£3.5bn of loan guarantees for affordable homes

The Communities and Local Government department announced today it will guarantee up to £3.5 billion of debt which will be lent to housing associations to build new homes to rent out to families in need.

It is also offering £3.5 billion of guarantees for private rented sectors homes, with an additional £3 billion in reserve to allocate to either tenure, depending on demand.

The £10 billion scheme involves the government underwriting new bond issues to finance development, thereby reducing the price.

‘Investors can now unlock billions of pounds to build high quality homes for private and affordable rent,’ said Mark Prisk, housing minister. ‘These changes offer a greater choice for new tenants across the country,’ he added.

The CLG said the affordable housing guarantee scheme could deliver up to 30,000 new homes for rent, when combined with existing £450 million in government grants.

It added the private rented sector guarantee scheme means organisations looking to branch out into managing homes specifically for private rent will be able to borrow money to invest at more affordable rates.

The CLG said a full application process will open shortly, but several large housing providers are already in early discussions about developments that could be eligible for the scheme.

Grainia Long, chief executive of the Chartered Institute of Housing, said: ‘This £10 billion fund was announced back in September, so we’re pleased that the working arrangements have now been confirmed.

‘Housing organisations are ready to work with the scheme to put their development plans into practice and start building new homes. It is an important step that has the potential to support the extra house building that we so desperately need.’

The government also confirmed that The Housing Finance Corporation will be the aggregator body to administer its affordable homes guarantee, as first revealed by Inside Housing. THFC has set up a stand-alone subsidiary, called Affordable Housing Finance, to run the scheme.

The company already performs a similar role by launching club bonds for small and medium-size associations that would otherwise struggle to tap the capital markets.