Pre Tender Market Engagement for GBP3bn UK housing scheme

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Pre Tender Market Engagement for GBP3bn UK housing scheme

Ministry of Housing, Communities and Local Government (MHCLG) in the UK has issued a prior information notice (PIN) for the Pre Tender Market Engagement Exercise on a GBP 3 billion (USD 3.7 billion) Affordable Homes Guarantee Scheme 2020 which is aimed at helping to build around 30,000 affordable homes.

In 2012, the UK Government has announced a GBP 10 billion (USD 12.5 billion) housing debt guarantees programme. GBP 3.5 billion (USD 4.4 billion) of that allocation was made available for affordable housing (resulting in the Affordable Homes Guarantee Scheme 2013, or AHGS 2013) and GBP 3.5 billion (USD 4.4 billion) to support the emerging Build to Rent sector (resulting in the Private Rented Sector Guarantees Scheme, or PRSGS). GBP 3 billion (USD 3.7 billion) was to be held in reserve for either scheme according to demand. Both AHGS 2013 and PRSGS were debt aggregator services run by an external delivery partner under Licence from MCHLG. The delivery partner acted as the debt issuer, having raised debt from the capital markets. AHGS 2013 was generally well-received by borrowers, through providing long-term, low-cost and fixed-rate finance.

At Spring Statement 2019, the UK Chancellor announced a new GBP 3 billion (USD 3.7 billion) Affordable Homes Guarantee Scheme (to be termed AHGS 2020) which is the subject of the issued PIN.

MHCLG and Homes England intend to carry out a Pre Tender Market Engagement Exercise, the purpose of which is to:
— help define the requirement,
— help provide a better understanding of the feasibility of the requirement,
— understand the best approach,
— understand the capacity of the market to deliver and possible risks involved, and
— provide the market with an opportunity to ask questions, raise queries and any issues to be addressed at an early stage.

The outcome of the project would be to appoint a supplier as the Authority’s delivery partner to provide a debt aggregation service that will enable not-for-profit and for-profit private registered providers to develop additional, new-build homes for affordable and social rent and/or affordable home ownership. The supplier will operate the scheme under a Concession Agreement from the Authority.

The successful bidder (who will owe a duty of care to MHCLG) will be required under the terms of the concession agreement to:
— promote the scheme to eligible borrowers,
— manage the raising of finance from the capital markets (likely to be listed debt securities) and on-lend the proceeds to approved borrowers,
— process applications from loan applicants, undertake due diligence, credit assessment and risk assessment,
— provide such management information and stress testing analysis as may be required under the terms of the Concession Agreement, and
— during the term of the loans, perform facility agent-type services such as processing any waivers or amendments and monitoring ongoing reports and certificates received from the borrowers.

Estimated date of publication of contract notice is September 2, 2019.

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