Call for new finance company
to raise £3 billion to improve council housing and regenerate
economy
PRESS RELEASE: EMBARGO 1am THURSDAY 16 MARCH 2006
A new housing finance company should be established to raise the £3
billion that is needed to bring Welsh council housing up to standard,
recommends an IWA report on the future of social housing published
today (16 March 2006).
The new company could raise the money at favourable interest rates
from the UK bond market, using the asset-based financing market route
already pioneered in Wales by Welsh Water. Its not-for-profit parent
company Glas Cymru has secured some £3 billion for funding for
the water sector on extremely attractive terms. If this precedent
were followed for council housing, using the property as the asset
guarantee, the potential for economic regeneration in Wales would
be enormous, the report concludes:
• It would produce more than twice the impact of the current
£1.5 billion Objective 1 programme for west Wales and the Valleys.
• It would focus investment in the poorest areas of Wales where
social housing is concentrated.
First, however, local authorities must transfer their housing stock
to housing associations which are able to borrow against the equity
of the property. So far in Wales only Bridgend has transferred its
council housing in this way, to the Valleys to Coast Housing Association.
This will be spending £290 million on improving housing over
the next 30 years with major economic benefits for the local economy.
At present only a few other authorities are contemplating following
Bridgend’s example. Commissioned by the Welsh Assembly Government
and the Principality Building Society, the 200-page IWA report The
Future of Social Housing recommends that most authorities in Wales
should do so. It says:
“If stock transfer was widely pursued the result would be the
transformation of the condition of local authority housing.”
There would also be a major economic and environmental benefits for
the wider community:
• Opportunities to promote affordable housing and to sustain
local communities.
• Important knock-on benefits to local economies, including
the development of a skilled local workforce.
• Promotion of private sector entities in Wales, which has a
relatively under-developed private business sector.
• Major benefits to social inclusion, health standards, and
educational aspirations in our most disadvantaged areas where most
social housing is located.
Maintaining the Welsh Housing Quality Standard in the 160,000 council
properties across Wales (excluding Bridgend) is estimated will cost
£3.3 billion over 30 years. Public sector funding will not be
able to meet this investment which, instead, will require a major
injection of private sector finance. The only way local authorities
can access this money is by transferring their stock to housing associations
which are not subject to Treasury borrowing rules. However, as the
report notes:
“There remains a widespread reluctance to venture down this
route, including fears by councillors that the local authority role
will be undermined, and tenant reluctance to relinquish local authorities
as landlords. There is undoubtedly a great deal of misinformation
and consequent misunderstanding of stock transfer as a way forward
for social housing in Wales. The process tends to become embroiled
with the privatisation debate, ignoring the twin realities that: (i)
much of social housing has already been ‘privatised’ through
‘Right to Buy’, a process that is ongoing; and (ii) council
housing stock has to be transferred to registered social landlords
which are not-for-profit organisations".
The report recommends that local authorities should follow the example
of Newport City Council which during 2004-05 appointed an independent
Housing Commission to examine its options. The council faced a position
similar to that of many authorities across Wales. It needed to invest
£240 million in the years before 2012 to bring its housing stock
up to the required standard, but only anticipates resources of £82
million. After year-long deliberations, which involved gathering comprehensive
evidence, the Commission recommended a stock transfer business plan
capable of generating £400 million investment over 30 years,
a major regeneration opportunity.
The IWA report identifies nine housing market areas across Wales within
which it recommends that local authorities should collaborate in establishing
new housing associations to raise the private finance for improving
stock and regenerating the economy.
NOTE FOR EDITORS
The report is being launched at the annual conference of the Chartered
Institute of Housing Cymru, City Hall, Cardiff, at 9.30am Thursday
16 March 2006.
To obtain copies (price £40) and for further information contact:
John Osmond, Director, IWA, 029 2066 0865, johnosmond@iwa.org.uk
Institute of Welsh Affairs, St Andrews House, 24 St Andrews Crescent,
Cardiff, CF10 3DD
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