Loans to Community Land Trusts and other community groups to provide rental properties for local communities at affordable prices.
The Affordable Homes Rental Fund was established to provide loan finance to community led groups within the UK which are undertaking affordable housing projects to be owned for the benefit of the community in perpetuity. These community groups often struggle to access mainstream finance due to a lack of a track record and the availability of assets to be used as security.
For instance, it is becoming harder for community land trusts to obtain commercial mortgages in today’s economic climate, therefore the fund can address this by supplying a flexible form of finance to community land trusts. This in turn enables them to increase the supply of affordable housing, fostering further community cohesion and stability for local people.
Each Affordable Homes Rental Fund investment is scored against five categories: affordability, security of tenure, community leadership, additionality and community sustainability.
Our £2.5 million investment into the Affordable Homes Rental Fund is structured as a 12 year loan paying a fixed quarterly interest payment of 3% per annum plus a 75% profit share of any excess returns generated by the Fund. The investment is secured upon the underlying property assets financed by the community land trusts, which provides a degree of capital protection for investors and risk transfer from the community land trusts to the housing stock itself.
Although the Fund will lend up to 100% of the capital required by a community land trust to pursue an investment, the loan-to-value ratio of an individual investment or property must not exceed 80%, giving investors an additional degree of protection against fluctuating asset prices.
The Affordable Homes Rental Fund helps local people stay connected to their local communities. Key workers and those in need of affordable housing, for example, are able to remain in their communities thanks to the houses built with support from the fund. The result is a diverse and cohesive local community and a stronger network of community land trusts.
By supporting the community land trust market, we hope that it will continue to grow in line with or ahead of general UK housebuilding volumes. In the future community land trusts may be able to refinance their loan from the Fund in the commercial market.