Thursday, 23 October 2014

Corporation to relax rules on association borrowing

The Housing Corporation has promised to liberalise its approach to regulation in a move which could vastly increase the borrowing capacity of the housing association sector.For the first time housing associations would be free to use their social hous

The Housing Corporation has promised to liberalise its approach to regulation in a move which could vastly increase the borrowing capacity of the housing association sector.For the first time housing associations would be free to use their social housing assets as collateral against loans for non-social housing activities in a move that eases the regulatory structures applied by the regulator.In the consultation paper, a draft regulatory code which has been circulated to chief executives, lenders and trade bodies, the corporation proposes to ‘relax our requirements on borrowing structures, thereby allowing associations to use social housing assets to secure funding for non-social housing activities, subject to tests'.The proposal was welcomed by the National Housing Federation and is seen as a positive step towards enabling the sector to realise its financial potential.National Housing Federation policy officer Bob Wilson said: ‘It will enable housing associations to consider doing more than they would otherwise be able to do. It should make the sector more attractive to lenders so funding could be that little bit easier.'The guidance says that associations' first recourse should be to fund diverse activities on non-social housing assets.But ‘exceptionally associations may secure borrowing to fund diverse activities on social housing assets' as long as it is in support of social housing activities; a robust business case exists; the association has sufficient capacity and skills; and the non-social housing activity does not increase the risk to social housing assets and tenancies.The guidance also sets out the criteria for associations to bear in mind when they propose to invest surpluses in non-social housing activities.HACAS Chapman Hendy director Jeff Zitron said the proposal was a progressive move by the corporation.‘The previous guidance was liberalising but one thing it did not do was allow social housing to be used as an asset against other activity. It's been a real problem, particularly for LSVTs.‘Presumably the corporation has realised that you need to do this if they are going to get wider involvement in regeneration and private finance initiatives. It's another building block in the expansion of housing association activities.'

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