An Excerpt
It is important to emphasize that housing policy in the UK has directed significant capital grants
to housing associations that have put them in the position today to use this collateral to raise
private financing. Unlike the US system which typically allocates grants to individual projects
(regardless of whether it has a nonprofit or for profit sponsor), the UK has invested their public
grants in nonprofits at the enterprise level and encouraged housing associations to own real
estate on a portfolio basis. Although this public funding has been substantially reduced due to
budget limitations, the historic level of investment has enabled nonprofits to build substantial
balance sheets which today they use to leverage private investment.
In addition, the UK used to provide a shallow but universal housing benefit to all eligible tenants
which provides support to help them afford their homes. This benefit also created a rental
income stream to the housing associations which they can flexibly use at the enterprise level to
raise private financing. Project-based rental assistance in the U.S. provides a much deeper
subsidy but this rental income is restricted to an individual project. While it can help an owner
secure or finance a mortgage on the specific property, this approach does not allow the
efficient leverage of private capital on a portfolio or enterprise basis as in the UK. This has
greatly expanded the capacity of British housing associations to raise funds to rehabilitate stock
transfer apartments.