Memorandum submitted by the National Housing
1. Executive summary.
2. Why financial inclusion is a critical challenge
for the housing association sector.
3. Distribution and use of unclaimed assets
to promote financial inclusion.
1.1. The National Housing Federation represents
some 1,300 independent, not for profit housing providers in England.
Our members include Housing Associations, Co-ops, Trusts and transfer
organisations. They develop and manage more than two million homes
provided for affordable rent, Supported Housing and Low Cost Home
Ownership housing about five million people as well as delivering
a wide range of community and regeneration services. Our members
are experienced in stretching public funding by levering in private
1.2. The Federation welcomes the opportunity
to submit evidence to the Treasury Committee's Inquiry into unclaimed
assets within the financial system. We wish to comment on the
potential distribution and use of unclaimed assets, and in particular
how these may be used to promote financial inclusion.
1.3. Housing associations are at the forefront
of promoting financial inclusion through providing tenants with
access to financial advice and capability training and in supporting
and contributing to capacity building of third sector financial
organisations. Often the only not-for-profit organisation working
in deprived neighbourhoods they can provide a critical role as
intermediaries in signposting to information, advice and suitable
1.4. We believe that the proposed Social Investment
Bank (SIB) could act as an equity investor in a housing sector
led project to deliver a suite of financial inclusion products
and services for tenants currently excluded from mainstream finance,
making use of the strength of unclaimed assets to provide security
for a sustainable guarantee fund.
2. WHY FINANCIAL
2.1 The role of the housing sector extends far
beyond the homes we build, own and manage. The work our members
do contributes directly to the creation and maintenance of successful,
sustainable and desirable neighbourhoods offering tenants an improved
quality of life, increased opportunities and improved social mobility.
2.2 In many neighbourhoods, housing associations
are the strongest and most experienced Third Sector organisation.
In almost every corner of the UK they promote community empowerment
and active citizenship and support community projects. The wealth
and resources of associations allied to the experience, local
knowledge and commitment of community and voluntary organisations
can produce a powerful force equipped to build safe, strong and
2.3 Around 70% of the financially excluded are
social housing tenants.
The FSA baseline survey identifies people who live in social housing
as amongst the least capable of choosing suitable financial products
and planning ahead.
We know that many of those most vulnerable to poverty, debt and
predatory lenders are housing association tenants or those living
in neighbourhoods where our members have a significant landlord
investment. We have therefore focussed our evidence specifically
on housing association tenants and how financial exclusion impacts
on them directly.
2.4 Housing associations are at the forefront
of tackling financial exclusion, providing and supporting a range
of services such as affordable credit schemes, cheap household
insurance, support for opening a bank account, and funding for
Community Development Finance Institutions (CDFIs). The sector
has made significant headway in increasing tenants' access to
financial services. In 2003 28% of tenants had no bank account;
by 2005 this figure had dropped to 14%.
2.5 Financial inclusion is a topic which is
of critical concern to our sector. As a trade body we have serious
aspirations to look at how we can develop and support financial
services and products that fit better for our customer base.
2.6 The Federation has already submitted more
detailed evidence to the Treasury Committee's inquiry on financial
inclusion (January 2006) about how housing associations currently
act to tackle exclusion. This evidence was reflected in the recommendations
of the Treasury Committee's reports on financial inclusion (November
2006) and recognised in the Government's response (April 2007).
2.7 We welcome the announcement that the Financial
Inclusion Fund is to be extended for the next spending period
to 2011. However, housing associations did not directly benefit
from the first round of grants. We hope that in future affordable
housing providers will be encouraged to apply for funding, and
that the Financial Inclusion Taskforce will ensure that they engage
fully with the social housing sector.
2.8 In November 2006 the Federation also contributed
views to the Commission on Unclaimed Assets (CUA) consultation
on "A Social Investment Bank", and has since met with
the Commission to discuss our proposals before they move publish
their final report before the 2007 Budget.
2.9 We believe that the release of unclaimed
assets from UK banks, building societies and other financial institutions
provides a unique opportunity to improve the lives of those living
in the most disadvantaged communities.
2.10 As independent social businesses housing
associations have a strong borrowing record with major lenders
and have a large multi million pound asset base. Associations
recycle their surpluses to invest in wider community objectives
beyond their traditional housing function. Associations also take
responsible market risks in the investments they make and use
the returns generated to deliver further affordable housing and
other products and services which meet their objectives. It makes
sound business sense for associations to protect their assets
by creating "neighbourhoods where people want to live'. Cutting
rent arrears, lowering the tenant turnover rate and reducing anti-social
behaviour, for example, all help secure their asset base. Furthermore,
housing associations see themselves as being very much part of
the wider Third Sector, and closer links with community and voluntary
groups offer tenants better access to their services.
