The guarantee scheme (7-page / 54KB PDF) for the private rented sector will support a number of investment options ranging from the building of new homes for private rent to the conversion of existing commercial properties into rented homes, said Housing Minister Mark Prisk and Chief Secretary to the Treasury Danny Alexander in a statement.
Projects with a minimum value £10 million will be eligible for guarantees under the scheme and the new homes will be required to remain in the rented sector until the money has been paid back.
Prisk and Alexander said the scheme aims to reduce risk for lenders by guaranteeing to repay the money in the event that the borrower defaults. This way, housing providers are able to borrow at below current rates, encouraging more investment in the private rented market whilst ensuring the protection of tax payers' money.
Support for affordable housing will be available through a separate guarantee scheme (7-page / 50KB PDF), which Prisk and Alexander said would be complemented by £225m of grant funding to unlock up to 15,000 new homes.
“The announcement today shows we’re getting on with delivering an ambitious guarantee programme, giving projects across the UK a unique opportunity to take advantage of the strength of the UK’s balance sheet, allowing businesses and homeowners to benefit from lower borrowing costs and more affordable housing," said Alexander.
“We must build on this momentum to boost vital investment in the housing sector, creating jobs, supporting small businesses and building the foundations for growth across the country,” he said.
“We’re introducing groundbreaking measures to unlock the vast, untapped potential for growth in the private rented sector," said Prisk. "Investors will now be able to draw upon low-cost lending so they can bring thousands of new homes into the market."
“The housing guarantee schemes will help to get spades in the ground, create jobs, and establish new business models that will ensure the private rented sector continues to grow and more affordable homes are delivered,“ Prisk said.
The Government first announced the guarantees initiative as part of its housing package in September last year. It has since consulted with the housing sector on how the scheme should work and also set up a focus group to provide ideas for the structure of the scheme.
Along with the new guidance, the Government also published an invitation to tender for the running of the schemes.
