Housing Associations: Funding & Risks In this presentation, we: • Explain how Housing Associations are funding themselves • Discuss investment opportunities • Identify potential risks
Housing Associations:Funding & Risks
In this presentation, we:
• Explain how Housing Associations are funding themselves
• Discuss investment opportunities• Identify potential risks
Housing Association
•What
• Purpose
• Profit?
• Social Housing Providers
Background
state support and bank loans
Financial crisis
government reducing spending
Funding vacuum
Investment Features
Inflation linked debt
Rental Income
Illiquidity
Government Support
Returns
England
Scotland
Wales
Northern Ireland
Housing Associations
178267
26
182
Property Income
Grants
Borrowings
Source of Income
Rental Income
Properties For Sale
Property Management Fees
Development Consultancy
Property Income
HCA (Homes and Communities Agency)SHG (Social Housing Grant)Available Fund
GLA (Greater London Authority)Responsibility?Aim?Grant Requirements?
Local Authorities
Grants
Banks
Government
Capital MarketsPension Funds
Borrowings
Contingency Planning
Investment in social housing
Benefit for long term investors• Cashflows• Yields
Benefit for Housing Association• large source of financing
Property Income• Rental Income• Service Charge Income• Properties For Sale• Property Management Fees• Lease Extensions• Development Consultancy
Revenue Grants• HCA • GLA• Local Authorities
Borrowings• Banks• Capital Markets
Source of Income
Rental Income• Leasehold Management –
service charge collection
• General Needs – charge rent
• Secured Homes Initiative – charge rent
• Retirement Housing
• General Needs Housing -
• Residential Care Homes
• Key worker accommodation
• Temporary Housing
• Shared Ownership
Social Housing Lettings1. General Needs
Housing2. Supported People
Contract Income
3. Key Worker Accommodation
4. Residential Care Homes
5. Temporary Housing 6. Shared Ownership
Social Housing LettingsResidential Care Homes
Providing accommodation and care to older people and people with learning difficulty
Temporary Housing
Short term accommodation for emergency homelessness
Shared Ownership
Where Association has sold part of the equity in the home to the occupier and charges rent on the remaining share retained by the association.
Great Source of IncomeGreat control over Arrears (Arrears get bank to pay it and they will add it to the mortgage)More power to Landlord (can evict under S21 1988 Act)
Non-Social Housing LettingsStudent Accommodation
Majority International students, great source of income, very willing to pay upfront for little discount e.g. 9 months upfront rent payment for 5% off rent.This gives landlords more security in terms of security and enables more accurate forecasts.
Nursing Homes
Homes registered under section 3 of the “Care Standards Act 2000” and provide accommodation and care to older people and people with learning difficulties. -Usually located close to hospitals-on contract with hospitals-reliable income-great impact if contract cancelled
Day Care Centres
Providing day services to older people and people with dementia-to maintain “social landlord status”-have access to government grants-low income source but a requirement to receive grants
Funding from own reserves•Shared OwnershipWhere part of the equity is sold on lease and resident pays rent on the rest of the property• Selling existing properties• Recycled Capital Grant Fund
Risk Analysis
Grants•Homes and Community Agency (HCA)Social Housing Grant (SHG) are received from Homes and Communities Agency (HCA) and it is used to reduce the original capital costs of housing properties. The amount of SHG receivable is calculated on a fixed basis depending on size, location, type of property and the amount received from HCA.
•Great London Authority (GLA)
Borrowings – VA Housing
•Credit facilities of £450m •£378m had been drawn down•Available credit facilities £72m (£2m unsecured & £2 Overdraft facilities) •Revaluation of certain loans arising from historic aquisitions
•Funding Sources
•Loans•Bonds
16%
84%
Funding Sources
Capital Market Bank
Building more Affordable Homes