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Innovative Financing Solutions for Co-op Housing Development: Unlocking £2 Billion Potential

Discover how the £2 billion potential in the co-op housing sector can be unlocked through innovative financing solutions. This comprehensive guide explores the uneven distribution of assets across housing co-ops, the challenges of securing grant funding, and the need for robust asset performance assessment. Learn about accessing loans, creating warehouse funds, and the criteria for viable schemes. Explore investment options such as large-scale bond issues and purchase and leaseback arrangements with pension funds to build and manage new homes sustainably.

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Innovative Financing Solutions for Co-op Housing Development: Unlocking £2 Billion Potential

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  1. Developing new homes

  2. estimated £2 billion in co-op housing sector • spread unevenly across c250 housing co-ops • 150 have useable assets? • average 30 homes in each co-op could be cleaned”? • average value of £150K per home? • £675m in available asset cover across the sector?

  3. Value for Money standard “Providers must maintain a robust assessment of the performance of their assets” • will Government come looking for our assets?

  4. its not as it once was! • very little grant funding available if any (15% of scheme costs?) • a lot of strings attached – “affordable rents” • can only be accessed through a Registered Provider who has an allocation or … • HCA community-led housing funding • can be used for variety of tenure approaches

  5. Getting loan funding • very difficult for one off schemes at good rates • work with the Mutual Housing Group and HCA to establish a “warehouse fund” to package the requirements of schemes • estimated requirement of £100m to £200m • including Starlings • funding prospectus to get financial intermediary to arrange funding • could be “phase one” of viable schemes

  6. Criteria for viable schemes • a group that can demonstrate effective governance and likely long term sustainability • a real site and a realistic scheme proposal • active support of local authority • a realistic development partnership • not consultant driven

  7. What might investors fund? • CCH meeting with a pension fund investor brought out the following options: • participating in large scale bond issue (ie. the warehouse fund approach) minimum of £5m at “gilts” + 2% (good rates) • “purchase & leaseback” option – ie. money from pension funds buys co-op properties providing money to develop more homes – and then leases them back to the co-op over 35 to 40 years at a lease rate linked to inflation. Minimum £5m and would prefer batched approaches. Option to buy back at end of period for £1.

  8. using pension funds to build new homes and manage them on 8 to 10 year management agreements. £5m to £10m investments. KPIs agreed with co-op, but no interest in management policies. Management fees between 20% and 35% but VAT an issue.

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