01/07/2009 4:55 pm
We are a very small HA/RSL started as a bit of a hobby some 45 years ago. We have a large demand for our properties and are now looking to expand for the first time. We are aware of the 40% grants available from the HCA but are looking for advice on obtaining the rest of the funding. The total project cost will be circa £1.3m so we need to raise about £750k. Where is the best place to go? Does it have to be a private sector institution? Are there govt loan schemes available? Can we mortage over say 60 years? Any other grants etc available? I should say that the development will be rented to older people only with no right to buy if that make any difference(?) Advice appreciated.
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02/07/2009 12:33 pm
Huw, a housing finance expert will no doubt be along with some detailed advice shortly (what a splendid resource this is...), but I would suggest that perhaps the simplest route for you to adopt would be to approach a larger local RSL and ask them to act as a development agent for you, both in obtaining the grant and the private finance.
I would have thought that an arrangement could be reached whereby the property is developed on your behalf and subsequently sold to you (at a discount to the value of the grant that the developing RSL obtains). The new property, and any you own that are currently not charged, should provide sufficient security for you to obtain a mortgage that the rental stream will pay off.
06/07/2009 4:52 pm
There are a number of ways in which a Housing Association can finance new developments.
Social Housing Grant – now administered by the Homes and Communities Agency – usually funds just over 40% of development costs and is allocated following a competitive bidding process. However, the Agency now recognises that the recession is making it difficult for Housing Associations to develop at low levels of grant and it is possible that it would contemplate providing Social Housing Grant at a higher level.
Private Loans are the other major source of finance. Housing Associations usually borrow from the major banks and building societies. The amount of borrowing that is affordable depends on the expected surplus of income (rent) over expenditure and the rate of interest that can be negotiated. Recently banks and building societies have been looking for higher rates of interest and this reduces the potential to fund new development from loans.
Social Housing Grant and Loans are often insufficient to meet the costs of a new development and Housing Associations often have to be innovative in finding additional resources. The sale of houses on the open market or as part of a shared ownership scheme can generate a surplus that can fund part of a social housing scheme. Similarly, housing associations can use their own resources (land or reserves) to fund new development. Other organisations, such as local authorities or private developers acting under planning gain agreements can also provide finance or land.
There would probably be advantages in discussing this with neighbouring housing associations, the local authority and the Homes and Communities Agency. Other housing associations may be able to share experience and a larger housing association may be able to act as a development agent on your behalf. The local authority would have to support any application for Social Housing Grant and may be able to offer financial, planning or other support. The Homes and Communities Agency is keen to support new build during the recession and may be able to offer advice or resources.
07/07/2009 10:22 am
Many thanks to you both. Really useful info.
Will contact HCA in the first instance and show a bit of leg to get more than 40%.
07/07/2009 4:58 pm
I work for a large South West RSL and manage one of the Homes and Communities Agency Investment Partnerships. The Partnership is made up of about 13 diverse RSLs to facilitate bidding for grant funding. Over 90% of Social Housing Grant is now allocated through investment partnerships and it does allow smaller RSLs to obtain knowledge and expertise to assist in this process. As a Partnership we also share discussions on lenders in the current market and other experience and knowledge of development.
If it would be helpful, I'm more than happy to talk to you further about this and offer any advice on this that may help. Please feel free to give me a call on 01380 735664.
Good luck with it all!