Townsend spent time on-loan at Leeds this season before his switch to Birmingham City.
Townsend, who has been loaned to eight clubs, said: "I have been out on loan a few times but this is completely different.
"When the Birmingham opportunity came, I couldn't turn it down. I have never been involved in a promotion push and I'm loving it.
"It's great being involved in a team that's winning. I just can't wait to see what unfolds."