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Innovative financing for
social enterprises
Strasbourg
16-18 January 2014
Gene Clayton
Irish Council For Social Housing
CECODHAS Housing Europe
What are Bonds ?
 Bonds are a debt investment in which an investor
loans money to an entity that borrows funds for a
defined period of time at a fixed rate of interest.
 Bonds are used by governments, municipalities,
companies and social enterprises including social
housing companies to finance a variety of projects
and activities.
 The estimated size of the global bond market is
€58 trillion with 20% of that in Europe.
What are Housing Bonds
 Housing bonds are issued by housing companies to
raise finance to build new or refurbish existing
housing.
 Housing companies use their existing housing stock as
collateral or security and their rental income to pay the
interest on the loan and repay the capital at the end of
the term.
 Bonds can be long-term investments more suited to
financing needs of housing sector
What are Social Impact Bonds
 Social Impact Bonds (SIBs) are a similar debt
investment to Housing Bonds
 The return or interest rate on SIBs is directly related to
improvements in defined and agreed social outcomes
 For example; how many ex-offenders will be housed by
a social housing company and remain out of prison
after 1 year, 3 years, 5 years.
 The rate of interest paid to the lender is linked to the
success of reaching the defined objective.
Why the interest in Housing Bonds?
 2008/09 Credit Crunch: sudden withdrawal of
normal availability of finance
 Worldwide inability/unwillingness of
banks/finance houses to lend
 Affected some countries/sectors worse than others
 “A” Countries: France, Germany, UK, Holland,
Nordic countries; business as usual (more or less)
 “B” Countries: Spain, Portugal, Ireland, Greece;
very difficult or impossible to raise finance from
banks
Impact on social housing sector in Europe
 For A countries: some effect, but housing companies
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continue to develop and meet housing need
Tighter bank lending led to increased use of bond finance
esp. in U. K. using The Housing Finance Corporation
(THFC)
For B countries: total or near collapse of state funding
systems, little or no access to private finance: near or
complete collapse of social housing provision,
Dysfunctional housing market, increased mortgage arrears,
negative equity, potential increase in foreclosures, growing
housing need
Diminished ability of central & local governments & social
housing sector to meet growing housing need
CECODHAS Response
 Recognition that existing financing only works for
some members in some countries
 Following success of housing bond issues esp. in UK,
idea for transnational European Housing Bond put
forward
 Proposal that social housing companies that are
capable of participating come together across Europe
to issue bonds
 Bond aimed at Pension Funds, ethical investors, those
wishing to meet Corporate Social Responsibility
requirements for modest, safe return.
Access to Finance Working Group
 Working Group set up in CECODHAS to establish
feasibility and see what investors want
 Investors want to see all aspects of company
performance in a transparent, comparable way
 Working Group looked at ways of meeting this
demand
Main Activities to be measured
 Financial
Performance: All aspects of financial
performance which impacts risk & return
 Management Performance: How efficient is the
company in providing homes and services
 Environmental/Energy Performance: How green
/energy efficient is the housing stock
 Social Return on Investment: What additional
(measurable) benefits does it bring to neighbourhoods
and society
Potential Benefits
 Less reliance on hard pressed individual national
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banking sectors
Large pool of investors /current low return investment
environment
Potential to create a niche market for a new financial
product
Potential to secure access to sources of secure, longterm funding at reasonable rates
Longer term potential for risk sharing to enable B
countries to access funding to continue to meet
housing need
Short, Medium & Longer Term Aims
Short Term
Identify CECODHAS members willing to take part in pilot
project leading to the issuing of European Social Housing Bond
Medium Term:
 Look to establish a Financial Intermediary (like THFC)
 Establish a credible track record for social housing companies
with investors by raising funds on a regular basis by issuing
European Housing Bonds
Longer Term:
 Build reputation as solid performer to attract investors and
enable qualifying social housing companies from B countries to
access funds and build solidarity
Conclusion
Housing Bonds are:
 A prudent recognition of changed financial
environments in a number of member countries
 An additional source of finance not a replacement of
existing funding systems in member countries
 An opportunity to create a financial product
specifically for the social housing sector across Europe
 A way of meeting growing housing need across Europe
 A long term project with long term benefits
Thank You