Minding your privates

The plan (as we report on page 7) would not only see housing associations getting less grant each year from the Housing Corporation, but will also cut the funding they can raise from stock sales. Budgets for maintaining and improving stock will, in consequence, have to be slashed.

However, the proposal may also be an opportunity, offering registered social landlords the chance to compete with housebuilders – and finally allaying the suspicion that private sector developers build more cheaply and efficiently.

There is a lot of evidence to suggest social landlords could compete on this more equal playing field. After all, private developers are going to have to produce a return on their investment – likely to be between 15% and 20%. This will reduce their ability to undercut associations, particularly the larger ones. Certainly, private developers have scale and can capitalise on the efficiencies this brings, but they also have shareholders to satisfy. Further, RSLs can benefit from comparatively favourable financing agreements, which will also keep their costs down.

And anyway, so what if private housebuilders can demonstrate greater efficiency? It may seem like bad news, but it will offer a chance for housing associations to learn from them. There’s not going to be a magic wand, but our sector could gain access to private sector skills and pricing methods.

There’s not going to be a magic wand, but our sector could gain access to private sector skills and pricing methods

Furthermore, would private builders actually want to manage the houses they construct? Their role is building, not dealing with tenants, rents and voids. If they were to hand on properties (inevitably to housing associations) soon after their completion, what would have been the purpose of their involvement in the first place?

Finally, how will developers deal with the additional regulation they would face? If the public and private bodies are going to compete equally, they must face similar levels of scrutiny. Will developers really want to spend time wrestling with the ever-growing volume of red tape? Probably not.

Those opposed to the private developers receiving social housing grant may take heart in the prospect of the Housing Bill failing to make it through parliament. They would be wise not to cheer too soon. Should the bill be dropped, existing law allows English Partnerships to step in and act as an intermediary between the Housing Corporation and developers. One way or another, it looks as though we need to get used to the idea that private builders are here to stay.