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Disappointment over guarantees scheme axe

Housing associations have expressed disappointment at the government’s decision to end a successful programme of guaranteed debt to fund sub-market rented housing.

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The Affordable Homes Guarantees Programme (AHGP) will cease at the end of March after the Treasury chose not to extend it in last week’s Spending Review.

The programme, under which the government underwrites debt to lower its cost, has so far raised £1.4bn of cheap debt for 45 landlords to fund the construction of 13,500 affordable rented homes.

The license was due to expire in March, but many housing professionals had expected it to be extended due to its popularity and success at raising low-cost finance.

It had consistently seen associations borrow at less than 3%, with two housing associations – Catalyst and Coastline – securing deals lower than the cost of government borrowing in May.

It is believed the programme has been ended because it funds affordable rented housing, which is out of step with the Treasury’s focus on boosting homeownership.

Rod Cahill, chief executive of Catalyst, said: “I think it’s disappointing they have removed that because it was a promising source of funding going forward.

“It is of course very, very welcome that the government has put more money into housing, but their strategy is terribly lopsided in terms of owner occupation.

“Currently we have a lot of things making it more and more difficult to build affordable rented housing, and this debt would have been helpful in making it work.”

Ken Youngman, finance director at Family Mosaic, added: “There are still ways for us to access cheap cash, but this is a very clear signal of government’s priorities.”

The end of March will be the deadline for borrowers to be approved for funding, but deals may take until 2017 to finally complete.

Affordable Housing Finance, a subsidiary of The Housing Finance Corporation (THFC) which runs the AHGP, will focus on processing applications which have the strongest credit quality and could approve 10 more borrowers.

It is likely to issue a further tap on its bonds, as well as loaning out some funding from the European Investment Bank (EIB).

Piers Williamson, chief executive of THFC, said: “The AHGP was first developed at a time of housebuilding market failure. Today we see both a market arguably in rude health and changed governmental priorities in terms of tenure choice.”


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