Affordable Homes Guarantee Scheme 2020

Published 16 October 2020

Applies to England

This document sets out the high-level rules of the £3 billion Affordable Homes Guarantee Scheme (AHGS) 2020 and is designed to guide potential applicants in establishing whether their borrowing requirements can be met by the scheme.

The scheme will provide loans to support the delivery of new-build and additional affordable housing. Loans will be funded by a capital markets bond programme which will have the benefit of a guarantee from the Ministry of Housing, Communities and Local Government (MHCLG).

The loans will be secured against existing affordable housing assets charged to the lender, with a borrower undertaking to develop Approved Pipeline Schemes identified from a borrower’s development pipeline that will deliver new-build affordable homes.

Scheme rules

1. Eligibility

1.1. AHGS 2020 will only support proposals that will deliver new-build affordable homes including those in existing affordable housing grant programmes (subject to not having started on site at the point of application).

1.2. AHGS 2020 will support the delivery of additional affordable housing in development pipelines, subject to all other scheme eligibility criteria being met.

1.3. Prospective borrowers may also, where applicable, apply for assistance for other affordable homes products (such as the Affordable Homes Programme 2021-2026). Eligibility for the loans will be assessed on the merits of each application irrespective of whether any parallel grant application has been, or is, successful. Where grant or other subsidy is provided to support delivery of any element of the proposal, then the loans will only be available for up to the net debt required to finance that element, subject to State Aid requirements or any successor regime.

1.4. Affordable homes products that will be eligible for both loan security and selected Approved Pipeline Schemes are Affordable Rent and affordable home ownership, plus Social Rent in line with the eligibility requirements under the Affordable Homes Programme 2021-2026, or any successor scheme.

1.5. Minimum size of proposal: total debt requirement to be not less than £5 million.

1.6. Affordable housing assets used for either loan security or selected Approved Pipeline Schemes must be used for Affordable Rent, affordable home ownership (subject to future staircasing) or Social Rent for the period of the loan.

1.7. Loans will be available either in full or where appropriate in tranches within a prescribed availability period. Borrowers must undertake to have commenced construction of each Approved Pipeline Scheme in respect of which an advance has been made within 24 months of the relevant drawdown date.

1.8. Homes delivered must be in England only.

1.9. Borrowers will need to be Private Registered Providers as defined in Section 80(3) of the Housing and Regeneration Act 2008.

2. Security and recourse

2.1. The lender will, as a minimum, have the benefit of a first ranking legal mortgage over the existing affordable housing assets that the loan is secured upon.

2.2. The property security value must be a minimum 105% on an EUV-SH basis and a minimum of 115% on an MVSTT (Market Value Subject to Tenancy) basis, and must be evidenced by a professional valuation addressed for the benefit of the lender and MHCLG.

2.3. There will be annual desktop valuations and five-yearly full valuations, or more frequently subject to market conditions

2.4. Security release will be permitted when asset cover exceeds 115% as evidenced by professional valuation on an EUV-SH (Existing Use Value Social Housing) basis or 125% on an MVSTT basis.

2.5. The lender will have full recourse to the borrower for any shortfall resulting from recovery following an enforcement on security.

3. Fees and costs

3.1. Approved borrowers will be required to meet the arrangement costs for facilitating the loan; this may be paid from loan proceeds.

3.2. Approved borrowers will be required to pay an ongoing management fee to cover the administration costs of managing and monitoring the facility. All borrowers will be required to pay the same ongoing percentage management fee.

3.3. Approved Borrowers may be required to pay additional fees in certain circumstances.

4. Covenants

4.1. A minimum borrower corporate interest cover ratio of 1.0x at all times will be maintained.

4.2. Other covenants may be required depending on the characteristics of individual borrowings.

4.3. Monitoring reports will have to be provided by approved borrowers.

5. Application

5.1. Borrowers will be required to complete a standard application which will detail the information required to support the application. This will be available from the lender at

5.2. All applications will be subject to full due diligence and approval prior to any funding under the scheme being provided. Any such funding will be at the complete discretion of MHCLG. No offer or commitment to provide a funding under AHGS 2020 is implied by the publication of these scheme rules. MHCLG reserves the right to amend the scheme rules at any time.

Frequently asked questions


Question 1. What do you mean by ‘additional new build affordable homes’?

‘Additional new build affordable homes’ are homes in Approved Pipeline Schemes that would enable an applicant to build more new build affordable homes, and that have not have started on site at the point of application. Homes included within the Affordable Homes Programme 2021-2026, equivalent Greater London Authority (GLA) programme, or any other government-funded programme will be eligible subject to not having started on site at the point of application.

‘Point of application’ means a satisfactorily completed application as assessed by the lender. Applications to Homes England or, in London, the GLA, for any grant or other subsidy may be made in parallel with an application under this scheme, and should be submitted in line with the requirements of the specific scheme in question.

Affordable homes on Section 106 funded sites funded both with and without grant are also eligible for consideration, as are affordable homes that receive no grant or any other government funding and are not Section 106 homes.

Question 2. What are the eligibility requirements for Social Rent under the Affordable Homes Programme 2021-2026?

The eligibility requirements for this tenure and other tenures under this funding programme are set out in the Capital Funding Guide provided as part of the Affordable Homes Programme 2021-2026.

Question 3. What is the definition of ‘Approved Pipeline Scheme’?

An Approved Pipeline Scheme means affordable homes in the borrower’s development pipeline (as evidenced by the borrower’s most recent board-approved business plan) that will, on completion, satisfy the scheme’s eligibility requirements and have been approved by the lender. Further information is available from the lender.

