PFI to become more popular
The momentum of the private finance initiative in housing is set to increase, one of the leading credit ratings agencies has said.Standard & Poor's has published a report saying the future of the initiative for housing is encouraging and much of the remaining investment needed to meet the decent homes standard is likely to come through PFIs.It said: ‘PFIs, in many cases, may be the only opportunities that can currently provide sufficient funding. Tenant agreement is not needed, although it is essential to have their support for the project to succeed.'Standard & Poor's emphasis on the decent homes standard is a contrast to the accepted view that PFI is more suited to new build. The initiative has been widely seen as moving away from refurbishment towards new build amid concerns that timescales are too tight to deliver the decent homes target by 2010 (Inside Housing, 14 May).Consultant Graham Moody said the report underplayed the importance of stock transfer and arm's-length management organisations in meeting the decent homes target.‘Because of that, their conclusion rather overstates the position of refurbishment PFI.'But he added that PFI was the only option available that could deliver new council homes, and this could be attractive in places where stock needed to be demolished and transfer was not popular.Richard Parker, director of housing public private partnerships at Price Waterhouse Cooper, said the decent homes target could be taken as a more general sign of the government's commitment to the social housing sector, and that PFI was also becoming a more popular option.‘Certainly the people we are working with are finding PFI more attractive in many cases than housing transfer when it's explained to them.'Bram Cartmell, the credit analyst who wrote the report, said the emphasis was not solely on decent homes. Standard & Poor's has provided ratings for around 65 PFI schemes in other sectors and Mr Cartmell said he was detecting increased interest in using the initiative across the social housing sector.The spending review allocation of £1.6 billion for housing PFIs over the next three years was also a positive sign, he said.‘The government is making more money available for housing PFI, which should further help PFI in the sector develop. This indicates government support for housing PFI.'But he said that PFI was likely to continue to be a controversial initiative. And he warned that housing PFI faced a unique set of risks which needed to be better understood. The report said: ‘It is essential that the unique credit risks featured in housing PFIs be clearly understood and effectively mitigated. ‘Otherwise, the sector will continue to struggle, with private sector investment in the form of PFI likely to remain weak, despite the UK government's efforts to encourage its growth.'Jeff Zitron, a director of HACAS Chapman Hendy, said the positive tone of the report by a well-respected credit agency with PFI expertise could help encourage the market. ‘That's going to encourage more firms to come forward, that means more competition and a better deal for the public sector,' he said.