The ‘Racing Bond’- provision of affordable housing

to support rural employers

Rural Housing Advisory Group

23 January 2014

Contents

1. Identifying the need

2. The solution - four elements

3. Legal agreements

4. Issues

1. Identifying the need

Donoughue report 2004

• Low cost accommodation major problem for employers

• Less tied accommodation

• Only 5% staff access local social housing

• Low wages and mobility limit options

British Horseracing Board Survey 2005 (of 228 Employers)

How Critical Is Affordable Housing to You and Your Business Success?

-

20

40

60

80

100

120

140

Very important Important Not important Don’t know

Nu

mb

er O

f R

esp

on

ses

Does Accommodation Cause Problems When Recruiting Staff?

-

20

40

6080

100

120

140

160

Yes No

Nu

mb

er O

f R

esp

on

ses

Looking for a new solution

• Donoughue: ‘the BHB should work with employers to develop a blueprint to improve the supply of affordable accommodation’ and in particular address ‘ways of financing and building new affordable accommodation’

2. A solution

Four elements

Finance

Land SupplyHousing

development

Management and

maintenance

Housing association

Housing association

Racing industry

Racing industry

Financials – achieving affordability

• Three options:• Low cost land

• Sale of nomination rights

• Bond capital with a ‘social rate’ of return for investors

• Possible fourth source:• Homes and Communities Agency grant funding

Land supply

• From within industry

• Rural exception sites

• Long leasing of land• Minimum 60 years • Reversion includes high quality property• £1,500 income per acre pa• Nil capital sum to developer

Nomination Rights

• For term of lease

• Assignable and mortgageable

• Housing association manages and allocates

• Assured shorthold tenancies

• Racing Welfare acting as broker and bulk purchaser

• Estimated cost £30,000 per nomination right

The Bond

• Terms• Private placement• First issue - £5 million (500 homes)• Minimum investment £20,000• 2.5% pa fixed return, emphasis on social benefits• 10 year term (Hastoe purchase of forward fix)• Terms to restrict housing for racing employees• Asset security from Hastoe

• Investors: • Anchor £2.5 million (Levy Board)• Other investors: Trusts, individuals, racing bodies

3. Legal agreements

Racing

Welfare

• Sale/ purchase noms

• RW on sell nom rights to employers

Land owne

r

• Long lease

Trust

• Deed of trust

• Deed of charge

• BondholdersEmpl

oyee

• Tenancy agreement

Contracts

Bond Co

4. Issues

Issues

• New form of tied accommodation?• Local authorities and views of their

nomination rights on exception sites• Components of solution already in industry• Any major rural employer?• Too complicated?