06 May 2005
A new system of paying development grants to leading housing associations could reduce efficiency gains, landlords have warned.
Instead of making a first grant payment to registered social landlords as soon as they acquire land, the Housing Corporation is waiting until associations start to build homes before giving them 50%. The remaining half is paid on completion.
Under the old system, RSLs received 40% at acquisition, 40% when they started to build and the remaining 20% on completion.
Neil Griffiths, research leader at the National Housing Federation, said associations were waiting six to nine months before receiving any grant. 'If you are in an area where the planning system works well, your time delay is less,' he said.
The corporation, which is under pressure from ministers to build social housing more quickly, is encouraging RSLs to buy land in advance. Some have even created land banks. But Griffiths warned that this would mean extra borrowing. 'That is bound to push up costs and could detract from efficiency savings,' he said.
Lester Hudson, assistant finance director at Metropolitan Housing Trust, said the scale of short-term borrowing would depend on the size of the development programme. 'Under the new grant regime, development interest costs will be higher,' he said.
About 80% of the £3.3bn in grants paid by the Housing Corporation over two years is being received by 70 large RSLs.
A corporation spokeswoman said RSLs had had plenty of time to adjust to the new system since it was announced in October 2003. 'The current formula gives housing associations greater incentives to complete their schemes early, as well as meeting government objectives,' she added.
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