HCA to test viability of £500m bond
The creation of a £500 million national housing bond has moved a step closer after the Homes and Communities Agency agreed to commission a panel of experts to test its viability.
Liverpool-based housing association Plus Dane has been discussing the group bond scheme with the HCA since the plans were first revealed by Inside Housing in December.
The bond, which could be issued as early as May, would be the sector’s largest ever club bond deal. The plan would see landlords which do not currently develop homes buy into a bond which would provide funds for other associations to build homes. It is hoped the deal would allow non-developing associations to use their assets and avoid criticism from the Tenant Services Authority for not using capacity.
The HCA told Plus Dane last Wednesday it will now set up a panel of finance experts, housing figures and consultants to assess whether the scheme could work and is due to report in late March or early April.
Ken Perry, chief executive of Plus Dane, said 16 landlords, split equally between developing and non-developing associations, have signalled an interest in the bond, but would not yet reveal who they are. Mr Perry said: ‘If we feel at this point that the idea is not viable then it will not proceed, but the learning from the review will add to thinking about new models. If we think it is, we will look to take it to market in May or June.’
According to the TSA’s most recent global accounts for housing associations, the sector has unused security of £24.7 billion and enough cash flow in 2009 to create £2.6 billion of extra borrowing capacity. Housing associations owning fewer than 2,500 homes had access to around a fifth of the extra capacity but were forecast to develop just 3 per cent of total homes.
Industry figures have reacted positively to the Plus Dane plan. Steve Douglas, director of consultancy Douglas Wood, said: ‘Anything that incentivises those associations with unused capacity to use it is a good thing. A bond could be a win-win situation because the non-developing associations would get a return on their capital investment.’
Gavin Smart, assistant director of research and futures at the National Housing Federation, said: ‘The new investment framework is going to require associations to maximise their ability to use private finance to support development of new homes.’
Plus Dane and the HCA are likely to approach The Housing Finance Corporation to issue the bond, Mr Perry said.
