflows reflecting restricted rent levels or pre-agreed transfer values. Developers often use these early disposals to release capital and reduce gearing mid-project.

In 2025, the most competitive development finance facilities are structured around these distinctions. Rather than treating a mixed-tenure site as one uniform project, lenders now separate each tenure within the loan model, allocating specific cost and revenue lines and linking drawdowns to tenure-specific milestones.

Valuation and Appraisal Methodology

Valuation is the most technically demanding aspect of mixed-tenure development. Because each tenure type generates a different income stream, valuers must blend approaches — typically residual for private sale, investment yield for affordable rent, and DCF for shared ownership.

Lenders scrutinise these assumptions closely. They test sensitivities such as changes in private sale absorption rates, variations in grant funding availability, and timing differences between affordable handovers and private completions.

For example, where a registered provider is purchasing affordable units, the lender will want to see the contract exchange terms, price schedule, and any conditions precedent to completion. This documentation allows the valuer to recognise the contracted income within the GDV and improves lender confidence in repayment certainty.

Shared ownership adds another layer of complexity. Because staircasing proceeds are uncertain, lenders typically ignore future tranche sales when calculating GDV, instead relying on the initial shared ownership sale to determine valuation.

Developers who provide transparent, professionally audited appraisals showing cost segregation, tenure-specific values, and cashflow sequencing achieve stronger terms and faster approvals.

Planning and Legal Framework

Local planning authorities continue to require meaningful affordable housing contributions, typically expressed as a percentage of total units or habitable floorspace. In 2025, 30–40% remains the common benchmark for major residential schemes.

Lenders expect developers to evidence compliance with these obligations through signed Section 106 agreements and affordable housing schedules. They also want to see legal clarity on phasing: which plots are designated affordable, which are shared ownership, and whether handovers are tied to private sale progress.

In addition, lenders require confirmation that housing associations or registered providers are approved counterparties with established funding capacity. Unknown or financially weak counterparties can raise credit concerns.

Legal due diligence must also address nomination rights, service charge structures, and management obligations to avoid cross-subsidy issues that could erode margins or complicate refinance.

Phasing and Cashflow Management

Mixed-tenure projects succeed or fail on phasing discipline. Because affordable and shared ownership sales often complete earlier — generating cash inflows sooner — lenders view these units as natural de-leveraging tools. However, they insist on detailed phasing plans showing when each tenure will commence, complete, and generate cash.

Lenders will typically structure the facility so that early affordable sales reduce the debt balance before later private sales begin. This staged repayment reduces exposure and can allow higher initial leverage.

To support this approach, developers must maintain tight coordination between construction sequencing, contractual obligations, and lender reporting. Delays in one tenure can disrupt the overall cashflow model.

Monitoring surveyors play a crucial role in verifying that tenure delivery aligns with approved plans. Lenders in 2025 are increasingly using integrated reporting templates that combine cost-to-complete, sales receipts, and Section 106 compliance into one consistent monthly update.

Lender Appetite and Product Evolution

Appetite for mixed-tenure lending has expanded rapidly. Specialist lenders now compete to fund schemes that deliver both financial and social value. Institutions with ESG mandates, in particular, are prioritising projects that blend private profitability with affordable outcomes.

Several trends define lender activity in 2025:

• ESG-Linked Incentives: Some lenders offer margin reductions if developers achieve verified affordable delivery or sustainability benchmarks.
• Forward-Funding of Affordable Elements: Institutional investors increasingly forward-fund the affordable component, allowing developers to recycle capital into later phases.
• Hybrid Loan Structures: Facilities now combine development and investment finance elements, allowing smoother transitions between build, sale, and stabilisation phases.

These innovations demonstrate a maturing market that rewards clarity, social impact, and sound financial structure.

Key Challenges Developers Face

Despite improved lender appetite, developers still face common obstacles when seeking funding for mixed-tenure schemes.

First, valuation reconciliation remains complex. Appraisers must justify different discount rates and yield assumptions for each tenure, and lenders will test the sensitivity of combined outcomes.

Second, timing mismatches between affordable completions and private sale receipts can create cashflow strain. Developers who fail to model these differences accurately risk breaching covenants or running short of liquidity.

Third, operator capacity is a growing concern. Lenders want assurance that housing association partners have sufficient resources to complete acquisitions on time, especially given sector consolidation and regulatory scrutiny.

Finally, exit alignment is crucial. Developers must plan their repayment strategy holistically: early affordable receipts, phased private sales, and potential portfolio refinance must dovetail seamlessly to satisfy lender expectations.

Structuring for Success

Developers who secure the best mixed-tenure finance outcomes in 2025 share three traits: early engagement, professional documentation, and strategic flexibility.

Early lender engagement ensures the facility structure reflects real-world delivery rather than retrospective justification. Professional documentation — including valuation reports, legal summaries, and cashflow schedules — demonstrates control and reduces perceived risk.

Flexibility matters most. Developers who treat tenure balance as a lever rather than a constraint can adjust delivery pace and optimise capital efficiency. For example, if private sales slow, the option to forward-sell additional affordable units to a registered provider can stabilise cashflow and preserve lender confidence.

At Willow Private Finance, we work with clients to model these scenarios and present them to lenders in a structured, data-backed format that showcases both financial rigour and delivery competence.

Outlook for 2025 and Beyond

Mixed-tenure development is now a permanent feature of the UK housing landscape. As policy continues to evolve, lenders and investors alike recognise that social integration and financial stability go hand in hand.

In the next few years, we expect to see continued growth in institutional forward-funding, enhanced government incentives for affordable delivery, and more widespread adoption of ESG-linked pricing. Developers who embrace transparent modelling, disciplined phasing, and lender collaboration will be best positioned to capture this capital.

How Willow Private Finance Can Help

Willow Private Finance has extensive experience structuring development funding for mixed-tenure schemes across the UK. Our team works with specialist lenders, private funds, and registered providers to align planning obligations, phasing schedules, and financial covenants.

We help developers present lender-ready documentation, model cashflows that reflect real phasing and repayment profiles, and negotiate facilities that preserve liquidity throughout the build programme.

Whether you’re delivering an urban regeneration project, an affordable-led suburban scheme, or a shared ownership conversion, we’ll help you secure finance that balances commercial success with social responsibility.

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