In the letter, prepared following discussion with industry and the Building Societies Association and to be sent to key players in the mortgage market, he says that he wants to see building your own house become much more common, to generate much needed supply of affordable and sustainable homes, and calls on them to make more specialist finance products available for self builders.
He says that few people realise that the self-build movement provides more homes than any individual housebuilder, but is still far smaller than in many other countries, and that he believes it could double in size over the next decade.
Lenders often shy away from the self build lending market due to the higher perceived exposure to risk, but with typical interest rates on self build products at around six per cent, Mr Shapps says that the self builder is an attractive prospective customer and with the self build market relatively undeveloped provided an opportunity for lenders to tap into a new market.
And he says that lenders should not be put off by self build development as that in reality the majority of self build projects are not "DIY builds" but involve professional builders, architects and project managers.
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He encourages lenders to make more widespread use of indemnity insurance and 'build out' cover to mitigate the risks of self build projects not being finished. He also cited experience from one specialist self build intermediary which indicates that of the 15,000 funded self-build projects started over the past decade, less than 50 have been repossessed.
The UK has one of the smallest proportions of self builders in Europe - the letter comes as part of the Government's ambitious work programme to encourage growth in the self build sector. He said that whilst Government would play its part, the future growth of the sector depends on lenders themselves backing the country's aspiring builders.
Earlier this year, Mr Shapps launched a new Industry-Government working group - led by the National Self-Build Association - to generate ideas on how to reduce the barriers faced by prospective builders, including the burden of regulation and the lack of access to land and development finance, which for too long, Mr Shapps argues, have thwarted the aspirations of people who want to build their own home.
Mr Shapps said: "Self builders deliver affordable, greener and more innovatively-designed homes; and make a big contribution to the number of new homes built in this country, yet there is scope to significantly increase the number of self built homes in the UK - both for individual households and for community-driven projects.
"I want to create a self build revolution where building your own home is not just the preserve of the privileged few and as the mortgage market continues its recovery, lenders have ideal opportunity to diversity lending into areas such as this. With expert knowledge from established intermediaries lenders can make a profit at low risk.
"I think there are real business opportunities for lenders here - as the market grows - and I call on them to help make this important housing sector more mainstream."
As well as proving much needed new housing, there are significant associated benefits to the economy with a stronger self build sector, such as creating local employment opportunities for building professionals, contractors and other property professionals, and helping individuals acquire new skills.
The Government is leading the way by reducing the burden of regulation on the house building industry and putting power in the hands of communities up and down the country, enabling them to give the green light to new developments through the Community Right to Build, and by identifying appropriate opportunities for self-builders when public sector sites are marketed.
(CD)
