MHCLG and Treasury officials are in dialogue with sector leaders about amortised grant
The Housing Finance Corporation (THFC) is backing a report by Housing Today and the G15 calling for affordable housing funding reform.
Priya Nair, chief executive of THFC, a non-profit organisation which issues bonds on behalf of social landlords, said the State of the Capital report’s recommendations “demonstrate just the kind of thinking our sector urgently needs”.
The report makes several recommendations for boosting affordable housing delivery. It suggests an amortised grant funding model could help London’s housing associations commit to development while making it easier for the cash-strapped government to invest in affordable housing.
Nair said: “This report champions those innovative solutions and provides a clear, actionable roadmap towards boosting the UK’s stock of affordable housing.
“It is vital that policymakers and industry work in partnership to make this vision a reality and genuinely move the dial on financing for the affordable housing sector.”
Under the amortised grant model housing associations would receive a higher amount of development grant per unit upfront. This would mean the housing association initially needs to borrow much less money privately to make up the development costs, meaning net rent could more easily cover costs without worsening interest cover metrics.
Over time, the association would pay back some or all of the grant interest-free to government. The advantage of this for the Treasury is that the grant paid back can be classified as an investment instead of as straightforward debt or expense to the taxpayer.
As reported last month, civil servants have shown an interest in the model in the run-up to the June spending review. Officials from the Ministry of Communities and Local Government and the Treasury are in dialogue with G15 leaders about the idea.
The amortising grant model is seen by the G15 as a supplementary model which won’t be for everyone in the sector and is needed in addition to more “fundamental” asks also outlined in the State of the Capital report around the rent settlement, rent convergence, access to the building safety fund and grant funding.
The report also calls for affordable housing to be reclassified as national infrastructure.
The State of the Capital was also this week welcomed by property consultant JLL.
Richard Petty, head of UK residential valuation and Marcus Dixon, Head of UK Living and Residential Research at JLL, said: “We welcome this first report from the G15 and Housing Today.
“It is a concise, thoughtful and innovative package of ideas that, as a package of measures, could really start to make a difference to the delivery of more affordable homes in London”
Robyn Lee, managing director at real estate investment and development company HSPG, said: “We’re pleased to see the State of the Capital report highlight the scale of London’s housing challenge, alongside practical solutions that could truly have a positive social impact.
“Reclassifying affordable housing as critical national infrastructure is a crucial step. This recognition would bring much-needed investment and long-term focus to deliver safe, secure homes for the most vulnerable members of society.”
Housing Today and G15’s State of the Capital report
Providing new social tenancies for the 323,800 households on London’s waiting lists would inject at least an additional £7.7bn a year into London and the UK’s economy.
However, while social housing providers and ministers are both aware of the need for more affordable housing, both housing associations and the government have balance sheets constraints.
This inaugural State of the Capital report, produced by Housing Today in partnership with G15, looks at several ideas that could be adopted to help the sector build much-needed affordable housing in London during these difficult times.
The report is written by Carl Brown of Housing Today, in collaboration with the G15.
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