Social Housing Speed Read – EIB investment
3rd May, 2016
The European Investment Bank (EIB) has announced it is investing a further £1bn into social housing in the UK in conjunction with debt aggregator The Housing Finance Corporation (THFC).
The EIB will provide two tranches of £500m funding which will be matched by a further £1bn from the THFC.
Background
The EIB initiative was officially announced on 23 April during a site visit by Jonathan Taylor, Vice President of the EIB and Piers Williamson, Chief Executive of THFC to a housing regeneration programme in South Kilburn managed by Network Housing Group and backed by the Affordable Housing Finance programme.
The EIB is the long-term lending institution of the European Union and is owned by its 28 member states. It essentially operates as a provider for long-term finance for sound investment in order to contribute towards EU policy goals.
One of these goals is the expansion of the Affordable Housing Finance programme. The initiative will be provided to housing associations in order to accelerate the building of 20,000 homes in the UK.
Housing associations that are expected to build new affordable properties range from some of the largest London-based operators to community-based providers.
The EIB has a legacy of providing support in the social housing sector and urban renewal which equates to more than £4.2bn since 1998. Furthermore, the EIB has supported investment in 40 projects in the UK.
The majority of EIB’s social housing lending has been in conjunction with THFC and since 2014 the EIB has worked directly with leading housing associations.
Analysis
The £2bn loan will be granted over a 30-year term and benefit from a government guarantee. The aforementioned sum represents the largest ever support for social housing by the EIB anywhere in Europe.
Many will recall that there was an allocation of a loan of £500m in December 2013, under the Affordable Housing Finance initiative, which was welcomed by registered providers and recognised as a successful investment.
To date, in excess of 70 housing associations have already applied for financing under the new initiative and it is inevitable that others will follow suit and put themselves forward for assessment in the coming weeks.
One example of a housing association that has benefited from the first drawdown was GreenSquare Housing Association (GHA). Although the amount was not disclosed, the agreement was completed at a long-term rate of 1.93%, 0.27% below the UK government’s own funding rate. GHA have stated that the funding has allowed progression on a development programme for 1,000 homes.
Reactions
Ultimately, it is very promising to receive assurance that the EIB are making a significant commitment to supporting the UK’s social housing sector.
The EIB have a strong pedigree in providing investment in the UK (forming half of the overall EIB support for social housing in Europe) and look to build on a successful partnership with THFC.
The THFC are optimistic about the initiative; Piers Williamson, chief executive of THFC, said: “Affordable Housing Finance, working in partnership with government, is sourcing some of the most cost-effective long-term finance ever utilised by housing associations to underpin the delivery of badly needed affordable homes, across Great Britain”.
This funding will provide confidence for registered providers to embark on new projects and comfort for members of the public who seek to benefit from the funding.
However, one prevalent issue that is fast approaching and could potentially affect the initiative is ‘Brexit’. In particular, how the initiative would be affected if the UK were not to remain part of the EU.
Shadow Secretary of State for Housing & Planning, John Healey MP, said the money made it clear that “if we want more affordable homes, we must remain part of the European Union……Conservative ministers have slashed investment for new affordable housing, so this new European Investment Bank funding is a vital contribution to tackling the country’s spiralling housing costs.”
The EIB stated that the Brexit debate had not been a factor in the timing of the announcement of the initiative.
However, they would not go so far as to say that if the UK withdrew from the EU the bank’s activities in the UK would not be at risk.
A spokesman for the EIB stated; “we would expect the bank’s engagement to be one of the many issues in a withdrawal negotiation”.
The funding does present a welcome relief to the social housing sector, however, how it will proceed is very uncertain. Let us hope that any decisions made in parliament do not deplete the current funding or discourage future funding.
If you have any questions on this article and how it will affect social housing providers, or any other questions as a social housing provider, please do not hesitate to contact John Murray or a member of our expert Social Housing Team.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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