2nd opinion: Private fears

With the Government's PSA Plus review on how to reach the decent homes standard just around the corner, now is a good time to take another look at the options available.

Transfers have had a rough ride in the last 12 months, with the collapse of the Birmingham proposals and Sheffield's step back from that option. Nevertheless, 2002/03 will see the highest number of homes transferred from local authorities to housing associations since 1988 – all after positive tenant ballots.

In contrast, private funding of the sector, which began only a couple of years before the first transfer, is going from strength to strength. Well over £14bn has now been raised to support the last 15 years of new development programmes in England, yielding homes for more than 400,000 households at below-market-level rents.

Will the success story of private funding affect the current feeling that transfer is "just one of the options"?

Transfers suffer today from association with the dreaded word "privatisation" and from fears about whether the new body will be accountable. Private finance, at a much earlier stage in its history in our sector, brought some of the same fears.

From a government viewpoint, private finance helped reduce a problem which it did not have the resources to solve. In the late 1980s the pressure was to create more social housing with less public expenditure and, at the same time and in part for the same reason, to stop local authorities remaining the main provider of new social housing. By 1990, housing associations had overtaken local authorities in this.

Private loans were substituted for public loans, while public grant continued under a revised funding system from 1989. Was that privatisation, and did it make the housing association model an unaccountable one? There was no difference in the legal arrangements by which associations were controlled; there were no shareholders who received dividends, and the lenders simply got the interest and repayments for which associations contracted.

In accountability terms Housing Corporation regulation continued, and working arrangements with local authorities have strengthened rather than weakened over the last decade. There has been a major culture change with more professional management and a much greater awareness of what can be learned and taken from the commercial world. But no tenants have suffered from corporate failures, which are all too common in that world. Tenant participation has increased.

I edited a National Housing Federation publication in the early 1990s to delete the myth that private finance had led to higher rents. The facts were that government policies, not the cost of borrowing, led to sharp rent rises for a number of years. The myths around transfer are more harmful because they prey on tenants' fears of a future which is uncertain for all of us. Those uncertainties are possibly greater for council tenants than those of housing associations because their living conditions depend on public expenditure availability.

As to the type of organisations we want for public and community interest services, the future is uncertain. Most people see a significant difference between the Railtrack of the past and Network Rail with its non-profit distributing status, because the move is away from a pure private sector approach. Housing associations provide services for the community but they are not a new and untested model. Because they are diverse by size and in the work they do, they have a strong need for clearer public perception.