2.11 Many of our members have run "traditional"
forms of financial support for many years. These include providing:
cheap, safe white goods; free furniture; expert advice on welfare
benefit claims; rent deposit schemes; reduced household insurance
and money advice to young people living in supported housing schemes.
2.12 More recently members have funded and otherwise
supported a number of Credit Unions and CDFIs. In our submission
to the recent Treasury Committee on Financial Inclusion we argued
that the Government should consider a charitable subsidy, as well
as the provision of Community Investment Tax Relief (CITR), for
housing associations to become core funders of more CDFIs (the
majority of housing associations are charities so the tax relief
is less relevant); and for Treasury to consider how regulation
can be streamlined for associations investing in CDFIs to avoid
disincentivising associations which are already heavily regulated
by the Housing Corporation and the Audit Commission.
2.13 We believe that housing associations are
well placed in the community to use their capacity to assist Government
in addressing financial inclusion, and the Federation and its
members will continue to work to develop suitable services and
products. Furthermore, the Government's way forward for financial
inclusion is entirely congruent with the aims of iN business for
neighbourhoods, our sector's programme for change and improvement.
2.14 Housing associations can therefore make
a unique contribution to tackling exclusion and stand ready to
make effective use of unclaimed assets to help channel this capital
where it can have the biggest impact. Our comments are based on
the successful track record of housing associations in delivering
high quality outputs and outcomes and continuous efficiencies
and value for money. Our members have the experience and expertise
to transform communities and assist the Government in delivering
a successful SIB.
3.1 The CUA has recommended in The Social Investment
Bankits organisation and role in driving development of
the third sector that unclaimed assets be used for investment,
that they be used to develop new products or services, and that
such investment will enable organisations to become more sustainable
and better able to serve the needs of their communities.
3.2 We believe that despite Government and third
sector innovations, there remain clear gaps in the range and scale
of financial services and products currently on offer to social
housing tenants, and that a more sophisticated funding approach
is therefore required.
3.3 For example there are gaps in financing
opportunities for tackling financial exclusion despite introduction
of the Financial Inclusion Growth and Access funds. We think that
a priority for the use of unclaimed assets should be to lever
in more resources to tackle exclusion through providing both equity
for social enterprise and security for affordable lending in low
3.4 The Federation has entered into a partnership
with the Royal Bank of Scotland to investigate the possibility
of providing affordable banking and loan products to tenants through
our housing association members operating in the most disadvantaged
areas. The partnership is carrying out research into the feasibility
of developing a suite of financial inclusion products and services
(eg banking, affordable credit, insurance, furniture, re-cycling,
energy, water etc) for financially excluded people, and aims to
produce a sustainable business plan by the end of 2007 for delivery
from 2008 onwards.
3.5 We believe that the SIB could potentially
act as an equity investor in such a project, making use of the
financial strength of unclaimed assets to provide security through
a sustainable guarantee fund, and enabling additional private
capital to be levered in from other sources.
3.6 As the aim of our project is to develop
a fully sustainable suite of financial inclusion products and
services backed by a guarantee fund, this proposal has the advantage
of not requiring unclaimed assets to be spent. The equity would
instead be an investment in tackling exclusion providing the security
required to deliver suitable products and services to those in
the greatest need. The security provided by this investment could
also serve to lever in additional capital from alternative sources
(for example high street banks and other financial service providers).
4.1 Unclaimed assets within the financial system
provide a unique opportunity to boost the Third Sector, and in
particular to tackle financial exclusion which is a major barrier
to building sustainable and wealth building communities. We agree
the CUA's view that financial inclusion is a specific sector the
SIB should consider. The Federation would argue in particular
that this provides an excellent opportunity to support the work
of housing associations in addressing social needs.
4.2 We understand that the quantum of dormant
funds available to a SIB is presently unknown, but the sums involved
are substantial, and in our view will have an even greater impact
if used as equity to lever in further private finance.
4.3 The housing sector has a proven track record
of delivering high quality outputs and outcomes, and continuous
efficiencies and value for money. Our members are experienced
in stretching public funding by levering in private sector resources
and could provide the best vehicle to ensure that the impact of
unclaimed assets is maximised. Associations are well governed
by boards accountable to a wide range of stakeholders including
tenants and are independently regulated by the Housing Corporation.
4.4 We have the experience and expertise to
change communities and to build new ones and stand ready to work
with the Government and the SIB to deliver our shared aims and
12 Chartered Institute of Housing, Financial Inclusion:
Good Practice Briefing No 31, November 2006. Back
Financial Services Authority, Financial Capability in the UK:
Establishing a Baseline, 2006. Back
National Housing Federation Figures 2006, based on analysis of
the Family Resource Survey Back