Ministers in talks to revamp housing policy in bid to jump-start economy
Coalition to dump build obstacles
Housing bosses have met government officials to thrash out how to boost the supply of homes in England as a stimulus for the flagging economy.
The measures, which are expected to be unveiled early next month, include guarantees for developing housing associations seeking to raise money on the bond market. This plan will be followed by an updated English housing strategy, which will outline the coalition’s plans post-2015.
In a further bid to kick-start development, the government this week proposed that developers could renegotiate the ratio of affordable housing in individual projects to make them viable.
Analysts said government guarantees could save up to 2 per cent from landlords’ annual interest costs in a bid to find alternatives to direct government subsidy.
David Montague, chief executive of 66,000-home London & Quadrant, described the guarantee idea as ‘positive’ and said it could effectively replace the £4 billion grant cut in October 2010’s comprehensive spending review. He said: ‘If we can get back to the formula in place during the previous CSR period we could double production [of homes].’
Some housing professionals have cast doubt over whether the reduced cost of debt would allow landlords to build more homes.
‘It will be interesting to understand how this helps housing associations which are already highly leveraged,’ said Steve White, chief executive of 48,000-home Hyde Group.
Lucy Thornycroft, a policy officer at the National Housing Federation, added: ‘It’s good if [housing associations] are able to increase their borrowing but it won’t help bring forward new supply.’
Sources close to the Treasury talks said the move could force bond prices down to as little as 60 or 70 basis points above the price of gilts - the cost of government borrowing.
Credit rating agency Moody’s agreed that a guarantee ‘would be viewed as credit positive’, meaning social housing bonds would be priced more cheaply. The latest landlord to issue a bond - Longhurst Group - issued at 242 basis points over gilts.
‘It isn’t clear that more attractive borrowing rates alone will stimulate development on the scale government is anticipating,’ said Tom Paul, an associate director at housing treasury advisor Trade Risks.
The Homes and Communities Agency admitted that around a quarter of the 80,000 homes it has pledged to deliver under the 2011/15 affordable homes programme will be built under section 106 agreements.
An HCA spokesperson said that its contracts with providers signed up to deliver the programme ‘will not change due to any renegotiation of section 106 agreements’.