Golden gifts, wrapped in red tape

Social Housing Grants worth £3.3bn will be available for building affordable homes between 2004 and 2006. This money will be made available directly from the Housing Corporation to a limited number of developing registered social landlords (RSLs – that is, housing associations registered with the Housing Corporation). The funds will be targeted at larger strategic sites including major regeneration and mixed-use developments. In short, some pretty big capital projects. This is likely to mean greater involvement in affordable housing schemes for contractors and consultants not traditionally involved in the sector.

Housing associations themselves are diversifying activity. A number of associations have set up trading subsidiaries, the profits from which are channelled into housebuilding activities.

Key-worker accommodation and commercial housebuilding are good examples of this diversification.

A number of RSLs have also developed specialisms in PFI projects to provide housing for key workers, particularly on hospital sites. By forging links with the right RSLs, contractors may find alternative routes into PFI projects work.

If you want to be involved in this work, you need an understanding of how housing associations operate. Broadly, constitutional and regulatory controls are greater than for other areas of property business and affect developers, contractors and consultants. What all housing associations have in common is heavy legal regulation. Registration with the Housing Corporation entitles them to seek access to public money to fund their activities. The high level of bureaucracy arises out of the quasi-public standing of housing associations and their charitable or mutual status. Understanding a little about that regulation is an important aspect of understanding the sector.

RSLs compete for grants from the Housing Corporation. Transactions are bid on a scheme by scheme basis so that there is the possibility that the money will not materialise. The Housing Corporation regulates grant funding and RSL activities. Regulation policy is driven by the objectives of raising the standards of housing, promoting sustainability and championing residents' rights.

Regulation has a direct impact on procurement. In particular, RSLs are keen to show best practice and Egan compliance. Housing associations have been at the forefront of developing partnering arrangements with those with whom they do business. The significance of partnering in the sector needs to be appreciated.

Housing associations also have bureaucratic controls arising out of their corporate status. Many are charities or industrial and provident societies. Charities (regulated by the Charity Commission) must have charitable objects in order to maintain their charitable status (which entitles them to tax benefits). An IPS must be a bone fide co-operative society. That is, one acting for the mutual benefit of its members or one whose business is intended to benefit the community.

Housing associations are "not for profit" organisations. They often have close connections with the voluntary sector. Their business preferences will often reflect this. Contractors and consultants should demonstrate commitment to the local community, to training and education of staff and to equal opportunities and other ethical policies.

The internal organisation of many housing associations may be more akin to local government than private business, in that decision-making is often by board and committee. RSLs' boards are made up of unpaid local professionals and residents. In this respect, too, the landscape may be changing. From July 2003 RSLs were permitted to pay board members up to £20,000 a year (subject to Housing Corporation approval). Perhaps more commercially driven individuals will now be attracted to join housing association boards.

Affordable housing is set to boom while other sectors may become less buoyant. If you are prepared to grapple with the regulatory complexities, there are lucrative opportunities to be had. In short, it may be worth your while taking a look.