16 February 2007
Social landlords must be willing to borrow substantially more from private lenders so that twice as many homes for rent can be built each year, the Housing Corporation warned this week.
According to a corporation report, an extra 40,000 to 50,000 homes for rent are required annually to reduce numbers in temporary accommodation. Last year, just 20,761 were built by housing associations and 299 by local authorities.
But such a large expansion will be achieved only if landlords and developers accept less grant for each home, says Unlocking the door, published by the corporation on February 16.
It proposes that the proportion of each home funded through grant is cut by almost a quarter over the next three to five years, from an average of 44% to 34%.
'For every £1 the corporation spends, there should be an additional £2 available through borrowing,' said Peter Marsh, the corporation's director of resources.
The report argues that RSLs have the capacity to raise an extra £6.8bn in private finance – £4.7bn to be funded through rental income and £2.1bn through property sales.
But the figures were dismissed as over-optimistic by the National Housing Federation. The federation, which is publishing its own analysis of borrowing capacity next month, accused the corporation of putting short-term expediency ahead of long-term viability. 'There is a limit to how far grant can be stretched,' said Bob Wilson, the federation's assistant director of market intelligence.
'If that limit is exceeded, the corporation risks either its own investment programme or the financial viability of associations.'
The corporation's report, which also calls on local authorities to provide more land at below market value, is based on a study by financial advisers Grant Thornton. Marsh told Public Finance that such a strategy could mean that fewer RSLs bid for development grants. 'Some may divert to being solely landlords,' he said.
A 2005 review by economist Kate Barker, now a board member at the corporation, declined to set a precise figure for the number of extra homes for rent required.
A parliamentary written answer given by housing minister Yvette Cooper on February 6 revealed that the number of homes for rent built annually by RSLs and councils fell from 42,465 to 21,060 in the ten years to 2005/06.
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