Senior leaders at Homes England issue ‘rallying call’ to sector over National Housing Bank

The agency was keen to highlight the Treasury’s backing for the bank, helped by the attendance of James Murray, chief secretary to the Treasury, who described it as “game-changing”.

Mr Murray pointed to the bank’s aim to use its government-backed £16bn investment to unlock a further £53bn of private investment. “That’s a really crucial point for us, using public investment to unlock that far greater wall of private investment,” he said.

Alongside the launch, Homes England also published its new investment prospectus: a 48-page document that aims to bring together “for the first time” all the tools at the agency’s disposal.

Ms Rees and Peter Vernon, chair of the National Housing Bank, sat down with Inside Housing after the launch to talk about the pace the bank will operate at, the types of sites it will prioritise and whether more money from the government will be forthcoming.

The bank’s products and rates of return

The £16bn of permanent capital will include Homes England’s £1bn share of the government’s low-interest loans for RPs. At an interest rate of 0.1%, these 25-year loans have been widely welcomed by the sector.

Other debt finance under the bank will include accelerator loans for smaller house builders, infrastructure loans, and lending alliances with banks and lenders. Its equity investments will be aimed at vehicles expecting to deliver more than 3,000 homes, and the bank will almost always take a minority stake, in order to “crowd in” private capital of up to 10 times its investment.

The bank’s first wave of guarantees, launching over the course of its first year of operation, will involve government-backed bonds or loans placed with institutional investors, with a focus on affordable housing tenures.

Overall, the bank’s cash will be roughly split into thirds between equity, debt and guarantees. But Ms Rees emphasises that the aim is to be flexible with how money is deployed. “The whole point of what we’ve set up in the bank is we don’t have to behave like we did as a programme previously. So we have the ability to be more flexible, to look at it over a longer period of time to make a rate of return.”

This flexibility means the rate of return the bank expects will vary across different schemes. Ms Rees says the approach is a “portfolio level of return”, pointing out that the low-interest loans for affordable housing providers “are not going to make gilt levels of return, by their very definition”.

She continues: “So [we] will have to look through this and make sure the overall rate of return fits that. There might be some products and some bits of deployment that won’t, but other bits will have to, and overall, we have to balance it.”

What are the chances of the government providing more cash through the bank? “Look, the honest answer is, I genuinely don’t know. Because the Treasury will have to decide for every £1 spent, is it better off giving a low-interest loan, or is it better off going to schools, hospitals?” Ms Rees says.

The chief executive says Homes England will need to evaluate the bank alongside the Social and Affordable Homes Programme (SAHP), and “genuinely tell a story... about what we think it’s done”.

“Then, if we think it’s hugely successful and additional, we would make a case, obviously, to go back to the Treasury, like we do for all of these things,” she adds.

Target sites and new flexibilities 

The bank is aiming to support the delivery of more than 500,000 new homes as well as major regeneration and mixed-use schemes. Simon Century, Homes England’s chief investment officer and the bank’s boss, told attendees at the launch that the focus of investment is “very, very deliberate”.

“We’re prioritising schemes that are well advanced, often close to delivery, but where progress has stalled because the financing didn’t quite work in the way it needs to,” Mr Century said. Put simply, he adds, the bank is “helping to make those deals stack again”.

Ms Rees tells Inside Housing that the bank is “not particularly targeting particular sites” but will target schemes that are “shovel ready”, where the bank “can make a real difference quickly”.

But this does not rule out coming in at earlier stages in a development, she explains. “I genuinely don’t think we have any kind of ‘we will do this, we won’t do that’ – we’re prepared to do all of it.”

And the bank will not set any specific targets on affordable housing delivery. Ms Rees says that across the £16bn in new finance and £27bn in grant, Homes England is “expecting an unprecedented level of delivery and ambition”.

But, she continues, “in terms of which bit will deliver what, we’re not trying to do that. We’re trying to say this has to deliver really quite a significant change in the number and volume of social and affordable housing.”

As with the affordable homes grant programme, early delivery is a priority for Homes England. But Mr Vernon says this will need to be balanced with longer-term schemes that “take longer to mature”.

“We really do want to talk to potential partners who’ve got schemes that are ready to go, as well as... investing appropriately and bringing forward longer-term, more complex projects. We’ve got to do both, but there’s a real focus on early delivery and confidence,” he says.

“What we do know is that we have lots of experience in Homes England of economic downturns, if that’s where we end up”

Both Ms Rees and Mr Vernon are also keen to highlight the speed at which finance can now be deployed into the sector. This is in part down to increased delegated authority to approve transactions, which “basically means quicker decisions”, Mr Vernon told attendees at the launch.

He tells Inside Housing that the bank can develop tailored financial products to address sector needs, bring them through its board and put them out in the market. This will be a “swift process”, he says, which is “very different” to grant funding programmes. 

This flexibility is especially important in the current economic context, Ms Rees suggests. When asked about the impact of conflict in the Middle East, which broke out at the end of February, the agency’s chief executive said it had “no impact” on preparations for launching the National Housing Bank.

“If anything, this would make us accelerate it and double down even more on the excitement,” she says.

Ms Rees continues: “When it will end, but also how it ends, will be really important. What we do know is that we have lots of experience in Homes England of economic downturns, if that’s where we end up.”

And if that is the case, Ms Rees says Homes England’s response needs to be fast. “The bank has a much better shot of doing that because of the way we’re now set up,” she adds. 

Working with mayors and social landlords

Along with the launch of the National Housing Bank, the agency is also this month moving to a new regional operating model. It has appointed five executive regional directors who will work closely with mayors and local leaders to ensure housing and regeneration schemes reflect local priorities. Metro mayors have also been allocated £7bn under the new SAHP.

This new regional focus is reflected in the way the bank will operate. Pat Ritchie, chair of Homes England, told attendees at the launch that “local teams will work with mayors, with local government, housing associations and others, to ensure that we’re bringing investment propositions to the bank”.

Ms Rees notes a difference between the bank and the grant programme in how mayors might take part in assessing bids from the sector. For the bank, value for money will be monitored nationally by the board, in order to ensure compliance with the government’s Financial Transaction Control Framework.

For the SAHP, there are “literally local seats at the table where [mayors] look at the shape of bids” and how grant funding will be deployed. 

“But we are clear, this delivery gets done with them, and that’s why we reorganised ourselves so that that can happen,” Ms Rees adds.

“Despite the challenges which we all know are out there, you’ve got to genuinely grasp that moment of excitement”

When asked how social landlords can make the most of the National Housing Bank, Ms Rees stresses that it is an “unprecedented level of ambition and investment”.

“They’ve got to grab hold of that, really, despite the challenges which we all know are out there, you’ve got to genuinely grasp that moment of excitement,” she says.

Mr Vernon also points to the importance of having a “collective discussion which embraces smaller and medium-sized RPs”.

During the launch event, Kate Henderson, chief executive of the National Housing Federation, questioned how the bank will work with these providers, which may have strong balance sheets but less development capacity.

In response, Mr Century urged these providers to “tell [Homes England] what you need”, and suggested the bank can play a convening role to bring them into partnerships with larger housing associations.

The bank has kicked off with an initial £100m partnership with Aviva, with the aim of delivering up to 3,300 build-to-rent homes in underinvested areas of cities. Ms Rees tells Inside Housing that following this first partnership, she hopes the sector will “see a very regular drum beat of announcements and business coming”.

What makes the National Housing Bank different to other public financial institutions, Ms Rees says, is that Homes England has “been doing this for a long time”.

“We do obviously have a pipeline, and we’ve been doing this kind of work for quite a long time... we just really hope to up the pace and the scale.”