RSLs should borrow more

29 Mar 07
Calls for social landlords to fund a larger share of new housing through private borrowing have been backed by a senior civil servant.

30 March 2007

Calls for social landlords to fund a larger share of new housing through private borrowing have been backed by a senior civil servant.

Richard McCarthy, director general for programme, policy and innovation at the Department for Communities and Local Government, told finance directors that housing associations must be more willing to take risks and use their assets to raise money from lenders.

Speaking at the National Housing Federation's finance conference at Warwick University on March 22, he said it was time for some associations to put 'a little more spark' into their balance sheets. 'You need to achieve those efficiency gains and sweat those assets,' he said.

Last month, the Housing Corporation argued that registered social landlords have the capacity to raise an extra £6.8bn in private finance – so allowing the corporation to cut the proportion of each home funded through grant from an average of 44% to 34%. The NHF dismissed these figures as 'expedient'.

McCarthy, a former chair of the federation, said pressure on RSLs to increase borrowing will grow when Communities England takes over responsibility for housing and regeneration in 2009. 'We want you to manage your risks well as social businesses. That doesn't mean avoiding risk at all costs,' he added.

Global accounts published by the corporation to coincide with the conference show that total RSL assets rose by 12% in 2006 to almost £45bn. Reserves rose by £1.7bn to £13.6bn.

Speaking at a fringe session on house building, Richard Hill, the corporation's director of programmes, said grant rates had already fallen from an average of £35,000 per home to £29,000 since 2003/04. But costs had not come down.

'You are absorbing more of those costs in your organisation and balance sheet,' he said. 'That's not a situation that can continue in the long term.'

PFmar2007

Did you enjoy this article?

AddToAny

Top