How funding works

Funding to build new homes

Yarlington develops various tenures such as shared ownership, affordable rented, outright sale and many more. Each of these tenures is funded in different ways due to the nature of the product.

Affordable Rent

  • The cost of the development of rented properties must be financed by the weekly rent charged for each property
  • Due to the very low rents charged Yarlington can only borrow a small amount of money from its private funders (banks)
  • This is impacted further by the annual cost Yarlington must expend managing and maintaining the property (rent loss through voids & bad debts, repairs, management costs, major replacement costs)
  • The cost of development far out strips the amount of money
    can borrow thus it procures the properties in two ways:
    • With the aid of public grants issued by the Government or Local Authorities
    • By means of buying significantly discounted properties through the planning gain system
  • The equation is simple:
    • Private Loan (serviced by the net rent) + Grant = Amount Yarlington can pay

Shared Ownership

  • Shared Ownership is financed in the same way as Affordable Rented units however a proportion of the property (usually 50%) is sold to the tenant
  • The rent charged is based on
    ’s retained equity (similar to an interest only mortgage, however at a much lower rate than the private market)
  • Thus the equation is as follows:
    • Private Loan (serviced by the net rent of 50% of the property) + Grant + Income (50% sale at market value) = Amount Yarlington can pay

Outright Sale

  • Outright sale is the simplest equation of the three:
    • Income from sales + profit = Amount Yarlington can pay

Yarlington, being a charity, uses the all the profit generated by the outright sales to help fund Affordable Rented and Shared Ownership homes.

Public Subsidy

  • Public money is available in several forms however the two main sources used by Yarlington are:
    • The Homes & Communities Agency
    • Local Authorities
  • However with the recent economic downturn and government spending reviews the amount available has significantly reduced
  • As a result less affordable housing will be generated
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