Corporation tightens purse strings on demolition funding

Housing associations have been warned they will find it increasingly tough to access funds from a Housing Corporation pilot programme set up to tackle low demand.

The corporation said it planned to be “very challenging” in dealing with applications to New Tools, a funding initiative set up in April 2000 to help associations buy private homes for refurbishment and demolition in areas of low demand. At least £10m has been allocated to New Tools schemes so far.

The corporation is tightening up on applications because rising house prices are pushing up costs. Its decision was backed up by an ODPM report last week that revealed house prices in housing market renewal pathfinder areas had been increasing. The report said the pathfinders should review their demolition programmes if there is evidence that the rise in housing demand is sustained.

The corporation believes the rising cost of homes indicates demand is now returning to low-demand areas. And it argues that the emergence of housing market renewal pathfinders offers alternative funding for demolition work. Three partnerships in the North-west and two in the North-east have been given approval to develop New Tools programmes – but three of them now fall in pathfinder areas.

The corporation also wants to focus its funding allocations on its core principle of providing new supply.

John Carleton, the corporation’s regional director for the North, said New Tools would not be closed but that changing market conditions mean applicants will have to produce a watertight case.

“If the prices of properties have moved on significantly from what they were when the allocation was first issued, we would be asking fundamental questions around whether the market is starting to address these problems,” he said. “Is it realistic to use public funds when the market is starting to take over?”

Steve Pearson, regional director at Home Group, said he doubted any new schemes would be accepted under the initiative.

He said: “I would be surprised if they did any other new stuff because virtually every one they did up to now is in the pathfinder areas. It has run its course a bit.”