New legislation, which now allows housing associations to raise money through methods like equity investment could unlock up to £30bn for the sector and save £5bn in government grants, says a new report from Policy Exchange.
Up until this April, housing associations had not been able to access equity-type investments and usually relied on a mixture of government grants and private loans.
But changes in law under the Housing and Regeneration Act 2008, which came into force on April 1st, now allow them to change their financing structure for the first time.
Housing People; Financing Housing says that this recent development could raise £30bn and build an extra 100,000 homes a year.
The report’s author, Natalie Elphicke, says that using the housing association sector’s profits to raise money from organisations like pension funds would save taxpayers £5bn in government grants, as well as helping solve Britain’s chronic housing shortages.
Renters’ rights – including security of tenancy – would not change under the new laws, which would only affect how housing associations raise money.
The report also recommends that housing associations should move towards social enterprise structures modelled on the success of 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.
Elphicke said: “Given that the 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 house building is able to continue even if grant funding 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 they can continue to grow and deliver new homes in this difficult economic climate.”
According to the NCVO Almanac 2010 there are 1,820 housing assocations in the UK which are civil society organisations. They had a collective income of £11.6bn as of 2007/8.
