Get ready to capitalise on the new National Housing Bank

Helpfully, Homes England has also published an Investment Roadmap, providing a more expansive overview of what to expect.

 

However, an ‘Investment Prospectus’, setting out the products in detail, bidding processes and the eligibility criteria to be applied, is yet to be published – we await this with bated breath.

 

For treasury teams looking to secure their development plans for the next financial year and beyond, time is of the essence, and for many the detail about the new products can’t come soon enough.

 

Last year Nigel Barclay, corporate director for loans at Homes England, hinted that the interest rate applied to the new loans would be “very low”, raising expectations in the sector, and the good news is that this has now been confirmed.

 

The Investment Roadmap explains that the NHB is intending to increase access to debt, equity and guarantee products to support the delivery of new homes and mixed-use schemes.

 

By prioritising “shovel-ready schemes” in the short term and backing partnerships with “delivery capability”, the NHB is also aiming to accelerate housing delivery in line with those ambitious government targets.

 

Among the products to be released by the NHB are new long-term debt solutions designed to fill gaps in the funding landscape and accelerate housing delivery.

 

There are also plans to make more of equity investment by developing delivery vehicles and platforms to facilitate the deployment of institutional capital into housing and regeneration projects.

 

The NHB is also intending to build on existing grant funding available from the MHCLG by introducing new guarantees and contingent liabilities to attract investment across tenures and regions.

 

Section 106 and stalled sites

 

Based on the latest information released by MHCLG, we understand that housing associations will be able to bid to use the new low-interest loans to acquire Section 106 homes, which should help to boost development activity significantly.

 

In fact, the government says that up to 10 per cent of the £2.5bn funding for these loans will be set aside to support the delivery of social and affordable homes via this route.

While it’s not yet clear what this will look like, Homes England’s roadmap also highlights plans for an affordable housing acquisition guarantee.

 

This is to establish new ownership vehicles to buy and operate stock and Section 106 homes for a range of uses, including shared ownership, general needs and temporary accommodation.

 

Existing grants available from MHCLG, including the National Housing Delivery Fund and Social and Affordable Housing Programme, will also be made available for “strategic and enabling infrastructure”.

 

This means they could be targeted to challenging projects which might otherwise struggle to secure finance, such as those in brownfield areas requiring a considerable amount of remediation.

 

While the primary focus of the NHB will be persuading housing associations to build more new homes, we believe that it is likely to support those housing associations with mothballed or delayed developments.

 

In particular, this could mean landlords with significant land assets waiting to be developed that are not financially viable using loans at the current market interest rates.

 

Providers with mothballed or delayed developments might be eligible for funding to support them in forging new collaborative partnerships, helping to get work underway.

 

Be prepared, stay alert

 

To ensure they are ready to take advantage of the NHB’s new grant and funding products, housing associations must ensure they are practising good treasury management.

 

This is always important of course, but even more so at a time when competition for funding is expected to be high.

 

Existing property portfolios should be well organised, with unencumbered stock prepped and ready to be secured.

 

Existing funding arrangements should also be evaluated to ensure fitness for purpose and to establish future funding gaps or other issues. This takes time, of course, so it is important to get financial health checks underway now.

 

Adding to the sector’s excitement about the new funding options, there has been some speculation that a step-change in investment in the sector could open up more capital market workstreams.

 

Bond issuances have (largely) been off the table for all but the largest of housing associations for some time, but an increase in institutional investment could unlock large-scale housing and regeneration projects and the capital markets could respond positively.

 

The reopening of capital markets is unlikely in the short term, however, and gilt rates would probably need to fall to make this possible. For now, treasury teams should keep a close eye on market movements and (if it fits with strategies and projections) be ready to move quickly.

 

So, with more detail still to be confirmed, it’s important for housing associations to stay alert to market developments and be ready and prepared to move quickly if required.

 

At a time when costs are high and housing associations are facing a wave of new regulations and standards, being ready to leverage new long-term finance options will be a key differentiator for cash-strapped housing associations.

 

The development dial is showing tentative signs of shifting, and the NHB could finally get things moving again.

 

Jon Coane, partner, and Michael Nutman, senior associate, Anthony Collins