29 March 2002
An increasing number of urban authorities is planning to establish groups of RSLs to circumvent government rules discouraging more than 12,000 homes being transferred to a single landlord.
But Clive Barnett, head of housing finance at the Royal Bank of Scotland, told the National Housing Federation's finance conference on March 21 that there was a danger some group structures might become too complicated for lenders.
'The more elaborate you are, the more convinced we're going to have to be over the likelihood of loss,' he said.
Referring to Birmingham City Council's plan to set up ten community-based RSLs if tenants vote in favour of the transfer in the next few weeks, Barnett stressed lenders could 'take a decision on anything', providing the element of risk had been identified.
Banks and building societies had shown that they could live with cross-collateral solutions, where funding flows between the different RSLs, as well as non-cross-collateral structures. 'You understand the need to spread risk and, to a certain extent, it spreads our risk as well,' he said.
The most fundamental issue was the purchase price paid for the homes, although, in cases where the government was promising to pay off overhanging debt, an artificial price was sometimes agreed to smooth the process.
'We shouldn't be taking on unnecessary debt just to get things moving,' said Barnett. 'We don't want it to come back to haunt us.'
Earlier, consultant David Mairs told the conference, which was held at the University of Warwick, that a major new issue in urban areas was the potential spending power of RSLs once a transfer had been completed.
Mairs, of Hacas Exchequer Services, said transfer landlords must be aware of the effect to the local economy once building and refurbishment work got under way. 'Contractors may think that all of their Christmases have come at once, but not all of them will be able to cope,' he said.
PFmar2002
