For those involved in housing and regeneration, we certainly live in interesting times. As I write we don’t know what the chancellor Alistair Darling will announce in the Budget, nor the firm date for the general election. However, one thing we can be certain of is that whatever the detail of the Budget or the outcome of the election, we are facing some tough funding challenges in the years ahead.

Mr Darling has already signalled his intention to cut the national budget deficit by a half over the next four years, and reductions in capital spending across government will clearly feature in this. We don’t know the precise amount for housing, nor the timing, but we know it is coming and that it will be significant.

How should the Homes and Communities Agency and the housing sector respond to this challenge? For me, the key to a successful response lies in three things: emphasising the important role housing will play in the country’s economic recovery; demonstrating the vital importance of good quality housing to the success of places; and, last but not least, showing how we will make more impact with the public funding that is available.

Economic lynchpin

Most of the debate on housing is framed in terms of need and not enough is said about its economic importance. I see this clout exhibited in four ways.

First, the house building and associated construction industry is a significant industrial sector in its own right, forming 6 per cent of GDP and making up 7 per cent of the total UK workforce in 2008/09. It is also geographically dispersed, with a significant presence, and therefore economic impact, in every region. As the bulk of the industry’s supply chain is UK-based, the multiplier effect of housing investment, private and public, is high. For every £1 million of new investment around 21 jobs are directly supported; and for every 100 jobs directly supported there are around 60 more elsewhere in the supply chain.

Second, housing plays a vital role in supporting the growth and competitiveness of the wider economy. The 2005 Barker review of housing supply found that undersupply can restrict labour mobility and create financial and operational burdens for businesses recruiting in high cost areas. More recent research estimates that the wider economy in the south east would benefit to the tune of more than £3 billion annually, were housing supply to be increased by 100,000 units above the long-term average.

Third, with residential property accounting for around a third of all energy consumption and a third of all UK carbon dioxide emissions, the transition to a low carbon economy represents a major opportunity for new economic activity and jobs, and to drive innovation in the sector.

And fourth, housing is an important part of regeneration and renewal, stimulating jobs and growth, and a renewed sense of pride in some of our most deprived communities. Investment in housing can be at the forefront of the wider drive to tackle unemployment, increase skills and improve communities.

Our development of the single conversation initiative with local authorities is, in part, driven by the need to locate housing as an essential part of ‘place making’. It is hard to see how anywhere can succeed unless it has understood its housing needs and built them into plans for the future.

Local challenges

In the same way as the importance of housing to the economic and social well-being of the country as a whole can be made, so the case can be made at local level. The task will vary from place to place but the issue of housing and its importance will be a constant feature. This is about more than numbers; it goes to the heart of why some places succeed while others struggle.

We need to get more from less. The challenge here is to demonstrate that the public funding available really has made the biggest possible impact. While the reaction of some is to say that we are already doing this, my experience talking to housing associations and local authorities is that they are very realistic about the need for more change.

To be a success, this will need to be a collaborative effort and not just a collection of top-down initiatives. But we can now see some of the key elements: alignment; flexibility; innovation and leverage.

Alignment of public funding streams is key and is something we are already addressing through the single conversation process. We will simplify our 17 spending streams to just four, which will reflect our broad areas of priority and focus. With that will come the flexibility to target our investment where it can have maximum impact in areas where it is needed most.

We still need more innovation in stimulating new supply. Through our public land initiative we aim to attract new development providers and make the most of public-owned land, deferring the immediate financial return in order to make the most of wider social value through development.

Alongside this, the private rented sector could offer a new source of investment for house builders and help to make private rental an option of choice for consumers rather than the last resort.

Finally, leverage. We need to harness public assets more effectively to secure more private finance. We need to use the value inherent in high quality sites, ripe for development, to secure regeneration benefits in other less prime areas of a given neighbourhood, for example. And our planned move from a grant to an investment-based approach under the national affordable housig programme is another example.

The resilience and creativity of the sector gives me a lot of confidence that we can rise to the challenge. However, the next six months are critical and could have a profound influence for many years to come.

Sir Bob Kerslake is chief executive of the Homes and Communities Agency

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