Housing association reaps rewards from bond issue

The money was used to provide accommodation for people with learning difficulties, writes Andy Hillier

A Golden Lane Housing property
A Golden Lane Housing property

Last year Lindsay Owen was worried about where her daughter Kelly was going to live. Kelly, 31, has Down's syndrome and had been the sole resident of a bungalow for a year after the other residents with special needs had moved on.

Her mother says: "She was so lonely when the other two residents moved out. She was so unhappy at the time." But in January this year Kelly moved into a new four-bed house that she shares with three other women in March, Cambridgeshire. It is owned by Golden Lane Housing, a specialist housing association set up by the learning disabilities charity Mencap.

Lindsay Owen says: "I can't say how relieved I feel. Now Kelly has moved in, she's really happy and content, and they're providing a good standard of care."

The property is one of 17 so far purchased by Golden Lane using the £11m it raised through a bond issue last July. Alastair Graham, director of GLH, says it has so far spent about £5.6m of the £11m acquiring the properties and adapting them, providing accommodation for 61 tenants with learning disabilities. It expects to buy a further 16 properties this year with the remainder of the money, which will provide accommodation for about 60 more residents.

Graham says that GLH was attracted to a bond issue because it was proving difficult to raise funding through traditional methods. He says: "In the past we were able to access grants from local authorities or health authorities and use that money for deposits against private sector loans, but grants became scarce and, since the banking crisis, private sector loans have become difficult to secure on acceptable terms."

Graham says the bond issue had three advantages over conventional bank lending. First, it was a cheaper way to access finance than a traditional loan; second, the bond was unsecured so it was not necessary to secure it against its property portfolio; and third, private loans normally require a deposit of 20 per cent or more, potentially affecting an organisation's cash flow.

In addition, persistent low interest rates make bonds very attractive for investors in the current climate. Graham says: "The rate that we offered, which was 4.375 per cent, was above what you can get in a bank deposit account."

Graham says the money has been invested in properties across the country, with a key consideration being whether it can secure enough money from the rental income it charges the tenants.

"We need to charge rents that can be met by housing benefit and are sufficient to generate the 4.375 per cent return," he says. "Only schemes where both of those things are viable can go ahead, but in most cases we're able to make it work."

Graham says that after the success of the initial bond issue – the £11m was raised in just eight days – GLH is now considering raising further capital, but he adds a note of caution.

"Like most organisations, we want a portfolio of capital that comes from different sources. We would not want to put all of our eggs into the bond basket, but it's a successful route to getting capital into our system."

But Graham says the bond issue has helped GLH to address the serious problems that many people with learning difficulties have in finding suitable housing. "It is very hard for anyone to find housing in the current market, but it's particularly difficult for people with learning disabilities because they usually don't work, have enough money to buy somewhere or have priority for social housing," he says.

"It's also good from the perspective of a local authority, which pays the rent, because it is able to provide care in a community setting, which is usually cheaper than funding people to stay in large residential institutions."

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