Some international markets for social housing finance are “largely untapped” because of the sector’s reliance on investors that can deal in sterling, a senior executive at a major landlord has said.
A panel on international finance at the NHF Treasury in Housing conference on 9 October (picture: NHF)
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Currency swap ‘obstacle’ leaves international markets ‘largely untapped’ by sector, says CFO #UKhousingDuncan Brown, chief financial officer of Metropolitan Thames Valley Housing (MTVH), said currency swaps have been a major obstacle to accessing additional funding.
Speaking on a panel at the National Housing Federation’s (NHF) Treasury in Housing conference yesterday, he admitted it would be difficult for landlords to start using these financial instruments without backing from a major bank.
Mr Brown said: “I think that currency swap point is key and I think that’s been our biggest obstacle.
“The reason that some of these international markets are largely untapped is because we’ve only really dealt with the investors that can do sterling, either because they have natural sterling, or because they are happy to swap into sterling.
“This sector hasn’t really done much by way of currency swaps.”
However, he added: “I think it would be tricky for us without, really, a big bank to sit behind it and say, ‘we’ll offer you the swap at a reasonable cost.’”
Mr Brown had earlier told the panel he believes there is “huge untapped potential across North America”, including Canada as well as the United States.
One basis point for that market is about £7bn, he explained. He added that the sector should also look to Europe where investors “get social housing”.
Mr Brown highlighted the Japanese government pension fund – the biggest of its kind in the world – which invests internationally but has not put money into UK social housing yet.
Asked by Inside Housing about the potential for the government’s National Housing Bank backing currency swaps, he said: “I think that is a really fascinating question because currency swaps, I think, are one of the biggest obstacles to housing associations being able to access more international funding.
“And we’ve now got, through a combination of Homes England, the National Housing Bank and the National Wealth Fund, access to grant, equity, low cost debt and guarantees.
“I think it’s a really interesting question to ask, could we add some sort of currency swaps to that portfolio which would unlock a huge amount of international funding for our sector?”
But there is still some scepticism in the sector about how significant a role the National Housing Bank will play in social housing finance.
Asked at a later session if the bank will be a “game changer” for how the sector is funded, nearly two thirds (62%) of an audience of 65 conference delegates said they were not sure, a quarter said “no” and just 14% said “yes”.
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