The BOE has published the agreements signed on July 31 between Housing, Economy and the Official Credit Institute (ICO), which will mobilize 6,000 million euros to increase the housing stock under affordable rental regime.
Last week, the Official State Gazette (BOE) published the agreements between the Ministry of Housing and Urban Agenda and the Official Credit Institute (ICO), which launch the ICO’s line of loans and guarantees for the promotion of social housing under an affordable rental regime. Specifically, these are the agreements for the implementation of the “Facility for the promotion of social housing” and for the management of guarantees on behalf of the State for the “Facility for the promotion of social housing”.
These lines of aid mobilise 6 billion euros through the ICO for the construction of affordable rental housing. These 6 billion euros are divided into two lines of investment: firstly, 4 billion in loans for public and private developers, from the Addendum to the Recovery, Transformation and Resilience Plan; and, secondly, a line endowed with 2 billion that will guarantee up to 50% of these loans, promoted by the Government of Spain and managed through the ICO.
The agreement was signed at the headquarters of the Ministry of Housing and Urban Agenda on July 31 and chaired by the President of the Government, Pedro Sánchez. The Minister of Housing and Urban Agenda, Isabel Rodríguez; the Minister of Economy, Trade and Business, Carlos Cuerpo; the Secretary of State for Housing and Urban Agenda, David Lucas; and the President of the ICO, José Carlos García de Quevedo, signed the documents that gave the definitive boost to these lines of aid.
The President of the Government highlighted the importance of the investment figure of 6,000 million euros of these agreements, which “fully reflect the ambition of this initiative”. In addition, 4,000 million euros are linked to the addendum of the Recovery Plan, which for the head of the Executive “proves the relevance that these European funds have for the day-to-day, not only of a sector as important as construction in our country, but also of the citizens”. The President, finally, highlighted the commitment of his Government to housing and recalled his will to “turn this legislature into the legislature of housing” that will result in “the construction of that fifth pillar of the Welfare State, which is access to housing”, he concluded.
ICO loans “Facility for the promotion of social housing”
The €4 billion loan line for public and private developers is aimed at projects that increase the stock of energy-efficient social or affordable rental housing through new construction or renovation, and also includes financing for the purchase of land or buildings.
The agreement signed by the Ministry of Housing and Urban Agenda, the Ministry of Economy, Trade and Business and the ICO provides for the financing of operations from January 1, 2022 that meet the conditions established for access to the loan. These loans must be requested before June 1, 2026 and formalized before August 31, 2026.
There will be two ways to access project financing, which will be distributed based on demand. Initially, the ICO is expected to mobilise 2 billion euros and the financial institutions adhering to the loan line will mobilise the remaining 2 billion. However, this distribution may vary depending on demand.
In the event that the ICO is the entity granting the loan, the operation will only require verifying compliance with the requirements and the risk of the operation for the subsequent granting of the loan. On the other hand, financial institutions will analyse the risk of the operation in accordance with their own risk policy, since it is the entity that assumes the risk of non-payment. If the financial institution route is used, once the entity and the promoter agree on the loan and it is granted, the ICO will transfer the amount of the operation to the financial institution so that it can proceed with the loan to the promoter.
Conditions for access to loans
The final recipient must apply for this “social housing” loan through their financial institution or directly with the ICO. It will be used for projects aimed at increasing the stock of social rental housing or rehabilitating existing housing, and which includes actions from the Program for the construction of affordable rental housing in energy-efficient buildings of the Recovery Plan, newly built housing on public and private land, the rehabilitation of buildings that will be used for affordable or social rental, the purchase of land for subsequent construction or assets owned by SAREB.
The homes built with these loans must be used for social or affordable rental, or transferred for such use, for a minimum period of 50 years.
Likewise, the projects will have to be completed on different dates, depending on the type of project financed. Specifically, the financing of the Program for the construction of the Recovery Plan must be completed before June 30, 2026. The construction of buildings on urbanized land before 4 years have passed since the formalization of the loan, with the possibility of extending it for 2 more years. In the case of undeveloped land, the term is 8 years, with the possibility of requesting an extension that extends said term for 4 more years. And a term of 4 years, with the possibility of requesting an extension of 2 more years, in the case of rehabilitation.
Funded projects must meet climate requirements, in which constructed buildings must achieve a primary energy consumption of less than 20% of that established for nearly zero-energy buildings according to national guidelines; and rehabilitated buildings must reduce at least 30% of non-renewable primary energy.
2 billion euros in loan guarantees
On December 27, 2023, the Council of Ministers approved the creation of a line of guarantees for State coverage of financing to increase the housing stock for social or affordable rentals, as well as to improve the existing housing stock.
The guarantee covers up to 50% of the loan capital amount and will be managed by the ICO. The guarantee is free and is granted automatically once the loan is granted, whether it is accessed through the ICO or from a financial institution adhering to the financing line.
The guarantee granted by the Ministry of Housing and Urban Agenda has the same validity period as the loan repayment period or, if longer, 30 years.
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