Memorandum from the Council of Mortgage
Lenders (CML) (BDH 31)
INTRODUCTION
1. The Council of Mortgage Lenders (CML)
welcomes the opportunity to submit written evidence to the Communities
& Local Government (CLG) select committee. The CML is the
representative trade body for the whole of the residential mortgage
lending industry. Our 135 members currently hold over 98% of the
assets of the UK mortgage market, and include commercial banks,
mortgage banks, building societies and non bank specialist lenders.
2. In addition to lending for owner occupation
and private renting, CML members have lent almost £60 billion
to housing associations (HAs) across the UK for new build, repair
and improvement to social housing.
3. This submission has been prepared following
consultation with the CML Social Housing Panel of members.
DECENT HOMES
AND PRIVATE
FINANCE
4. Since the introduction of the target
in 2000 to bring all social housing up to a decent standard by
2010 many local authorities have considered the options available
to them to ensure their homes meet this standard. Some authorities
have chosen to consult and ballot tenants on the large scale voluntary
transfer (LSVT) to a new or existing registered social landlord
or housing association.
5. Members of the CML's social housing panel
have provided funding for the improvement of social housing to
the decent homes standard (and often locally agreed higher standards)
both through the funding of LSVT and directly to existing housing
associations.
6. The existence of a consistent housing
policy in relation to the standard of housing to be provided in
the affordable housing sector has had the benefit of ensuring
that there is a level of forward planning in relation to funding
requirements. This resulted in an increase in the availability
of private finance and until recently a highly competitive market.
7. Since the beginning of the credit crunch
borrowing conditions have deteriorated for housing associations
and pricing has increased. However this is starting to improve
and there is still significant investor appetite in the sector.
Housing Associations have been making more use of the capital
markets to secure funding and there have been some new entrants
to the commercial lending market.
8. There is a need for a clear policy on
what steps the government will take to ensure that decent homes
standards are met and sustained after 2010. The Tenant Services
Authority is currently looking at what the requirement for private
financial might be from the affordable housing sector over the
next five years. It is essential that this includes funding needed
not just for new build but also for the improvement and repair
of existing homes including through housing transfer.
CONSULTATION ON
DIRECTIONS TO
THE TENANT
SERVICES AUTHORITY
9. The government is currently consulting
on how the Secretary of State will direct the Tenant Services
Authority (TSA) on issues that directly affect central budgets
or key policy issues. The proposed directions cover three issues
in relation to registered providers (housing associations); quality
of accommodation, rent policy and tenant involvement and for local
authorities two issues: quality of accommodation and tenant involvement.
10. The proposed direction on quality of
accommodation proposes that the decent homes programmes continues
but states that it will not propose any additional burden on landlords.
It highlights that meeting and maintaining the standard depends
on funding availability from government or other sources (eg rental
income or private finance).
11. The proposed direction on rent levels
aims to continue the rent policy set to achieve convergence between
average rents on housing association and local authority social
housing in the same area and of similar quality. However it also
includes a change to the formula to permit a floor of minus 2%
on increases to rent levels in 2010-11 in recognition of current
negative inflation.
12. There is urgent need for a coordinated
approach to policy on the standard and funding for meeting this
for social housing. The impact of the proposed floor on rents
will be significant on the ability of housing associations to
continue to meet and maintain the decent homes standard. It will
have a disproportionate impact on LSVT associations' programme
of works to achieve the decent homes standard. All of this comes
at a time when the housing association (and increasingly local
authority) sector is expected to play a significant role in the
provision of new supply.
13. The reduction in rental income for housing
associations will potentially impact on their ability to service
existing debt and/or raise additional borrowing to continue to
meet the decent homes standard as well as deliver new social housing
at this critical time in the recession and future recovery.
THE FUTURE
OF HOUSING
TRANSFER
14. The government are also consulting on
the Reform of Council Housing Finance. This paper similarly reaffirms
the government's commitment to the decent homes standard for both
council and housing association homes. It sets out the intention
to dismantle the housing revenue account subsidy system and replace
it with devolved responsibility and funding.
15. In the detail of the paper it is evident
that there is some conflict with the consultation on directions
to the TSA on quality of accommodation. The paper proposes that
the decent homes standard should remain but with the inclusion
of items such as lifts and common parts missing from the original
definition. There may also be additional standards put in place
to reflect energy efficiency and work carried out to identify
alternative funding sources for this type of work. As stated in
paragraph 10 of this submission the consultation on directions
states that it will not propose any additional burden on landlords
in relation to the existing decent homes standard.
16. In terms of transfer the proposal is
that standards and costs of council housing will be on a common
basis with the standards and costs that will be accepted with
a transfer. The self financing option set out in the paper seeks
to create a level playing field between transfer and retention
in terms of public funding support. This does not seem to take
into account the advantage transfer brings in ensuring that future
borrowing is off the public sector balance sheet.
17. This leaves a great degree of uncertainty
amongst lenders to the sector as to the future of transfer and
the demand for funding. This will not help to sustain and build
on the existing market for affordable housing funding at a time
when instability continues amongst financial institutions and
confidence needs to be restored for markets to function properly.
September 2007
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