21 September 2007
Housing associations have said they are willing to increase their borrowing to fund the construction of new housing – providing they can raise rents faster and sell thousands of new homes on the open market.
In a long-awaited analysis of the borrowing capacity of registered social landlords, the National Housing Federation – as expected – dismissed Housing Corporation claims that the proportion of affordable housing funded through grants could be cut from 44% to 34%.
But according to the report Building neighbourhoods, published on September 19, it would be possible to reduce grant rates to 39%, leaving RSLs to fund the remainder from their own budgets, including private borrowing.
The extra borrowing would be partly funded by RSLs increasing the number of homes they build for outright sale from 2,000 to 10,000 per year over the next five years.
At the same time, says the report, associations should be allowed to increase rents by 1% above the retail price index. Rent rises are presently capped at RPI plus 0.5%.
The corporation's suggestion that RSLs could increase borrowing so that just one-third of each new home was grant-funded was contained in Unlocking the door, published in February. But the NHF says this would exhaust RSL borrowing within five years and leave associations to raise £1.5bn through asset sales to make ends meet.
Neil Griffiths, the federation's research leader, urged the corporation to recognise that associations are taking risks and leave their boards to decide whether surpluses should be spent on housing or other community facilities. 'If housing associations are able to borrow more because they keep their surpluses and can put up their rents slightly faster, we can afford to build more homes with the grant that we are already being given,' he told Public Finance.
The NHF report points out that, between 2004 and 2006, RSLs built 33% extra homes in return for receiving just 15% more grant.
But if they were to increase the number of homes built for outright sale to 10,000 per year, the corporation would have to scrap a regulatory rule that says no more than 49% of RSL activity should be 'non-social housing'.
PFsep2007
