Recession is ‘worst timing’ for pathfinders

Housing market renewal pathfinders in the north and midlands are being hit hard by the recession and may struggle to recover.

That is the warning from the Audit Commission, which says that the downturn ‘could not have come at a worse time’ for the 10 pathfinders.

It kicked in just as most of them were switching from buying land to building new homes.

More than 7,000 homes were built or converted in pathfinder areas in 2007/08, the commission says in a new report, published this week.

But developers are now retreating and banks are likely to become more cautious about financing the pathfinders, the Housing market renewal programme review warns this week.

‘Lenders and developers are aware that there is a heightened risk in HMR areas and will be cautious about future levels of engagement,’ the report says.

And it predicts a difficult year ahead for the programme as new build progress slows: ‘Targets will need to be renegotiated and plans will need to be revisited - this is not without risk.’

The pathfinders were set up in 2003 to boost housing markets in areas of low demand, such as Salford, Oldham, and north Staffordshire.

But the financial crisis has squeezed mortgage availability, and ‘many of the people finding it most difficult to access finance are the very ones that pathfinder products are geared towards’, the commission says.

It calls for the Homes and Communities Agency to monitor the pathfinders more closely, to establish a broad vision for the programme, and to find ‘softer’ ways of measuring its impact than numerical targets.

It also instructs pathfinders to revise their targets, rephase developments and restructure their development agreements.

Anne Mulroy, director of north east pathfinder Bridging Newcastle Gateshead, said the organisation was dealing with the downturn by ‘developing affordable housing solutions, investing in refurbishment and liaising with developers and lenders’.

Government funding for the pathfinder programme is expected to total £2.3 billion by 2011. But the Audit Commission warns pathfinders to prepare themselves for shrinking government subsidy from 2011.

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