More rental homes thanks for online loan platform

More rental homes thanks for online loan platform

Published on: 4 May 2021

Housing corporations need billions to make their existing rental homes sustainable and build more homes. Through the auction site LIST Amsterdam they can now borrow money easily and quickly. APG Asset Management is a co-initiator of this fully digital loan platform. “With fifty approved loans worth half a billion Euros, this is already a great success.”

 

How do you find affordable rental housing if you have a modest income and can forget about buying a house? This is becoming increasingly difficult in the Netherlands. Tenants often have to wait years to get a home. That is why the housing corporations want to build about 34,000 more social rental homes each year; that is double the amount they've had built in recent years. In addition, the pressure on housing corporations to make their (more than two million) existing homes more sustainable is increasing, because in 2050 all housing corporations must be CO2 neutral.

 

New financing source

That can only mean one thing: the 300 housing corporations in the Netherlands will need many billions in the coming years. How will they get that money? Rent increases offer little solace because rents in the social rental sector are capped. In practice, the corporations now borrow money mainly from two sector banks, the Nederlandse Waterschapsbank (NWB) and the Bank Nederlandse Gemeenten (BNG). “A third source of funding has now been added with the platform LIST Amsterdam. Through this online marketplace, corporations can apply for a loan very easily and efficiently, compare the offers from institutional investors and take out the loan that is most favorable for them,” says Hans van Westrienen, senior portfolio manager of APG Asset Management.

 

Taking advantage of the platforming trend

He explains that APG was approached a few years ago by Amsterdam-based entrepreneurs Adriaan Hendriksen and Erik Wilders. “They saw opportunities for an online lending platform where housing associations could make direct contact with institutional investors for their financing needs. Without all kinds of intermediaries, such as brokers; that immediately saves a lot of money. We thought it was an excellent idea and helped them set up this platform.” In doing so, LIST Amsterdam is responding to the trend of platformization: after all, we have become accustomed to online platforms for ordering food, arranging a cab or an overnight stay, or hiring a handyman. Lending money through crowdfunding platforms like Geldvoorelkaar, Kickstarter and Voordekunst have been around for years, but a platform for large, long-term loans is new, observes Van Westrienen: “It’s simple: the housing association puts in its request for money directly to institutional investors via LIST Amsterdam. Regular banks are not involved.” Wouldn’t APG have wanted to set up this platform itself? “No, in this case the rule is: stick with what you know. Setting up an online auction site like this is also subject to strict conditions, based on legislation and regulations.” 

 

More competition, lower interest

The platform clearly meets a need: after two years, some fifty loans have been traded through LIST Amsterdam, with a total value of half a billion Euros. Why is APG participating? Van Westrienen: “We are happy to make these investments through this platform because our clients, the pension funds ABP, bpfBOUW, SPW and PPF APG, not only want to provide long-term loans with a stable and reliable return, but also want to contribute to solving the housing shortage and making homes more sustainable. Moreover, they want to invest more in the Netherlands where possible.” Van Westrienen has had a lot of praise from the housing corporations. “They can now choose from more financiers. And because there has been more competition, the housing corporations pay a somewhat lower interest rate than before.”

Return, risk, costs and sustainability

APG usually bases its investments on four criteria, Van Westrienen explains: “The risk, the return, the costs and the sustainable, social character of the investment. We certainly meet the last criterion - by investing through LIST Amsterdam - given the desire of housing associations to use these loans to build more rental homes and to make existing homes more energy efficient.”

As for the risk; the Dutch State guarantees this type of long-term loans to housing corporations. This is done through the Social Housing Guarantee Fund (WSW), a construction that is interesting to institutional investors like APG. "Because of this guarantee, the risk for us is low. The interest rate on these loans is slightly higher than on Dutch government bonds, so on balance we can realize a slightly higher return at a comparable risk. At the same time, the return on these low-risk loans is relatively low, which makes them less attractive to the ordinary large banks. But that low return is not a problem, in part because by investing through LIST Amsterdam, we score so well on the other three criteria.” And what about the fourth criterion, the costs? “Those are relatively low, because the whole auction process is automated and very efficient.”

 

Simple, digital security system

This automation is possible in part due to extensive standardization, Van Westrienen explains. “Normally, you can incorporate all sorts of tailor-made options into these kinds of large loans. For example the option of early repayment, a variable interest rate during the term, or an annuity structure. With the loans through LIST Amsterdam you only have to deal with a template on which you can enter the term, the amount to be borrowed and the interest rate. That’s very straightforward.” The system works surprisingly simply: at eleven a.m., on fixed days during the week, investors are shown a template on which corporation X has indicated how many million Euros they want to borrow. Interested investors then enter the interest rate they want for that loan. The corporation then gets five minutes to tick which interest rate they prefer, and thus automatically which investor they will go with. And then the deal is done. “We have no contact with the housing corporation in question. We used to process these types of investments manually in our administration. My coworkers in Trade Processing, together with our Integration team, have ensured that everything runs digitally and in a standardized way. Even the signing of the required signatures by all parties is now done electronically, via AdobeSign. Especially now that almost everyone works from home, this is extremely convenient. This digitization means fewer errors, more speed and lower costs. Good news for the housing corporations and for our clients and their participants that we invest for.”

 

 

 

“LIST Amsterdam is very good news”

 

Housing corporation De Alliantie was the first to take out a loan through LIST Amsterdam in 2019. Jan Michiel Aeilkema, treasurer at De Alliantie, said this about it on the ABP website earlier this year, “It is our mission to ensure sufficient social rental housing. In our case, ninety percent of our stock consists of homes for which rents are capped. We can’t just raise those rents to pay for sustainability, for example.

We try to borrow money as cheaply as possible, at the lowest possible interest rate. Because we don't need brokers when we work through LIST Amsterdam and many processes are highly automated, we also have fewer expenses when attracting funding this way. And if we don’t like the offers we get on the platform, we can always approach the sector banks.”

What does Aeilkema think of LIST Amsterdam? “For housing corporations, the social housing market and the large group of people who depend on it, this is very good news. The cheaper loans and lower costs mean that we can keep housing affordable and make it more sustainable. So it's a very good thing for the Netherlands.”