New Thinking for Housing Association Funding

 

Times have never been more challenging for the successful delivery of housing  with 22,000 households in Northern Ireland still in housing stress – new solutions and new thinking are necessary.                                                                                                                                                              

The good news is that according to the Northern Ireland Federation of Housing Associations, this year supported by close to £570m investment from the Department for Social Development and working with the Northern Ireland Housing Executive, Housing Associations have exceeded delivery targets by 20%.  More than £300m of private finance has been secured by Housing Associations to make the government grant go further and provide just over 10,000 new social and affordable homes.                                                                                       

Private loans are a major source of finance. In negotiating loans Housing Associations will need to consider, along with their borrowing strategies, whether they have the power to borrow and that they have the ability to service debt.                                                                                                   

As Associations increasingly seek loan finance for their projects from private sector institutions, they will need to ensure:

  • That the borrowing limit in their rules is not defined to accommodate borrowings where the amount outstanding increases over time, e.g., index linked or deferred interest borrowing;
  • That their rules prohibit them from paying interest on any loan at a rate which exceeds that prescribed by Department of Finance and Personnel; and
  • That their rules do not permit the giving of a floating charge over their assets.

Housing Associations need to operate within their borrowing limits and in particular, Housing Associations borrowing on deferred interest, index linked or deep discounted terms, where the amount outstanding increases over time, will need to institute a procedure to review regularly the level of their undischarged borrowings.                                                                                                 

On the legal side, Housing Associations will also need to ensure they receive sound and robust advice on the provisions of the loan agreements which all lenders will require and subsequently have a clear and organised strategy in providing the security by way of fixed charges over their stock to enable drawdown of the loan available in a timely manner.

Recently, opportunities have arisen to borrow not just from local lenders but also through the European Investment Bank.   The Housing Finance Corporation Limited have been the leaders in providing this type of funding which is lent to Housing Associations in tranches over up to thirty years. These loans can be drawn down for three years after they are agreed and are available for retrofit projects and new developments. Any part of a scheme funded by an EIB loan cannot be sold. Social Housing must remain as social housing while the EIB loan is outstanding.

Recently, opportunities have arisen to borrow not just from local lenders but also through the European Investment Bank.   The Housing Finance Corporation Limited have been the leaders in providing this type of funding which is lent to Housing Associations in tranches over up to thirty years. These loans can be drawn down for three years after they are agreed and are available for retrofit projects and new developments. Any part of a scheme funded by an EIB loan cannot be sold. Social Housing must remain as social housing while the EIB loan is outstanding.

If you would like to discuss any of the above please contact Solicitor Emma Copeland on 028 90 232303 or email her at ecopeland@jmckee.co.uk.