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There is “definitely” scope to use some of the £8bn of loan guarantees announced in last year’s Budget for affordable housing, the chief executive of Homes England has said.
Speaking exclusively to Inside Housing, Nick Walkley revealed that the possibility of housing associations getting more government-backed loans to build affordable homes is more likely than previously thought.
Initially, Philip Hammond announced the £8bn of loan guarantees as being intended “to support private housebuilding the purpose-built private rented sector”.
Immediately after the Autumn Budget, however, the Treasury confirmed to Inside Housing that it would be consulting on using the funds for affordable housing.
It is understood that the government has been consulting with housing associations as well as other sector bodies on the best model of loan guarantees.
Mr Walkley said: “Leveraged investment is really important because while £8bn is a big number, it isn’t going to get you to 300,000 [homes a year].
“Encouraging more people to be financing [affordable homes] is really important. Affordable homes have great advantages, don’t they? Long term, stable. If you don’t want a high return but you want a stable return, maybe there’s a conversation to be had there.”
At the moment, housing associations can access government-backed loans for affordable housing through the Affordable Housing Finance (AHF) programme, but funds for that programme have all but run out.
Piers Williamson, chief executive of AHF, called Mr Walkley’s comments “promising”.
He added: “If AHF is involved, we would assume it would involve an open tender process. Because it’s a more proven concept now, I suppose it would be more hotly contested.
“Just as we’ve got housing associations merging, we’ve got lenders merging. There’s a lot of concentration of both buying and selling in fewer and fewer pockets. The advantage of a guarantee is typically investors have much bigger caps, or don’t have caps investing in guaranteed paper.”
AHF has provided borrowing to housing associations at very close to or even less than the cost of government borrowing since 2012 but that is due to end next month.
Meanwhile, some associations have found borrowing from the bond markets on their own become more expensive as ratings agencies downgrade associations over the UK’s looming exit from the European Union and debt levels rise in the sector.
The European Investment Bank had been crucial as a lender through AHF, but Brexit has thrown the future of its relationship with the sector into doubt.