Select Committee on Treasury Written Evidence

Memorandum submitted by the National Housing Federation


  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.

  4. Conclusion.


  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 sector resources.

  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 financial products.

  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.


  2.1 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 sustainable communities.

  2.3 Around 70% of the financially excluded are social housing tenants.[12] The FSA baseline survey identifies people who live in social housing as amongst the least capable of choosing suitable financial products and planning ahead.[13] 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%.[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 Bank—its 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 income communities.

  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 objectives.

February 2007

12   Chartered Institute of Housing, Financial Inclusion: Good Practice Briefing No 31, November 2006. Back

13   Financial Services Authority, Financial Capability in the UK: Establishing a Baseline, 2006. Back

14   National Housing Federation Figures 2006, based on analysis of the Family Resource Survey Back

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