The impact of the current economic and financial situation on businesses in the West Midlands Region - West Midlands Regional Committee Contents


Memorandum from the National Housing Federation (WM 14)

  1.  The National Housing Federation welcomes the opportunity to submit evidence on the current financial and economic situation and its impact on businesses in the West Midlands. This submission outlines:

    — The current challenges facing housing associations attempting to provide new affordable housing

    — The details of the fiscal stimulus that the Federation, as part of the 2020 Group, is asking of Government.

  2.  The Federation represents 175 housing associations in the West Midlands who own nearly 250,000 homes on behalf of over 450,000 people. Housing associations are independent, social businesses. In 2007 associations in the region employed over 11,000 people directly and had a combined turnover of close to £950 million. A recent study has calculated that direct employment by associations in the West Midlands contributes £280 million to the regional economy per annum.

  3.  The housing association sector is keen to engage and provide positive solutions during this period of economic uncertainty. However, housing associations as social businesses are facing the same credit pressures as other businesses and need to de-risk where possible.

  4.  Many associations are at the forefront of supporting local communities during the credit crunch, particularly through financial inclusion work and skills/training projects to obtain work. Housing associations also house some of the poorest and most deprived households and therefore are a good conduit for accessing these groups by bringing unemployed people into the workforce and so ultimately driving up the GVA of the region.

  5.  Associations are experienced in working in regeneration and have a positive history of engaging and supporting local communities in accessing employment and training initiatives. Many associations support residents in dealing with complex money management issues, providing advice or funding advice workers and giving access to saving schemes. A large number of training opportunities, social enterprise and employment opportunities are given through housing associations. Many examples of this work could be provided but one example is the Walsall Housing Group Skills Centre which provides training and employment experience in construction and property maintenance trades. Six housing associations are currently involved in the LSC pilot on adult advancement and careers service prototypes which supports the long-term unemployed and also to enhance the skills of existing employees.

  6.  The most significant challenge to the sector is how to deliver the current affordable housing development programme. Our members who are developing are facing considerable difficulties. This submission will summarise the key challenges facing members.

CHALLENGES FOR THE SECTOR

  7.  Our members are facing a reduced flow of finance from lenders. In some cases, lenders are demanding the review of the entire loan book when negotiating new finance deals. The rationing of finance has led to some schemes being abandoned or delayed.

  8.  The slowdown in the sale of shared ownership properties caused largely by the lack of mortgages available for shared ownership have led to a decline in the development of new shared ownership schemes. Therefore, funds from shared ownership sales used to cross-subsidise development no longer exist.

  9.  The lack of private development has resulted in drying up of section 106 agreements, which is reducing the development of affordable housing.

WHAT WE ARE ASKING FOR

  10.  The Federation has urged ministers to use nationalised bank Northern Rock to boost the supply of mortgages for low cost home ownership. We believe that Government should take action to require lenders that have benefited from the bank bail out to offer mortgages for shared ownership.

  11.  The Federation is calling for the Homes and Communities Agency to increase grant rates and therefore increase the capacity of the social housing sector to deliver more homes. The Federation has carried out some modelling work to calculate the cost of delivering an additional 20,000 homes nationally at a 75% subsidy rate. Increasing the grant rate for Social Housing Grant would act as a short term stimulus to supply homes and create jobs. It would enable associations to forward finance new schemes and to ensure that new schemes break even without the cross-subsidy from shared ownership. This would provide a positive solution through difficult market conditions and enable associations to offer a new range of home options to customers.

  12.  The National Housing Federation is calling for an additional £6.35 billion over the next two years, which would build 100,000 new homes; 20,000 on top of the original target. This would consist of £3 billion for 20,000 new homes above the CSR target, £2.6 billion to ensure we continue to deliver existing CSR targets and a £0.75 billion infrastructure fund to pump-prime new developments that would not otherwise be started in the short-term.

  13.  The Government should also consider whether public loans could be made available to housing associations as an alternative to private finance to enable the social housing development programme to flourish. This would be of an extra cost to Government but would result in a new income stream in the form of loan repayments. Members would welcome the use of equity stakes in schemes. At the same time, the Federation and its members are looking to develop other funding models including equity release to support sustainable long term funding plans. The Federation acknowledges the pressure on public spending and is seeking to find innovative new models of funding to ensure the continued supply of social housing through most efficient means.

  14.  As well as a fiscal stimulus to support the growth of new social homes, we would be looking to the HCA to consider how public sector land might be more easily released for development.

  15.  The economic benefits of such a package are as follows:

    Reducing job losses. An additional 20,000 social rented homes over a two year period would directly preserve 30,000 jobs.

    Sustaining business activity. Would improve cash flow and reduce risk for private and social developers and suppliers.

    Retaining skills and driving innovation. Public sector to take lead in innovation in house building.

    Increasing labour market mobility. Social housing will provide some of the housing required to enable people to move to where the jobs are.

    Promoting long-term macroeconomic stability. By supporting the house building industry through the downturn it should reduce some of the economic volatility which leads to such big economic cycles.





 
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