National Housing Bank must help with sector’s ‘lack of cheap funding’

“If it’s going to be standard funding, slightly more quickly and easily available, that’s interesting, but if you set the same net cost of funding as we pay now, I think it will be very poorly used,” Mr Andrew added.

The bank will offer debt, equity and guarantees, but as yet the sector has not been told what interest rates they will be able to secure on lending.

Just last month, bond aggregator MORhomes posted a £67,000 loss in its annual accounts following “challenging” conditions in the capital markets, after reporting a £1.1m profit last year. However, a majority of pension funds still consider housing a priority asset.

The new bank will also deploy some of the £2.5bn in low-interest loans announced in the Spending Review to support building social and affordable homes.

It is hoped that the bank will accelerate housebuilding – especially on complex sites with higher upfront costs – and leverage in £53bn of additional private investment, creating jobs and delivering over 500,000 new homes.

Mr Andrew pointed out that housing associations plan out their funding decades in advance, which means the rates would have to be right for them to opt for the new lending.

“If it was at such great rates, with such great grant rates, that we looked at it and said, ‘Actually, we can build quite a lot more,’ then it’s really useful,” he said.

“But if it’s at the same rate that we can get now, it’s not going to make any difference, really.”

Kirsty Spark, executive director of finance and business services at Accent, said the National Housing Bank is welcome, particularly because the cost of debt has hampered many organisations.

“That’s why we’ve seen so many roll back on the development aspirations, because they’ve just not got the income cover to support the debt,” Ms Spark said.

“We’d really like to know what the structure of that lending is going to look like, the eligibility criteria and security, because that is something that challenges the sector.”

Amanda Williams, chief investment officer at Aster Group, agreed that the bank could “alleviate some of the funding squeeze facing housing providers and developers”.

“The low-cost loans for housing associations could drive more flexible investment, but it’s important to remember that the sector’s capacity for more debt is limited – these loans cannot and should not be a substitute for more fundamental structural support,” she explained.

Housing minister Matthew Pennycook recently told an audience in Westminster that his government’s long-term housing strategy will address the “financialisation of housing” and end overreliance on speculative development.

At Sovereign Network Group (SNG), the government announcements have meant the landlord is now actively reviewing its business plans.

Peter Benz, chief financial officer at SNG, told Inside Housing that the landlord is interested in understanding opportunities for “evergreen funding” from the National Housing Bank, including the use of its financial instruments to support new towns.

A new National Housing Delivery Fund will also be set up to complement the National Housing Bank and administer £5bn of new capital grant funding for infrastructure and land. It will be operational from 1 April 2026.

Homes England recently announced it had appointed Amy Rees, former boss of the UK’s prison service, as its new chief executive.