Homes agency offers 50% of land buying costs to housing associations that promise to build more

The new Homes and Communities Agency has told some cash-strapped housing associations it will fund up to 50% of their land acquisitions if they can guarantee they will get homes built through the downturn.

The news comes after Robert Napier, the HCA chairman, said in October he was asking the government for permission to invest in development land while it was cheap. It also follows the release of a letter by Richard Hill, the HCA director of investment, to investment partners outlining how funding for new social housing would work.

Meredith: HCA will expect an equity share
Meredith: HCA will expect an equity share

The letter said the agency would have arrangements in place with key developing organisations by the end of March and that the HCA would consider helping associations to convert unsold homes into rented property if they agreed to build homes in future. The agency might also help associations to buy land or build on HCA-owned sites if they can do so fast and on a large scale.

However, a source at the agency said: “We’ll fund 50% of acquisition costs for sites – it’s something we’ve not done before.”

The source said the agency was looking for investment partners to bundle together large portfolios of schemes for potential funding by the agency. Partners were told they could expect more generous grants on stalled schemes if they identified possible new sites for homes.

Dale Meredith, Southern Housing Group’s development director, said the HCA would expect an equity share in exchange for the funding. He said: “The expectation is that this land bank is to deliver future programmes. You secure part of that at good value when land values are reducing significantly.”

The HCA was formed on 1 December, joining together English Partnerships, the Housing Corporation and central government funding streams. A spokesperson said he “did not recognise” the 50% figure.

Meanwhile the Tenant Services Authority (TSA) is in talks with several associations that are having difficulty raising funds about providing short-term loans. The lenders are believed to include London & Quadrant, Circle Anglia, Affinity Sutton and other cash-rich associations.

London & Quadrant said it was looking at a variety of ways to help struggling associations including mergers, sales of homes and short-term limited loans. Clare Miller, executive director of governance and viability at the TSA, said: “This is a short-term opportunity to plug the gap. We are not talking about associations in terminal difficulties but those that would normally borrow from banks.”