by Paul Goodman
Policy Exchange has been concentrating much of its energy recently on housing. Today, it's published another work on the matter. Housing People; Financing Housing
recommends that housing associations should be set free to raise money
through methods like equity investment.
Natalie Elphicke, the report's author, claims that this so-called “equitisation”
could raise £30 billion and build an extra 100,000 new homes a year – and that using the housing association sector’s profits to raise money from
organisations like pension funds would save taxpayers £5 billion in
government grants, as well as helping solve Britain’s chronic housing
The report recommends associations should move towards
social enterprise structures modelled on the successes of the Co-op,
the John Lewis Partnership or BUPA. Under these mutual models, investors
use flexible methods like buying preference stock – where interest gets
paid only when the housing association is in profit. Renters’ rights – including security of tenancy – would not change under
Until this April, housing associations were unable to access
equity-type investments . But changes in the law now allow them to
change their financing structure for the first time. The number of new mortgages being arranged is at their lowest level
since 1975, while housing waiting lists have risen from 1 million in
2000 to 1.75 million today. The number of social homes has fallen by
250,000 in the last eight years.
Policy Exchange Deputy Director Natalie Evans said –
“More housing is desperately needed but housing associations can’t raise the finance to build. Changes in the law now mean that they are no longer forced to look only at conventional loans.
“The credit crunch also means that banks simply have less cash to lend at the moment. At the same time, investors like pension funds are looking for secure long-term places in which to put their cash. Dividends of 4-5% would be very attractive to them.
“There is no risk of nasty landlords coming in and booting out social tenants – their rights are already protected under the law and under regulation – this paper is just about using the money and assets better and more wisely.”
Ms Elphicke said –
“Given that government is under severe fiscal pressure, and will surely examine the future of grant funding, equitisation will allow better value for the taxpayer, and ensure affordable housebuilding is able to continue even if grant is reduced.
“The current method of financing housing has been in place for 30 years. The time is right for housing associations to explore new ways of financing housing to make sure that they can continue to grow and deliver new homes in this difficult economic climate.”