TODAY might have marked the beginning of the end of the housing crisis. Top housebuilder Taylor Wimpey was due to announce £500m of new investment and housing minister Caroline Flint was poised to reveal details of the government's market rescue package.

Instead things got even worse. Taylor Wimpey was forced to admit that the new investment the markets had expected only two days ago was not coming. 'In the light of current market conditions we have not been able to conclude a satisfactory transaction,' it said in a trading update [go here to download details and its presentation to City analysts]. It also announced the departure of its finance director, a £550m write-down on the value of its landbank and the loss of another 300 jobs. 

The situation is especially shocking since Taylor Wimpey is also a significant presence in the troubled Spanish and US housing markets. It thought it had learned the lessons of the US crash by cutting spending and jobs quickly but plainly even it has been caught out by the speed of the deterioration in conditions here.

Elsewhere in the construction industry, it was more doom and gloom. The RICS said workload in the private housing sector was falling at the fastest rate in the history of a survey that began in 1994. One housebuilding expert predicted that 100,000 jobs will go in the industry this year.

Cue the lifeboats. Flint revealed the bare bones of the market rescue package on the Today programme this morning [go here to listen again - but you'll have to scroll through to an hour and 15 minutes in]. There would be an additional £270m - she admitted this would be reallocated from the existing budget - to buy up unsold homes and there would be flexibility to bid for further rounds of the money on what sounded like an ad hoc basis rather than quarterly. And, as widely trailed last week, Housing Corporation payment terms would be changed so that builders get paid more up front. 

The details just announced here confirm that the £270m is part of the existing £8.4bn Housing Corporation budget for 2008-2011 and brings the total amount of that allocated to £3.6bn. A 'new national clearing house' would be set up so that housebuilders can approach the Corporation with proposals to sell unsold stock to housing associations - building on the £200m already announced (and reallocated from the existing budget). 

There would also be 'increasing flexibility around when providers can bid for funding' from the £8.4bn budget and be able to come up with proposals at any time rather than waiting for the quarterly bidding round. 

The good thing about the package is that flexibility - the room for manoeuvure that it leaves to bring funding forward to buy up unsold land and homes and do more in future. Further details may yet emerge but my instant reaction is that, compared to the housing market rescue package of 1992, this one is still puny. As a reminder, the then Conservative government came up with £577m of new - not reallocated - money for associations to buy up unsold homes. The results were far from perfect but the rough equivalent at today's house prices would be more like £1.5bn. 

The situation in the housebuilding industry now is even worse than it was in 1992. As an illustration, share prices have fallen so low that the government could comfortably afford to nationalise the leading companies (as Daniel Thomas noted in the FT yesterday). Crazy idea or not (and all their land would be publicly owned...hmm), the crisis surely calls for more than shuffling money around here and a bit more flexibility there.

Posted by Jules Birch, July 2

Posted in Finance, Housing associations, Housing market, Housebuilding

IT'S far removed from their key role of providing new affordable homes but housing organisations' work on financial exclusion has just as big an effect on the lives of the communities they serve. So today's announcement by financial secretary Kitty Ussher that the government is to relax the rules on credit unions has the potential to have a major impact.

At the moment credit unions have to prove that their members share a 'common bond', such as living in the same area. But Ussher confirmed that membership criteria will be liberalised and the common bond radically changed so that credit unions can provide their services to a wider range of people.

That could clear the way for more housing associations and possibly other landlords to run their own credit unions. In November, Inside Housing revealed that Riverside Group was carrying out a feasibility study into setting up a credit union for all its tenants and staff in anticipation of the change in the law. 

The legislative reform order announced by Ussher would also make it possible for groups, rather than just individuals, to become members and allow credit  unions to pay interest on members' deposits and charge the market rate for services such as chequebooks and money transfers. There could also be scope for housing groups and tenants to benefit from a change in the rules on cooperatives to remove the limit on risk share capital.

Associations are already involved in organisations like Change and the National Housing Federation is also pushing the financial inclusion agenda. It's early days yet but today's changes appear to open the way for an expansion of financial exclusion work in the poorest communities. Largely abandoned by the banks and prey to the eye-watering interest rates charged by doorstep lenders, they deserve an alternative - especially one that is in their landlords' interests too.

Posted by Jules Birch, June 30

Posted in Finance, Housing associations, Poverty

AFFORDABLE housing was meant to be one of the key issues of Gordon Brown's premiership. But by cruel irony a year that has seen the announcment of the biggest increase in investment since the early 1990s also saw the return of a more unwelcome aspect of that period - a housing market crash.

David Orr of the National Housing Federation joins the assessment of Brown's first year in office today by 'warmly applauding' his early decision to set the ambitious target of 3m homes by 2020 but calling for more support for housing associations in the wake of the dramatic change in market conditions. 