Question 4. Is Supported Housing eligible as an Approved Pipeline Scheme?


Question 5. What costs count towards ‘development costs’ for the purposes of delivering Approved Pipeline Schemes?

Development costs mean all capital costs and expenses properly and reasonably incurred by the borrower in developing Approved Pipeline Schemes (including, but not limited to land, housing-related infrastructure costs, construction costs, professional fees, sales and marketing costs, legal costs, any non-recoverable VAT and interest and administration charges incurred in connection with any senior finance) and excluding any costs in relation to demolition or remediation works.

For the avoidance of doubt, new affordable homes delivered on regeneration sites where existing units are being demolished may still be eligible as Approved Pipeline Schemes.

Question 6. Will proposals that incorporate an element of Modern Methods of Construction (MMC) be eligible for funding under the scheme?

The government is supportive of MMC: proposals incorporating MMC would be eligible for funding as long as all other requirements are met.

Question 7. Are deferred drawdowns permitted under the scheme?

Yes. Depending on the circumstances of each loan, a small number of loan tranches may be supported, subject to a minimum size per utilisation. Options may be discussed with the lender.

Question 8. Will borrowers be required to provide the full amount of property security at the point of drawdown, or will they be permitted to draw loan proceeds into a sinking fund and replace them with eligible housing assets over time?

Yes, this will be permitted subject to compliance with the lender’s sinking funds requirements and replacement with full property security within 24 months of the relevant advance.

Question 9. Over what period may loan tranches be taken?

Borrowers must undertake to have commenced construction of each Approved Pipeline Scheme (definition above) in respect of which an advance has been made within 24 months of the relevant drawdown date.

Question 10. What is the maximum loan size the scheme will entertain?

The size of loans offered must be discussed with the lender. However, borrowers should be aware that in approving any loan MHCLG must consider its overall exposure to the relevant borrower and the counterparty limits set by MHCLG in relation to specific Registered Providers.

Question 11. What will be the loan term be?

Up to a maximum term of 30 years.

Security and recourse

Question 12. What tenures will be allowable as security?

Social Rent, Affordable Rent and affordable home ownership will be allowable as security.

Question 13. What level of shared ownership will be allowable as security?

Shared ownership will be allowable, subject to ensuring a robust mechanism is in place to monitor staircasing volumes and receipts. It will be for the lender to discuss with individual applicants the level of shared ownership that is appropriate as security for each borrowing.

Question 14. Is Supported Housing eligible as security?


Question 15. The rules state that construction must have started within 24 months of drawdown – what happens if this covenant is breached?

The loan will be considered to be in default.

Question 16. How will it be judged that construction has commenced?

Schemes will need to meet the definition of start on site used by Homes England and the GLA and set out in the Capital Funding Guide and relevant GLA guidance. This definition will be used for schemes which only require funding under the AHGS 2020 and for schemes which also require grant funding.

Question 17. Will substitution of security assets be permitted?

Yes, subject to the arrangements set out in the loan agreement.

Question 18. What arrangements will there be for a liquidity reserve?

Each borrower will be required to place up to 12 months interest cover, and a minimum of 6 months interest cover, in a liquidity reserve fund held by the lender prior to or on drawdown of that individual loan. Should there be a payment shortfall by that borrower these funds will be utilised by the lender to make up the shortfall; any unused funds will be returned to the borrower once the loan is fully repaid.

Question 19. What will be the arrangements if I wish to repay a loan early?

Any full or partial optional repayment on a loan will be subject to ‘Spens’, the typical make-whole payment for early repayment on long dated fixed rate debt. The lender can provide the details of this calculation.

Question 20. What happens if I want to apply for a loan, and wish to charge an affordable rent without applying for additional grant? How do I comply with the Regulator’s tenancy standards on rent?

To charge an affordable rent, and comply with the Regulator’s requirements, the Registered Provider will need to have a delivery contract for new supply with Homes England and/or the GLA. If a provider already has a contract to deliver homes with Homes England or the GLA any additional homes delivered as a result of funding under AHGS 2020 will be added as additional nil grant homes to the existing contract and monitored separately for the purposes of National Statistics reporting.

If the provider (i) does not have a contract, or (ii) only has an existing short form agreement, then in the case of (i) a new short form agreement will be needed and in the case of (ii) the homes which will be funded under AHGS 2020 will be added as additional to the existing short form agreement and monitored separately.

Fees and costs

Question 21. How will the cost of borrowing be determined?

The cost of borrowing will be a combination of Gilts, a market-determined liquidity premium, the lender’s arrangement and management services fee. In exceptional circumstances the guarantor may charge the lender a fee which will be passed on to borrowers, for example to reflect MHCLG’s cost of risk.

Question 22. Are there any additional fees that may be payable by borrowers?

There are a number of fees that may be charged in certain specific circumstances. For example, borrowers may be charged a special servicing fee should a loan become distressed, and the lender may recover out-of-pocket expenses from borrowers (including but not limited to legal fees).


Question 23. How will covenant arrangements be determined for individual borrowings?

Covenants will be discussed and agreed with the lender on a case-by-case basis.

Question 24. What monitoring reports will be required?

These will include data to enable additionality to be tracked for the purposes of reporting to the Office for National Statistics and for reporting to MHCLG. The loan agreement will set out reporting requirements in full.


Question 25. How long is the application window?

The scheme will be open for applications for a period of 3 years until midnight on Friday 26 April 2024.

Having considered the scheme parameters set out above, should you think the scheme may be suitable for your organisation’s borrowing requirements, please do not hesitate to contact the lender at The team would be happy to hear from you.