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Housing associations ‘able to borrow more’ under new Affordable Homes Guarantee Scheme
Housing associations will be able to borrow against more generous valuations of their properties in the government’s new Affordable Homes Guarantee Scheme (AHGS).
The scheme, aimed at giving registered providers access to low-cost loans underwritten by government, is expected to deliver around 17,000 new homes for social rent, affordable rent and shared ownership in England over three years.
The £3bn AHGS will allow landlords to borrow based on valuations via the market value subject to tenancy (MV-STT) method, unlike its predecessor scheme which lent based on existing social value for social housing (EUV-SH).
The difference between MV-STT and EUV-SH is that the former values properties based on their – typically higher – value when sold outside of the social housing sector, while EUV-SH provides a value assuming the property will be let in perpetuity as social housing.
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Richard Green, partner at ARA Venn, which will run the AHGS, told Inside Housing that the changes allow greater asset efficiency for borrowers.
He said: “They can borrow more because, on an MV-STT basis, the asset is valued more highly.
“For a given asset on their balance sheet, they are able to get a bit more debt against it, which is helpful for registered providers.”
Richard Petty, head of UK living advisory at valuers JLL, said under the new valuation regime “take up will be high” and in some cases produce values 2.6 times greater.
He added: “The fact that government is prepared to put its guarantee behind a higher level of borrowing, that is implicitly more risky, is a great vote of confidence in the stability and resilience of the sector.”
The previous version of the scheme, the Affordable Housing Guarantee Programme 2013 to 2016, was run by bond aggregator The Housing Finance Corporation (THFC) and regularly offered rates of below 2%.
ARA Venn, which will run the scheme via its subsidiary Saltaire Housing, said it is holding preliminary talks with housing associations and expects to be able to take on formal applications at the end of the year. Mr Green predicted the first bond via the AHGS will come in quarter two of 2021.
Mr Green said: “I think as a broad estimate, if we were issuing some 30-year bonds today, maybe those would be around gilts plus 40 to 50 basis points with a small asset management fee that goes on top.”
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