WIREDGOV

Millions to be invested through innovative charitable bond model.

The Scottish Government is investing £25 million next year in charitable bonds that could lead to up to 450 affordable homes being built, Social Justice Secretary Alex Neil confirmed yesterday.

The money, from the UK Government’s ‘financial transactions’ funding, can only be used as loan and equity investment but, through a charitable bond model, the Scottish Government has pioneered an innovative way of creating grant to support affordable housing in Scotland.

The charitable bond enables the Government to make an ethical investment that brings forward future interest in an upfront donation for affordable housing by providing a loan to a social housing provider that is repaid in 10 years.

Through the bonds, £7.3 million of grant subsidy will be generated to deliver more than 125 social rented units, and £17.7 million of loan funding will be provided to support housing associations build over 300 social homes in Scotland.

The investment is part of a £200 million increase in next year’s Scottish Government housing supply budget. That increase is forecast to support at least 6,500 jobs and lever in significant private investment to deliver £600 million of total investment.

Visiting an Edinburgh development by Castle Rock Edinvar Housing Association and Places for People, who were involved in the first Scottish Government charitable bond investment last year, Alex Neil said:

“In a fair and socially just society we want to make sure that everyone in Scotland has access to good quality housing that meets their needs.

“Charitable bonds represent the type of fresh thinking that is helping increase the supply of affordable homes and is supporting our construction industry.

“Last year, with a £10 million investment, we became the only government in the UK to invest in these bonds. The loan from that investment supported Castle Rock Edinvar to deliver quality, affordable homes.

“Next year, our £25 million investment will evolve our approach, using the financing model to direct the grant and the loan to support the provision of much-needed affordable housing across the country.

“Through our partners in councils and housing associations, we have now delivered more than 21,000 affordable homes and are two-thirds of the way towards our target of 30,000.

“We have boosted housing supply budgets by investing £1.7 billion in affordable housing over the lifetime of this Parliament. Our house building rates, per head, continue to outperform other parts of the UK.”

Heather Macnaughton, Head of Community Investment at Castle Rock Edinvar said:

“We are delighted that there is further funding being made available to develop the use of the charitable bond model in Scotland, to increase finance available for affordable housing.

“Continued financial innovation by the sector is required to maximise the return on the Scottish Government’s investment and deliver housing that is affordable to everyone.”

Notes To Editors

This £25 million is part of financial transactions funding allocated by HM Treasury to the Scottish Government. The Scottish Government cannot use financial transactions funding as capital grant, but only for the provision of loans or equity investment beyond the public sector, and it must be repaid to the UK Government in future years.

By using this money creatively and investing it in a Charitable Bond the Scottish Government is able to convert part of it into grant funding for charities and provide loan finance for affordable housing in Scotland. The grant element is a one-off payment for charities and does not have to be repaid to UK Government.

The calculations of impact are based on an established methodology that uses the financial details of the package in conjunction with the Scottish Input Output tables http://www.scotland.gov.uk/Topics/Statistics/Browse/Economy/Input-Output
to assess the impact on jobs.

Contact: Iain V Monk on 0131 244 2056 or 07771 555 601