The Ministry of Housing, Communities and Local Government has announced that £2.5bn of long-term, low-cost loans will be made available to private registered providers of social housing (RPs) to support the delivery of more social and affordable homes.
The loans form part of what the Government has described as the ‘biggest boost to grant funding in a generation.’
The loans will be available on a 25 -year term, with a fixed interest rate of 0.1%, and will be repayable at maturity in a single bullet. The loans will be unsecured and subordinated to third-party debt, allowing them to sit alongside senior borrowing within an RP’s capital structure.
The loans will be available between 2026 and 2030 through a competitive bidding process, with criteria expected to align closely with the Social and Affordable Homes Programme (SAHP). Applicants will be required to demonstrate deliverability, value for money and, critically, that the loan will enable the delivery of significantly more homes than could be achieved using grant and conventional borrowing alone.
Successful applicants will receive the financing through the newly established National Housing Bank, which will operate within Homes England, and in London through the Greater London Authority.
The National Housing Bank is intended to operate as a broader financing platform for housing and regeneration. In addition to providing low-cost loans for social and affordable housing, the Bank will deploy a wider range of financial products, including debt, equity investment and government-backed guarantees, to facilitate both direct and indirect investment into housing delivery. This broader toolkit is intended to unlock private capital, support the development of large or complex sites that may struggle to secure early-stage funding, and expand access to finance for housebuilders, including SMEs. The Bank is also expected to work with mayoral authorities and other local partners to develop integrated packages of support combining finance, land and grant funding to accelerate housing and regeneration projects.
Within that wider framework, the 0.1% loan product represents a targeted intervention aimed specifically at supporting registered providers to deliver additional social and affordable homes.
Of the £2.5bn allocation, 60% (£1.5bn) is expected to be directed to London. Up to 10% of the total funding may be set aside for the acquisition of section 106 homes. The Government has also confirmed that both not-for-profit and for-profit RPs will be eligible to apply.
The loans are intended to operate alongside SAHP grant funding and support the same social and affordable tenures and strategic priorities. As part of their SAHP application process, RPs will therefore be asked to indicate whether they wish to bid for low-interest loan funding. Further detail is awaited on minimum and maximum loan amounts, additional bidding rounds or whether continuous market engagement opportunities will be available beyond the initial allocation period.
Given their subordinated structure and long-dated maturity, the loans are expected to function as an alternative form of patient capital within an RP’s capital stack. The low interest rate will also enable RPs to overcome the hurdle of interest cover covenants limiting their investment capacity. These factors combined may improve scheme viability and enable providers to deliver additional homes alongside grant and senior debt.
Sarah Whitty, Banking and Finance Partner at Winckworth Sherwood, said:
“The proposed loan scheme represents a significant shift in how affordable housing delivery may be financed. Ultra-low cost, long-term subordinated funding has the potential to act as a powerful catalyst alongside grant and conventional borrowing, particularly for providers looking to scale delivery through partnerships and platform structures. Providers may see this as an opportunity to unlock schemes that might otherwise struggle to stack up financially.”