The Government is hoping the loan finance scheme will attract developers new to building for rent, particularly non-registered housing providers, although housing associations will still be able to participate.
The funding was announced in last year's Spending Review, but with little detail at the time. Last week's working paper from the Department for Communities and Local Government adds more substance ahead of bidding guidance and a prospectus that is expected over the summer and a deadline for bids that has been set for October 2014.
The proposed model will see recoverable Government loans made available to meet part of development costs, with 50% available at start on site and 50 per cent at practical completion.
All houses built under Affordable Rent to Buy must then be let at 'Affordable Rent' – that is up to 80% of local market rates – for seven years or more. After this initial seven year period, and on repayment of the loan finance, the developer will be free to sell the property on the open market or offer it at full market rent.
Access to funding will be through a competitive bidding process, assessed on value for money, deliverability and credit-worthiness.
