£3bn guarantees rolled over from previous programme

EIB exit

The original scheme got off the mark in 2014 with a £500m loan from the European Investment Bank (EIB), the non-profit institution owned by the 28 member states of the European Union.

Mr Williamson has previously said that “it took EIB funding to get AHF going”, helping to form government risk appetite while encouraging associations to try a new concept.

Senior EIB executives have confirmed the UK’s departure from the non-profit bank as a result of Brexit.

Mr Williamson said: “It would be fantastic if we can use them again, but it’s doable without the EIB.”

Investors in AHF included a range of UK institutional insurance and investment funds, along with some sovereign wealth funds and central banks.

Asked whether there would be the investor appetite to meet a £3bn programme, Mr Williamson added: “We didn’t have a problem last time and given the growth in sterling bulk annuity funds and CDI [cashflow driven investment], we think this is an opportunity to ramp up competition among investors. US investors that can fund in sterling are also able to compete. Clearly, in the background, there is a potential concern based around the UK sovereign rating and hard Brexit.”

Borrower take-up

While most borrowers in the AHGS are English, a handful of Welsh and Scottish registered social landlords have also taken funding via the scheme. The long-dated loans typically amortise to an average maturity of around 20 years.

AHF – which is run through a management services agreement with its parent THFC – applies 10 basis points in fees.

There has been some criticism that borrowing was only for new homes and the application process was regarded as onerous.

Mr Williamson added: “Most of our borrowers think it’s onerous. Yes, it’s a rough job – but it’s taxpayers’ money.”

Reaction among the sector has generally been upbeat, albeit with calls for grant funding to continue.

John Bruton, executive director of finance at Stonewater, said they would be interested in the scheme, but would “need to see the details”.

He said he would like to see a reduction in the “relatively high number of homes required as loan security”. Meanwhile, he suggested that the requirement to deposit one year’s interest in a cashflow reserve could be reduced.

Phil Jenkins, managing director at treasury advisor Centrus, said the last scheme “worked well and efficiently” but questioned the additionality it delivered from a policy perspective.

But he added: “If you shave one per cent off the borrowing cost of £3bn, and apply the interest saving to acquiring new properties at a cost of, say, £150,000 per unit, you end up with an extra 200 homes a year. It’s not even beginning to knock a dent in [the housing crisis].”

Stuart Heslop, head of UK housing finance at NatWest, told Social Housing: “Whether the sector ‘needs it’ or doesn’t need it, it is going to take it – because it will allow them to deliver more volume. The government and the sector objectives are completely aligned - to deliver new housing.”

David Cassidy, head of social housing at Barclays, said: “The fact that government is still pointing resources at the sector and increasing investment either directly or indirectly for guarantees has to
be welcomed.”

He added: “We as a bank haven’t done anything yet to utilise directly that support and that’s not to say we wouldn’t look at doing that, but that’s a slower burn for us.”