Traditional Financing Systems Hamper the Scaling Up of Innovative Markets

The research, carried out within the Innovation and Scaling Program for Housing (IOP) by the Ministry of Housing and Spatial Planning (VRO), shows that the bottlenecks are not so much in the technology or market demand, but in the way financing, guarantees, and risk assessment are organised today. This makes industrial housing a concrete example of a broader financing issue that hampers the development of innovative markets. 

Funding structures do not align with new production models

From multiple financing tables and discussions with builders, financiers, insurers, guarantee funds, housing corporations, and other market parties, it appears that existing financing structures do not sufficiently align with industrial construction processes. 

Liquidity problems arise because costs are incurred earlier than payments are made. Additionally, permitting procedures, bank guarantees, and limited access to guarantee funds create extra risks and uncertainties. As a result, investments in factories, innovation, and production capacity are delayed or even made impossible. 

The consequences are visible in practice. Several industrial builders have encountered financial difficulties in recent years, while the demand for affordable and sustainable homes remains high. 

From analysis to financial solutions

Invest-NL focuses within Market Development on solving financing bottlenecks that hinder the scaling up of new markets. Together with market parties, not only have the bottlenecks been analysed, but concrete solutions have also been developed. 

The research highlights include: 

• insurable permitting risks; 
• project-specific bridging finance; 
• alternatives to bank guarantees; 
• better access to guarantee systems; 
• new solutions for decommissioning and replacement risks. 

These solutions can increase the fundability of industrial housing, but are also relevant for other innovative markets facing similar systemic barriers. 

Follow-up: further development of solutions

In a follow-up project, Invest-NL, De Bouwcampus, and the IOP are investigating which bottlenecks are the most pressing and which solutions could have the greatest impact. The results will be used to further validate the analysis and to develop the most promising financing solutions.  

The goal for Invest-NL is not only to accelerate the scaling-up of industrial housing but also to demonstrate how financial innovation can contribute to the development of new markets.