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Affordable and social housing: funding and regulation

Last updated: 9 May 2017

At a glance

  • Affordable and social housing is substantially funded by our members, both through direct investment in housing associations as developers, and through provision of residential mortgages to support the purchase of housing association homes.
  • According to the Homes and Communities Agency (HCA) 2016 global accounts of private registered providers, published 17 February 2017, debt (at a consolidated level) increased by £2.2 billion to £66.7 billion. This debt is primarily in the form of bank loans, with new debt increasingly being raised in the capital markets.  Most of this private finance, whether from bank loans or capital markets, is provided by our members.
  • According to the HCA’s Quarterly Survey for Q2 2016-17 (published 2 December 2016), the undrawn facilities in place total £14.3 billion.  
  • Housing associations are subject to strict economic regulation through frameworks and approaches which focus on governance and financial viability as well as customer services.
  • The robustness of regulation gives funders the confidence they need to continue to invest in the sector and helps ensure that associations identify and manage risk appropriately. 
  • Housing policy, funding and regulation is devolved to the UK’s national governments.
  • We and lenders call on the governments of the UK to deliver:
    • Ongoing robust economic regulation
    • A favourable policy environment for existing and new private investment
    • Certainty in relation to grant and rent-setting
    • Stable, consistent and sustainable implementation of welfare reform and the roll-out of universal credit
    • Tabs on this page give an overview of issues and perspectives across the sector, and the particular positions in England, Scotland, Wales and Northern Ireland.
  • Following the Autumn Statement 2016, the government announced that it is preparing a comprehensive set of housing measures to address the needs of people at different stages of their lives, to ensure a housing market that works for all. The Autumn Statement detailed investment of over £7.2 billion in housing - this will effectively double annual capital spending on housing.
  • This increased investment will mean a corresponding increase in the number of new homes being built and a breakdown of the additional investment has been announced by government as:
  1. a new Housing Infrastructure Fund of £2.3 billion to unlock new housing supply with the potential to deliver up to 100,000 homes
  2. £1.4 billion to deliver an additional 40,000 affordable housing starts by 2020 to 2021 - in addition, the government will relax restrictions on grant funding so providers can deliver a mix of homes for affordable rent and low cost ownership, to meet the housing needs of people at different stages of their lives
  3. £2 billion of funding to pilot ‘accelerated construction’ to speed up house building on surplus public sector land (£1.7 billion once Barnett Consequentials are factored in)
  4. £1.8 billion of extra spending by Housing Associations from sources other than central government
  • On 30 November 2016 the Department for Communities and Local Government (DCLG) published a Tailored Review of the Homes and Communities Agency. In the review it is proposed that the social housing regulator be separated from the investment arm of the agency, into a new body.
  • To take this forward, a separate consultation was announced on using a legislative reform order to establish the regulator as an independent body. Read our response to the consultation.

Our position

The CML and lenders call on the UK’s national governments to deliver:

  • Robust economic regulation, which is sufficiently well resourced, independent, credible and able to provide clear, consistent and calibrated judgements on both the financial viability and governance of registered provider associations.
  • A policy environment which is favourable to new and existing private investment and does not expose funders to increased risk or threaten the value of existing security portfolios.
  • Certainty in relation to public funding, including grant and rent-setting.
  • The stable implementation of welfare reform in a way which does not undermine the financial viability of housing association businesses or threaten the creditworthiness of the sector.

Why this is important for lenders

Private funding of housing associations is an important part of the commercial lending and investment activities of a range of financial institutions including banks, capital market investors and pension funds.

The development of homes for sale by housing associations means there is an overlap between the interests of lenders’ commercial funding and residential mortgage lending activities.

Regulators, in their periodic surveys and global accounts for the sector, report that it is financially strong. A number of larger associations attract top credit ratings. Risk is generally well managed and returns are attractive to investors looking for low risk long term investments in a sector which is founded on strong charitable and social credentials.

Although associations are private businesses, they serve a strong social purpose, and supporting this purpose is attractive to many funders and investors.

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