Housing associations can use cash reserves to help spark economic revival - however they must be sensible about doing so
Striking a balance
Last week’s report by the Ernst & Young Item Club highlighting that the private sector is sitting on huge cash balances raises an interesting question - should private organisations, including housing associations, use their cash balances to spearhead economic revival?
According to the Tenant Services Authority’s latest global accounts for the sector, housing associations hold cash balances of £2.4 billion - a tidy sum. But set against this figure is a commitment to deliver 170,000 homes under the new affordable homes programme. In Where next?, London & Quadrant’s recent report with Pricewaterhouse Coopers, we estimate that housing associations will need to raise £15 billion of private capital to meet this commitment. In this context, £2.4 billion is a small contribution.
In L&Q’s latest financial statements we report £263 million cash balances, but with plans to invest £1.3 billion in new homes in a world of continuing economic uncertainty, we think it entirely appropriate to raise the cash before we enter into any financial commitment. That’s why we have just approached the bond markets again for another £250 million.
But that doesn’t get us off the hook. Should housing associations spearhead economic revival? Yes, absolutely. Over the past four years, again according to our regulator’s global accounts, the sector has reduced costs, increased margins, boosted our bottom line, borrowed more, completed our decent homes programmes, reduced grant rates, built more homes and increased resident satisfaction.
We are a resilient, and creative sector. We share a social mission with government and local authorities. Every penny of our annual surplus is reinvested, and each of us plays a vital part in economic revival.
David Montague is chief executive of London & Quadrant