From where I'm sitting …

Private eye: Alistair Baker

Too often, housing associations use public money to outbid the private sector for land. But in many cases, the identical product could have been supplied with no public subsidy. Tens - if not hundreds - of millions of pounds are being wasted.

With the expansion of the government's shared-equity programme, the number of organisations able to waste public money in this way will multiply.

Land is worth whatever someone is prepared and able to pay for it, but registered social landlords have an unfair advantage. The market is being distorted by their ability to overbid using Housing Corporation subsidy. This inflates values solely to the benefit of the landowner. Merlion has direct experience of more than £8m being misspent in this way last year. Last November, we gave the then ODPM select committee 27 examples (published by the government in March).

However generous the government is in funding its Homebuy low-cost home ownership programme, grant cannot meet the level of demand for starter homes. Only the private sector has the capacity and flexibility to respond to market pressures and meet public aspirations. A greater role for private developers in the provision of affordable homes for sale would achieve a better balance between demand and supply, as well as improving affordability. The private sector offers the quickest means of bringing more affordable homes within the reach of more people.

Housing and planning policies need to change. Local authorities should be required to include shared equity in their spatial and housing strategies. The government should place a duty on local authorities to include shared-equity housing and to consider the role of the private sector in planning policies and section 106 deals.

A level playing field is needed in planning as much as in funding.

The market is being distorted by RSLs’ ability to overbid

Merlion is the largest provider of non-grant-funded shared-equity housing in the country. Since 1991, we have provided more than 1000 homes to lower-paid workers under shared-equity and shared-ownership schemes. The private sector as a whole could invest £1bn to deliver 100,000 affordable homes in the next decade.

Support for first-time buyers is rightly a government priority. The steep rise in house prices has put home ownership out of reach for large numbers of people. This forces local people out of popular rural areas, away from family members who might help with childcare or so far from essential jobs that vacancies become impossible to fill. Housing need in the intermediate market might not be as acute as the basic need for a roof over our heads, but it is a genuine need.

Public eye: Tim Holden

Of course public grant allows us to make a higher bid for land. It improves the cash flow in the development process and saves on the amount of interest clocking up on loans.

There is a risk in relying on grant. We do not necessarily have it in the bag when we bid. If the grant fails to materialise, we have to cross-subsidise from other tenures or from our reserves.

In fact, the risks for us in buying land and developing it are entirely different from those faced by a private developer. We don't have to get a return on the purchase price over two to three years. We hold on to the land for decades and borrow over a longer period too.

If need can be met without grant, we save it for the future

On the other hand, we have no flexibility over the rents we can charge to repay loans or the date at which we can sell on the land.

Grant is usually available to us when we are meeting the most desperate housing needs and that goes to the crux of this debate. Public grant is well spent subsidising land purchases that deliver the homes most in need, not those that make the most profit or offer the least offence to neighbouring homes for private sale.

We build three-bedroom houses where a private developer would build one- and two-bedroom flats. Where flats meet housing need, we build larger flats than the private sector. In other cases, we use grant and our reserves to build schemes that offer 100% affordable housing.

The housing associations that develop homes are doing so ever more efficiently. The Housing Corporation is getting more units out of the grant system than three years ago. We do not use grant indiscriminately. If housing need and the priorities of our business plan can be met without grant, we will save it for other schemes.

Local authorities like dealing with housing associations. Our proposals are often more palatable, not just because we meet the most acute needs but also because we are seen to invest in communities for the long term. Many private developers we work with exhibit high levels of corporate responsibility but the perception remains.

It is not just grant that inflates land prices. The requirement to return profit to shareholders must have the same effect. When the shareholders take a percentage return, that value is never replaced. Housing associations recycle grant constantly. Any profit or surplus will subsidise future projects.

If I were a private developer, I would be more concerned about competition from major property companies entering the residential market. They have the advantage of flexibility from their long-term landholdings and borrowings, without many of the restrictions faced by housing associations.