London to receive 60% of £2.5bn low-cost loan fund

Matthew Pennycook has announced 60% of funding through its new £2bn low-cost loans fund for registered providers will be allocated to London.

The housing minister, in a written statement to parliament today has outlined more details about how the funding will work. It will be used to deliver a 0.1% interest funding model first proposed by Housing Today and G15.

Pennycook said the fund, which is available only to private registered providers, will be administered by the Greater London Authority in the capital and Homes England’s new National Housing Bank in the rest of England.

The loans will be for a duration of 25 years and will “used to deliver the same social and affordable tenures and strategic priorities as funding under the Social and Affordable Homes Programme (SAHP)”

Pennycook said there will be a competitive bidding process to make the loans available.

He said: “We expect providers to submit ambitious grant bids for the SAHP when it opens next month, with the loans intended to secure additional homes over and above those delivered with SAHP grant funding alone.”

Up to 10% of the loans will be available to acquire section 106 homes, said Pennycook, with further details to be announced “in the near future.”

The loans will be used to allow providers to develop homes with less of a need to take out upfront commercial loans. This will be helpful for providers with low EBITDA-MRI interest cover who are constrained in the short term on the amount of extra interest costs they can take on. It is a problem particularly in London.

Because the funding is repaid, it can also be classified an asset rather than debt on the public balance sheet.

Ministers have announced several policies in the last 24 hours, including the level of rent convergence uplift, and changes to section 106 and Housing Revenue Account thresholds. It has also published the Decent Homes Standard and Minimum Energy Efficiency Standards.