FINANCING SOCIAL RENTAL HOUSING. AEDES/ DIGH Erik Beijer CEO DIGH

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1 FINANCING SOCIAL RENTAL HOUSING THE DUTCH EXAMPLE AEDES/ DIGH Erik Beijer CEO DIGH

2 TWO KEY FACTORS SUPPORT DUTCH GOVERNMENT BANKABLE : BANKABLE : GUARANTEESTRUCTURES

3 Financial structure Dutch Rental housing sector 1: Central government (Housing Act 1901) ( ) (soft) loans Objectsubsidies Running cost subs. Social Housing Organization (since 1901) (affordable housing) (good basic quality) rent Local government tenants

4 Basic cash flow in rental stock rent Variable costs Fixed costs 0 50 (30) years

5 NET CASH FLOW RESULT GRANT 0 Deficit Surplus

6 STATE SUPPORT PHASE 1 Mixture of object subsidies upfront (20-30% of investment) and long term cash flow subsidy State Loan finance on decent conditions State Loan finance on decent conditions - fixed interest rates - low interest rates - long term

7 Financial structure Dutch Rental housing sector 2 Social Housing Guarantee Fund (W.S.W.; est. 1983) guarantee (reconstruction) Bank (since 1983) Central government ( ) funding loans Housing Association (since 1901) (soft) loans (construction) rent Objectsubsidies - maintenance - regeneration - running costs Local government Rent allowance tenants

8 (STATE) SUPPORT PHASE 2 Mixture of object subsidies upfront (20-30% of investment) and long term cash flow subsidy New construction and regeneration Less state Loan finance on decent conditions - fixed, low interest rates on long term basis GUARANTEE behind WSW guarantees (Triple A).

9 Financial structure Dutch Rental housing sector 3: USE OF GUARANTEE STRUCTURES Secundary security Social Housing Guarantee Fund (W.S.W.; est. 1983) guarantee Bank (since 1988) Tertiary security Central government Primary security Central Housing Fund (rating system!) (C.F.V.; est. 1988) Social Housing Organisation (since 1901) Investmentbudget for urban regeneration rent Local government tenants Rent allowance

10 ((STATE)) SUPPORT PHASE 3 Only subsidies left for inner city regeneration Introduction if Individual Rent Allowance System. No Loan finance available any more: - > Capital market + guarantee structures Tertiary security behind WSW guarantees and CfV (Triple A security).

11 THE LAST EPISODE BRUTERING Associations: full professional developers: integral development Increased role of WSW and CfV New State interventions

12 BRUTERING 1995 Net balance between: - remaining outstanding Loans - remaining subsidies to pay. State Repayments:26,6 Bjn. SHI s Net: 10,2 Bjn.

13 SHI s: Full Professional Developers

14 INCREASING ROLE WSW State Guarantee Triple A (off balance!) Guarantees WSW (own buffer: 500 mjn.) 415 SHI s: 85 Bjn. Guaranteed loans (total balance: 120 Bjn.

15 WSW, besides the guarantee role: Assesses financial positions as well as the overall quality of SHI s devotes attention to their cash flows analyses the market on an ongoing basis requires SHI s to provide information twice a year and asks for both actual and forecast figures advises SHI s on the range of products available in the market is actively involved in developing new financial products for the sector

16 INCREASING ROLE CfV MONITORING FINANCIAL POSITION AND PERFORMANCES SHI s - yearly basis - rating INTERVENTIONS - assessments / reports - interim management - financial support (financial restructuring SHI) ADVICE on: (to Ministry of Housing) - Merging procedures - Changes in Statutes of SHI s HOUSING AUTHORITY?

17 NEW STATE INTERVENTIONS NEW LIMITATIONS OF PLAYING FIELD SHI s - focus on lower income groups - limited activities in gap market. - balanced Level playing field with Commercial Sector - limited (WSW) guarantees NEW YEARLY CONTRIBUTIONS (to CfV) RESULT: - New product development of: - WSW and SHI s: guarantee structure for Gap Market Investments.

18 THE DUTCH CASE AS AN EXAMPLE? MIXTURE OF OBJECT SUBSIDIES UPFRONT and CASH FLOW SUBSIDY? INTRODUCTION OF GUARANTEE STRUCTURES POSSIBLE? (without a Triple A state guarantee behind it?) ROLE OF DIFFERENT PLAYERS? - Central/ local government - CfV?WSW SHRA? - Housing Finance Fund?

CONTEXT. About 19% of all households in the country live in rented accommodation. 44% of people that rent earn between R1500 - R7500 per month

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