Caroline Flint, the housing minister who took over after the good bit and is having to make the best of the bad, does her best to sound upbeat in an interview in the Financial Times today. The paper reports that the government will announce a new package of initiatives to help homeowners and housebuilders next week, with one eye-catching proposal that the Housing Corporation will give them bigger upfront payments to improve their cashflow. 

It remains to be seen what else the package will include but it seems unlikely to be enough for the NHF. Orr argues - unsurprisingly - that ministers should 'support housing associations in developing mortgage rescue schemes that prevent households from losing their homes, and they should help associations buy unmarketable homes from private developers'. 

The government should listen both to that and to calls from the British Property Federation for action on build to rent. The housing crisis certainly needs a more radical response than has been seen so far. Otherwise Gordon Brown will be remembered as the prime minister who pledged 'an end to boom and bust in the housing market' when Labour won power in 1997 and has ended up presiding over both and as the man who promised the biggest expansion of housebuilding in 30 years and ended up with the lowest level of output in 60.

Posted by Jules Birch, June 27 

Posted in Housing associations, Housing market, Politics

TWO days, two Pyrrhic victories for housing associations on Ground 8, the controversial procedure that means they can evict tenants with eight weeks of rent arrears with no room for discretion by a judge.

Yesterday, the High Court rejected an application by a former tenant of London & Quadrant that it breached the Human Rights Act when it used Ground 8. And in a House of Lords debate on Monday an amendment to the Housing and Regeneration Act to make it illegal for associations to use Ground 8 was withdrawn to allow a working party on the issue to complete its work. 

But 'victory' can rarely have tasted less sweet. The High Court dismissed London & Quadrant's argument that its decisions were not subject to judicial review since it was not a 'public body' - a nightmare ruling that could mean not just a flood of judicial review applications but could also threaten their ability to raise private finance. 

In the Lords, although the government successfully argued for more time, the minority of associations that use Ground 8 came in for trenchant criticism. Lord Best (a former director of the National Federation of Housing Associations) said it could not be right that tenants could lose their home because their local authority had failed to pay their housing benefit or that associations could use Ground 8 to make them pay up. Having it in the Bill was 'an offence against justice'.

Communities minister Baroness Andrews said the working group needed more time to consider further research and come up with recommendations. But she also had harsh words for associations that use the power when she agreed that 'serving notice in such circumstances is an affront to justice'.

Associations - and lenders - who argue that it is important to keep the option to use Ground 8 may yet get their way. The working group may turn out to be a way of kicking the issue into the long grass - though housing and legal groups appear will keep up the pressure.

London & Quadrant may appeal successfully against the judicial review ruling. However, the Press Association report of the court case left little doubt of what is at stake, with London & Quadrant warning that it could affect associations' ability to finance their operations 'thereby potentially risking the future delivery of affordable housing'.

For the last 20 years associations have successfully operated in the grey area between public sector and private sector and social responsibilty and business efficiency. How much longer?

Posted by Jules Birch, June 25

Posted in Housing associations, Legal

OPPORTUNITY or threat? The most confusing thing about the credit crunch is that it's both at the same time.

Even as some housing associations are champing at the bit to buy up land and homes from builders at a substantial discount, others are warning of the section 106 deals drying up and risks to cross-subsidy of their programmes from new development for sale. 

Keith Exford of Affinity Sutton, newly crowned as the number one developing association, tells this week's Inside Housing that the market slowdown means it's unlikely to stay there. The triumvriate of housing agencies work on the market rescue plan demanded by the government and try to work out ways of ensuring that risks are not simply transferred from builders to associations. As work starts on the £1bn Olympic Village there is still no sign of the public-private partnership that was meant to lead the way.

And though the market turmoil means it should be possible to buy unsold homes on the cheap, associations warn that grant rates will have to rise. Add in to that that the cost of building materials will almost certainly continue to rise thanks to a falling pound and rising commodity prices, and you have a recipe for confusion.

But housebuilders unsurprisingly see the situation in much starker terms. Seen from their perspective, this is a crisis that threatens to become a disaster and the government needs to act now.

Given all that, it's not surprising that we are still groping for a solution. At the top, the government still seems wedded to its outdated home ownership agenda. Some intereresting new ideas are being put forward by the CIH and National Housing Federation. There are some positive signs from the Homes and Communties Agency, English Partnerships and the Housing Corporation even though it doesn't seem the best time to be looking for leadership in three different directions.

Amid all the confusion, some clear thinking is needed - even if that means scrapping all of the assumptions behind the current investment programme and starting again. The world has changed.

Posted by Jules Birch, June 20

Posted in Housing associations, Housing market, Housebuilding