Housing associations enjoy funding choice, but policy doubts cloud the horizon

The UK’s housing associations — regulated, non-profit organisations that provide social housing — are becoming steadily more financially sophisticated. Some have issued bonds and private placements for many years, but the tide of ultra-cheap, very long term bank loans that used to be their funding staple has ebbed. Taking its place has been an institutional investor base eager for long term, yielding, safe paper. This has led to many more associations entering the bond market for the first time, either in their own names, or through an intermediary finance company, THFC. A new model is emerging, of five to seven year bank loans for working capital and bonds for longer term finance. Also in the mix are a programme of government-guaranteed funding and loans from the European Investment Bank. But with finance generally available, what will shape the sector fundamentally is changes in government policy. To many, a spate of recent government decisions seem disjointed, even capricious. The state has cut grant funding, forcing associations to do more commercial activities to subsidise their social housing — more recently, it has forced them into rent cuts and given housing association tenants the right to buy their homes. Joining GlobalCapital to discuss the sector’s opportunities and challenges were three associations, THFC, and three leading banks and advisers to the sector.