26 November 2004
Housing minister Keith Hill this week responded to private sector calls to boost the lethargic social housing Private Finance Initiative market with a programme to help tenants 'get better homes faster'.
Hill launched the Office of the Deputy Prime Minister's housing PFI procurement pack on November 24. He claimed it would 'simplify the process of agreeing contracts with private partners and speed up the delivery of decent and affordable homes' in hot spots such as the Southeast.
It outlines comprehensive PFI guidance and template contracts that can be used by councils seeking public-private deals, something the ODPM claims will 'reduce the timescales of housing PFI schemes to two years' and help control start-up costs.
The procurement strategy, forged in partnership with the Public Private Partnerships Programme (4Ps), the local government procurement body, is timely.
It was issued on the same day that credit ratings agency Standard & Poor's published a study of the PFI market in housing, which has been slow to develop compared with areas such as health and education. Manchester, Islington and Reading recently became the first three councils to have active PFI contracts.
S&P's study warns that ministers need 'to improve the legislative and regulatory environment' to encourage wider use of housing PFI schemes.
It also claims that, without a clear understanding of the risks involved and how to mitigate them, 'private and public interest in the sector may dissipate and the sector will continue to struggle, limiting funding options for local authorities.'
The government's Sustainable Communities Plan, published in 2003, has effectively limited council housing investment to one of three choices: a PFI scheme, a stock transfer or the establishment of an arm's-length management organisation to manage stock.
The S&P report author, Bram Cartmell, believes that if the problems with risk can be overcome, PFI schemes could provide many councils with their only access to sufficient funding, particularly as ministers have set aside £1.22bn over the next three years to help kick-start projects. Councils have been invited to submit applications for the fourth round of deals by January 2005.
Cartmell told Public Finance: 'The ODPM procurement pack is a step in the right direction and will help alleviate some of the problems in the PFI sector. But it is not going to be a complete cure.
'The market also needs time to mature and to work out the risks, and contractual needs specific to housing.'
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