The loans will enable housing providers to borrow money to invest in new housebuilding on more favourable terms.
First up is the affordable housing guarantee scheme, which will be run by Affordable Housing Finance, part of the Housing Finance Corporation. Through this scheme, the government will guarantee up to £3.5bn of debt for Affordable Housing Finance, which will be lent to housing associations to build new homes to rent out to families in need.
This, combined with £450m in government grants, could deliver up to 30,000 new affordable homes to rent, ministers says, in addition to the 170,000 new homes already being delivered by 2015.
The second scheme will be a £3.5bn private rented sector guarantee scheme. This market is currently dominated by individual landlords rather than organisations, so to encourage greater institutional investment the government will offer direct guarantees to housing providers. Investors and developers looking to branch out into managing homes specifically for private rent will be able to borrow money to invest at more affordable rates, theoretically.
The full application process with government will open shortly but the government said that it was already talking to several large housing providers.
Subject to demand, both these schemes could be boosted by a further £3bn being held in reserve, taking the total amount of government guarantees available to £10bn.
Housing minister Mark Prisk said: “The £10bn housing guarantees schemes are now open for business, with a groundbreaking new offer of low-cost lending to get spades in the ground, create new jobs and deliver thousands of new homes specifically for rent.
“With the government’s backing, investors can now unlock billions of pounds to build high quality homes for private and affordable rent. These changes offer a greater choice for new tenants across the country.”