Mark Prisk announces £10bn lending guarantees to boost new affordable home supply
Published by Max Salsbury for 24dash.com in Central Government and also in Development, Finance, Housing
Mark Prisk: "I am going to be focused on delivery"
The Government is setting out how two new schemes will put up to £10bn of lending guarantees to work so investors can expand the private rented sector and build new affordable homes, Chief Secretary Danny Alexander and Housing Minister Mark Prisk announced today.
The ministers are publishing further details on two guarantee schemes that will use the Government’s "fiscal credibility" to provide property investors with low-cost finance so they can deliver new private rented or affordable housing.
The guarantees were announced in September to kick-start private investment in the housing sector, which the Government says will create thousands of new homes and jobs and boost growth across the country.
Following consultation with the housing sector, the Government is setting out eligibility requirements and how the guarantees will be structured, in the scheme rules, and is also publishing an invitation to tender for the running of the schemes.
The guarantees will support new build projects, located in the United Kingdom.
The Private Rented Sector Guarantee will back a variety of options to invest in new homes for private rent, from building new homes to converting existing commercial spaces into rental properties.
Finance will be made available for projects in any part of the UK that have a minimum value of £10 million. The new homes will have to remain in the private rented sector until the money is paid back.
A separate scheme will be available to support new affordable housing projects, which it is claimed will unlock development for up to 15,000 new homes, on top of the Government’s existing house-building programmes.
Mark Prisk said: "We’re introducing groundbreaking measures to unlock the vast, untapped potential for growth in the private rented sector. Investors will now be able to draw upon low-cost lending so they can bring thousands of new homes into the market.
"The Housing Guarantee Schemes will help to get spades in the ground, create jobs, and establish new business models that will ensure the private rented sector continues to grow and more affordable homes are delivered."
The guarantees will support investors in a variety of ways. For example, if an investor wants to spend £20m on a block of 100 flats that they will then offer for private rent, they can apply to the guarantee scheme for up to £16m, or 80 percent of the project cost.
To qualify the homes must not yet have started on site, be well-designed and commercially viable with a plan for rental management, and meet the scheme’s stated criteria. If the application is successful and the scheme goes ahead as planned, the Government will guarantee their debt until it is repaid.
Danny Alexander said: "The announcement today shows we’re getting on with delivering an ambitious guarantee programme, giving projects across the UK a unique opportunity to take advantage of the strength of the UK’s balance sheet, allowing businesses and homeowners to benefit from lower borrowing costs and more affordable housing.
"We must build on this momentum to boost vital investment in the housing sector, creating jobs, supporting small businesses and building the foundations for growth across the country."
Liz Peace, chief executive of the British Property Federation, said: "We welcome the pace at which the Government has brought this scheme to market. Clearly the detail will be important, but the mere fact the Government is offering this kind of support to build-to-let, shows its confidence in the sector, and we hope that proves infectious, building on the momentum of investment the sector has already seen in 2013.
"Significant strides have been made to put the various different elements of the Montague Review in place, with an equity fund, debt guarantees and task force in various stages of development. There is, however, one major area which is outstanding and critical to creating sustained investment in the sector and that is planning.
"Without clarity on its planning treatment local authorities and investors will be cautious about build-to-let. The Government will have the opportunity to clarify this over the summer as the Taylor Review requires new guidance to be drafted and we look forward to dialogue on that."