Monday, 22 September 2014

European bank to lend landlords £400 million

Housing associations are set to benefit from £400 million of cheap, long-term financing from the European Investment Bank.

The Housing Finance Corporation is expected to sign a deal next month to secure the loan, which will mainly be used to fund energy-efficiency projects and could provide an alternative to green deal funding.

A dozen housing associations have tentatively agreed to take individual 30-year loans of up to £50 million from THFC.

The company expects to have the full £400 million of funding allocated before the end of March 2013. ’We have gone out to various associations and have had good interest in it,’ said Steve Primarolo, relationship manager at THFC.

The money was initially thought to be restricted to fund retrofit projects but can now also be used for associations funding new housing that meets level 4 of the code for sustainable homes. Providers are expected to take chunks of between £20 million and £50 million from the fund, although Mr Primarolo said the EIB would prefer to deal with fewer borrowers and larger tranches of debt.

Borrowers have up to three years to draw down the money after agreeing the loan, with the deal priced at the same level as the EIB’s cost of funds. At current rates, that would mean they would be able to finance projects around 1 per cent to 1.5 per cent cheaper than they would through the bond market.

THFC will charge borrowers an arrangement and administration fee but will not change the interest rate charged by the lender. The deal marks the seventh time that the EIB has offered funding to be distributed by THFC since 1998.

The bond aggregator last secured a loan from the European Union’s lending arm in September 2009, when around 30 housing associations shared £345 million of funding. The EIB, which borrows large sums in the capital markets to lend at favourable rates to projects which ‘further EU objectives’, has in the past lent directly to housing associations including Gentoo and Wakefield and District Housing.

Readers' comments (4)

  • Rick Campbell

    Last month at an update meeting tenants were told that our landlord has abandoned building to level 4 ... that's us not being considered then?

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  • Hi Rick. The reality is that at the moment RPs have very little financial incentive to pay the extra money at development stage to move from Level 3 to 4. It is possible that if the rates charged are good (cheap) enough it could offer a suitable incentive for your landlord to reconsider.

    As someone working at an RP (with HCA funding) I can confirm that we would love to be able to build at level 4 and above but with less grant and tough delivery targets it appears that we have decided to opt for code level 3.

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  • Sexton

    How do the borrowers plan to return the loan and interest where in reality they can not increase the rent to reflect the hogh cost of investment.

    In reality this means other tenants who do not benefit from the improvement have to subsidy the return via annual surplus, resulting in the lack of investment in the essential components.

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  • European Investment Bank! Set to benefit! benefit whom? isnt it right that they should give this money to house all the europeans that have come to the UK?

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