Count me in

This is a timely reminder for those of you who have retained your pesetas and francs for spending next summer. Come January, they will no longer be legal tender.

Apart from staff and tenants’ holiday plans, does the introduction of the euro have any impact on UK social housing provision?

Present indications are moving towards a ballot on the UK joining the euro earlier rather than later. Historical precedent is for business concerns to win over emotion at the ballot box and hence there is an expectation of joining.

I believe a ‘no’ vote will only happen if there is incontrovertible evidence that the exchange rate at the time of joining is too high or it is obvious that we will be importing higher levels of European unemployment.

The UK would be joining some years later than the first wave, so the problems of converting accounting software – such as for collection and recording of rent accounting and housing benefit – should not be as traumatic; Europe will have pioneered the solutions and printed the notes.

But what of the longer-term effects, such as the availability and cost of private finance, harmonisation of the tax and benefit systems and cross-border competition?

Europe has a more price-stable and less active property market than the UK, both in the private and social sectors. People move less frequently and housing is treated less as an investment than in it is the UK.

The cost of mortgage finance has been more stable and cheaper because of lower real interest rates. There is a less developed housing finance sector, with higher margins, probably because residential property is not perceived as an investment.

This is one of the reasons that in many European countries social housing finance is supported by assurance or guarantees provided by government or quasi-governmental organisations.

Is it likely that UK entry will provide benefits? By attaching the UK to European interest rate and inflation stability, there should be a substantial benefit, as a reflection on the volatile interest rates and inflation between 1970 and the early 1990s demonstrates.

Whether entry will mean higher margins is more debatable, as lenders would have more opportunity to lend into European markets on the back of UK savers, while European lenders would have better access to the UK market.

Probably more of a threat is the globalisation of the European lenders through a succession of mergers. This is more likely to dominate, with margins being forced up from lack of competition despite entry into the euro.

In some ways, the financial outcomes have some level of predictability. More difficult to judge will be the effect of harmonisation on public spending, tax and benefit regulations. These are not direct effects of the euro, more part of the trend towards integration.

The UK is unusual in the percentage of housing and repair liability borne by local authorities and in the cost of housing benefit.

Although housing may not be a European competency, relatively minor changes in the public sector accounting regulations could either terminate or speed up the transfer process, and move benefits towards the European model where these are a personal rather than a property subsidy.

There is also the slightly more difficult issue that Social Housing Grant could be construed as an ineligible subsidy or thrown open to more competition.

Whether these changes are positive will depend on the willingness of UK government to push its vision of social housing.

The later we join the euro, the more likely it is that the solutions will already be given, and there must be concern that housing is not a high enough priority to be a factor in the decision to join if it is made later.

Another issue will be how to reconcile UK charitable law with the wider range of activities that can be undertaken by European not-for-profit companies.

In most European countries, housing associations have a larger share of the housing stock and offer a wider spectrum of provision, although rarely low-cost home ownership. In some countries, such as France, they tend to mimic, and are controlled by, local authorities. Although the individual organisations are larger, resources are often scarce because of rent controls and because housing in Europe has not appreciated in value to the same extent as in the UK. Activity and funding is invariably local.

The other interesting comparison is the fact that the divergence between areas of high value and demand, and those of low value and demand, is not as important as in the UK, reflecting the more disparate population of most European countries.

Can we expect, like the spread of utilities in the 1990s, cross-border activities and mergers with the restraint of trade regulations preventing countries favouring their homegrown housing providers?

Would competition with new ideas be a bad thing? Are there cross-border economies of scale? Will tenants be concerned whether their landlord is based in London or in Paris? Do you mind that you buy your water from a French-owned company?

The euro is not the cause of these potential changes; it is a reflection of the proposed closer economic ties within Europe and the ambition of many to achieve a closer legislative framework.

The potential outcomes include a wider spread of financing options and potentially a wider map for the professional housing providers to work on.

For existing and prospective tenants, these changes could mean more choice but more responsibility.

Housing provision will be less responsive to the policies of individual parliaments and those most vulnerable could fall through the net.

My view is that it is better that we are in there shaping that provision early rather than having it handed down later.