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New borrowing vehicle growing fast with backing of 26 associations
More housing associations are joining a new borrowing vehicle “on a daily basis” with the total reaching 26 today, the project’s backer has said.
The new aggregator is intended to help associations group together to raise debt at far cheaper rates than they would be able to on their own.
The project is backed by the law firm Allen & Overy and investment advisors JCRA.
Adrian Bell, director and head of social housing at JCRA, told Inside Housing that he anticipated the vehicle growing to include “30 or 40” associations.
Mr Bell said that the first stage was now complete and that he was working on getting a full specification ready by the end of September.
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He added: “Our objective is to get to a position where we have a sponsor group that is talking for over 20% of the debt in the sector and 20-25% of the units under ownership and we’re very confident that we will arrive there.”
The associations currently signed up – which are from all parts of England, Wales and Northern Ireland – have a combined debt of around £13bn and own and manage 450,000 homes. These include Sovereign, A2 Dominion and Southern Housing.
Housing associations are understood to be seeking new methods of finance since the end of the government-guaranteed debt programme Affordable Housing Finance (AHF), which will finally complete in the coming months.
That programme offered bonds as cheap as 0.2% above the cost of government borrowing, and loans from the European Investment Bank (EIB) at below government rates.
Housing associations have been issuing own-name bonds on the capital markets less frequently since 2015, with the rent cut and an increased level of housing for sale altering investors’ view of the risk profile of the sector.
Mr Bell said: “[Housing associations] are seriously concerned about the process they’re obliged to go through to walk into the capital markets. They’re very worried about the pricing they get. They’re looking for a replacement for AHF, which is clearly phasing out, which offers them many of the same advantages in terms of economics, and they’re looking for much more flexible access to capital markets.
“I think that’s a concern that’s been building up for the past two years. This vehicle is responding to a concern. The more people you talk to, the more you hear them saying ‘in the next two or three years we’re going to have to raise £20m, £30m, £50m or more of debt and we don’t like the hurdles we have to go through at the moment’.”
JCRA is setting up study groups to examine different possible areas for expansion as it moves into its second stage.
