£50m charitable bond to deliver hundreds of affordable homes

Kingdom Housing Association in Fife, Eildon Housing Association in the Borders as well as Orkney Housing Association and Ayrshire Housing Association will benefit from this year’s £25m bonds. A further £25m is earmarked for 2016-17.

The bonds, issued by social investment charity Allia, provide a new source of finance for housing associations to build around 750 new affordable homes, while interest on the loans provide grants for 200 social homes.

This year’s £25.6m investment has resulted in £18.9m in loans for new affordable homes, and over £6.7m grant funding, to be allocated by the Scottish Government, to build new homes for social rent.

Speaking after visiting a Kingdom Housing Association development near Dunfermline, this morning social justice secretary Alex Neil said: “Innovative financing schemes such as charitable bonds will play a major role in our approach to supporting a major expansion in housing supply over the next parliamentary term.

“Between 2013 and end of March next year we will have supported the building of more than 1,000 homes by investing £62m in charitable bonds, the only government in the UK to do so. The bonds are ethical financial products that are providing housing associations in Scotland with easily accessible development finance for new affordable homes.

“I am delighted that these four housing associations have benefited from the bond programme and I look forward to more development finance for other housing associations over the year.

“We have now exceeded our target of delivering 30,000 affordable homes in this Parliamentary term, including nearly 21,000 social homes. Our ambitions go further though, which is why we have committed to deliver a further 35,000 social homes as part of our plans to build 50,000 more affordable homes over the next five years, backed up with investment of more than £3 billion.”

Phil Caroe, Allia’s director of social finance, said: “The four loans made by Allia with Scottish Government’s investment will have significant benefit for communities across the country. We’re seeing strong demand already from potential borrowers for next financial year and will be inviting other investors to come alongside the government to support the development of more affordable housing in Scotland.”

Rhonda Leith, Ayrshire Housing Association chair, said: “Alongside the recent uplift in grant rates, this innovative bond finance will help housing associations to build at a much greater rate. The guaranteed funding stream from Allia means that we can now seek out and plan new developments with much greater confidence than before.”

Nick Pollard, Kingdom Housing Association director of finance, added: “We are delighted to be involved in this innovative funding which is being provided by Scottish Government using Financial Transaction Fund support and the Allia charitable bonds vehicle. It enables us to continue to deliver much needed homes across the Fife region meeting our planned objectives.”

Sandy Dennison, finance manager with Orkney Housing Association, said: “We are currently working on an ambitious development programme, and the terms of the charitable bond mean that we can keep building high quality affordable homes whilst minimising future rent increases. We will use this funding to support an additional build of 24 rented properties over the next year.”

Nile Istephan, Eildon Housing Association chief executive, added: “Eildon Housing Association are pleased to have secured £10m of loan finance from the Scottish Government through the Allia administered scheme. The deal makes sense for us as it provides a long term source of funding to grow our business and meet housing need in the Scottish Borders where demand for quality affordable homes continues to outstrip supply.

“The deal has been straightforward to arrange as it provides unsecured loan finance and fits well with our overall treasury management strategy. As a result of this funding we will be able to develop much needed new social rented homes in Galashiels, Newtown St Boswells and Kelso.”