The Scottish Government has unveiled a £50 million investment in charitable bonds over the next two years to provide support for almost 1,000 new homes.

Kingdom Housing Association in Fife, Eildon Housing Association in the Borders as well as Orkney Housing Association and Ayrshire Housing Association will benefit from this year’s £25m bonds. A further £25 million is earmarked for 2016-17.

The bonds, issued by social investment charity Allia, provide a new source of finance for housing associations to build around 750 new affordable homes, while interest on the loans provide grants for 200 social homes.

This year’s £25.6m investment has resulted in £18.9m in loans for new affordable homes, and over £6.7m grant funding, to be allocated by the Scottish Government, to build new homes for social rent.

Speaking after visiting a Kingdom Housing Association development near Dunfermline, this morning social justice secretary Alex Neil said: “Innovative financing schemes such as charitable bonds will play a major role in our approach to supporting a major expansion in housing supply over the next parliamentary term.

“Between 2013 and end of March next year we will have supported the building of more than 1,000 homes by investing £62m in charitable bonds, the only government in the UK to do so. The bonds are ethical financial products that are providing housing associations in Scotland with easily accessible development finance for new affordable homes.

“I am delighted that these four housing associations have benefited from the bond programme and I look forward to more development finance for other housing associations over the year.

“We have now exceeded our target of delivering 30,000 affordable homes in this Parliamentary term, including nearly 21,000 social homes. Our ambitions go further though, which is why we have committed to deliver a further 35,000 social homes as part of our plans to build 50,000 more affordable homes over the next five years, backed up with investment of more than £3 billion.”

Phil Caroe, Allia’s director of social finance, said: “The four loans made by Allia with Scottish Government’s investment will have significant benefit for communities across the country. We’re seeing strong demand already from potential borrowers for next financial year and will be inviting other investors to come alongside the government to support the development of more affordable housing in Scotland.”

Kingdom Housing Association, which secured £5.22m of borrowing through the Allia bond, said it will develop 116 new homes for the people of Fife.

Kingdom will on lend £2.62m of the Allia loan to its subsidiary company Kingdom Initiatives Limited which is, for the first time, seeking to build its own homes. Kingdom Initiatives will build 16 homes for sale under the Partnership Support for Regeneration funding in Kincardine which seeks to make available home ownership to specific groups, e.g., first time buyers or families moving from social rented properties in to home ownership. Kingdom Initiatives will also develop a further 9 homes for mid market rent at the same location.

Kingdom Housing Association will build 2 homes in Kincardine for affordable rent plus a further 22 homes in Dunfermline, 49 homes in Cupar and 18 in Lower Largo. All the homes for rent and for sale are planned to be on site during 2016 and be ready for letting and sale in the first half of 2017.

Nick Pollard, Kingdom Housing Association director of finance, said: “We are delighted to be involved in this innovative funding which is being provided by Scottish Government using Financial Transaction Fund support and the Allia charitable bonds vehicle. It enables us to continue to deliver much needed homes across the Fife region meeting our planned objectives.”