Government favouring guarantees to housing associations to trigger housebuilding

Published by 24publishing for 24dash.com in Housing and also in Central Government, Communities, Local Government

A meeting convened by Vince Cable – which included 20 senior public and private housing leaders – took place yesterday, days after the business secretary said the Government could offer guarantees to housing associations to trigger a new housebuilding boom.

The meeting, which included housing minister Grant Shapps, Chartered Institute of Housing chief Grainia Long and representatives from private housebuilder CEOs, is understood to have discussed a wide range of options to stimulate housing supply, including loan guarantees to the housing sector.

It was chaired by the Government's chief construction adviser Paul Morrell.

Other items up for discussion was the planning system and how the new National Planning Policy Framework (NPPF) needs to "start working", with suggestions from some that pressure needs to be applied on local authorities to ensure decisions were being speeded up. There were also calls to pump more money into the Government's FirstBuy scheme - equity loan funding of up to 20% of the purchase price split equally between the Government and the housebuilder - to help stimulate mortgage activity further.

One source said: “I understand it was a wide ranging discussion about what could be done across all parts of housing. It was part of a wider discussion not a meeting that was conclusive to any approach. It was an opportunity to take views.”

The Government has already taken action to support new housebuilding and infrastructure investment through government guarantees.

In the next month it is set to announce further measures to do more.

In a speech Mr Cable made to think tank, the Centre Forum earlier this week, he said there was now some “interesting ideas” out there for Government guarantees that could trigger a significant volume of housing investment - replicating the recovery model of the 1930s and leading hopefully to a “virtuous circle of new building lending to increased affordability and also increased private demand”.

He said: “[One] approach is to use government guarantees, which do not count as public sector liabilities but are sufficient to trigger investment which would not otherwise occur. For example, my department operates the Entreprise Finance Guarantee under which we might guarantee £100m of borrowing but only score, say, £20m against the deficit.  Arguably the conservatism of the banks is preventing this scheme from achieving as much as it should but it has undoubtedly ensured that many thousands of companies can survive and expand.

“There is little doubt that these models could be expanded on a large scale in other sectors, and particularly infrastructure. One sector where progress could be made rapidly is in housing. The main vehicle for social housing for rent (as well as shared ownership) is housing associations. These are independent, not for profit, institutions which can – and do – borrow in capital markets. There is large unmet demand for social housing which may be self-financing if built, in conjunction with private housing. Indeed, some major UK contractors are doing just that with access to long term – 10 years plus finance – with access to guarantees.  This activity could be multiplied.”

Speaking last week at the Chartered Institute of Housing conference in Manchester, Paul Johnson, Director, Institute of Fiscal Studies - who previously worked in the Treasury - said there was now scope for the Government to stand behind lending.

He said: "I think there is some scope for the Government to stand behind some lending - either of its own or from the private sector which would allow money into the housing sector at cheaper rates than are available commercially. That, to me, seems to be the route to which if you were to do this you would be able to make that difference. There's more probability of that in the housing arena than in the other competing arenas.

He added: “If there is a place being given serious consideration to some of these spending issues it's housing. The issue for housing is different. Firstly, there is scope for some kind of impact on short terms economic performance through investment in housing and because there are long term issues in terms of the need.”

In his mansion house speech last week, George Osborne said: "We are already taking action to support new housebuilding and infrastructure investment through government guarantees.

"In the next month we will set out how we can do much more."