MHCLG confirms go-ahead for policy first set out in State of the Capital report ahead of further detail on affordable housebuilding acceleration package later today
The government has announced its £2.5bn low cost loan fund for social housing providers will have a nominal interest rate of just 0.1%.
This confirms the government is adopting an “amortised grant” or “recycled subsidy” model first recommended by Building’s sister title Housing Today and the G15 group of London housing associations last year.
Paul Hackett, chief executive of Southern Housing, said: ”We are delighted that the government confirmed a nominal interest rate of 0.1%. This is very much what we’ve been arguing for and was the model put forward in the State of the Capital report in March 2025, jointly produced by Housing Today and the G15.
”We believe this will make a difference to associations with constrained EBITDA-MRI cash interest cover.”
Under this model, providers receive higher “amortised grant” (or a loan with zero or nominal interest) upfront which is then repaid at a later stage. This reduces the amount of private borrowing the housing association needs to take on to fund development.
A key question outstanding is whether providers will be allowed to use the loans to “top up” conventional grant or whether they will need to use them separately as an alternative. Using them as a top-up would allow the £2.5bn to go further.
Housing minister Matthew Pennycook has ruled out allowing councils to use the model due to “fiscal considerations”, despite new council leaders membership body Association of Directors of Housing urging government to do so.
The measure was one of several trailed overnight from the housing ministry including an extra £3.5m for the government’s Council Housing Building Support Fund, on top of £5.5m provided last year.
Housing Today and G15’s State of the Capital report
Providing new social tenancies for the 323,800 households on London’s waiting lists would inject at least an additional £7.7bn a year into London and the UK’s economy.
However, while social housing providers and ministers are both aware of the need for more affordable housing, both housing associations and the government have balance sheet constraints.
This inaugural State of the Capital report, produced by Housing Today in partnership with G15, looks at several ideas that could be adopted to help the sector build much-needed affordable housing in London during these difficult times. One of these - an “amortised grant” model to reduce upfront commercial borrowing for housing association development - has since been adopted by government.
The report is written by Carl Brown of Housing Today, in collaboration with the G15.
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