The thinking behind involving the private sector in the provision of affordable housing is simple. Those housing associations that develop their own properties are not doing it fast enough. The sector is struggling to produce 28,000 homes a year: many fewer than the number required, especially in the South. So, the argument goes, why not get the private housebuilders on board? Their value engineered, cost-efficient standard housetypes would be cheaper to build than the individually designed homes produced by most RSLs, so making Treasury money go further.
The government sees other benefits, too. The move could help to generate partnerships between housebuilders and RSLs, allying some of the efficiency driven practices of the former to the socially driven businesses of the latter. And it may not have escaped policy-makers attention that it is a powerful way to apply pressure to the social housing sector.
If you accept the force of this argument, the next step is to maximise efficiency by letting the housebuilders take possession of the whole development process, and to give them direct access to grant funding. And, indeed, the government is engaged on a consultation process with interested parties with the aim of formulating a policy to do just that.
Not surprisingly, the housing associations that are involved in development, the "developing RSLs", are spitting feathers over the proposals. They fear that allowing private housebuilders access to "their" grant would create inequalities. First, because the many regulations applied to RSL developments would be relaxed to make the deal stack up for private housebuilders. That could lead to their being forced out of the development process altogether. And second because tenants would be offered homes of widely differing quality.
Somebody has to pay for social investment. If the proceeds go to shareholders, it’s not an appropriate use of public money
Tom Dacey, Southern Housing Group
"It's the economics of the madhouse," says Tom Dacey, chief executive of Southern Housing Group, an RSL with a £180m development programme. "Private developers won't find it profitable to take public subsidy if they face our regulations regime – so it's very likely that a lighter regime will be developed for them. There's no evidence this will be more cost-e ffective and I don't think this is the best way to increase affordable housing output."
Furthermore, the remit of RSLs goes beyond bricks and mortar to the creation and maintenance of sustainable communities, incorporating initiatives such as local training and youth clubs. Dacey says: "Housing associations reinvest the receipts from shared ownership housing and rentals. If these proceeds don't flow into housing associations, those social investment initiatives will not be funded. They are not optional extras – these people need support, assistance, investment and community development. Somebody has to pay for this. If the proceeds instead go into shareholders' pockets, I don't think that's an appropriate use of public money. In the long term it could damage the creation of sustainable communities."
John Assael, managing director of architect Assael Architecture, agrees that the change would hurt the quality of tenants' living environments. "Private housebuilders might be able to procure homes more quickly, but quality will go down. The private housebuilders' approach is to get something built, whereas housing associations build to last. They care about the finishes, the durability and the maintenance."
Affordable housing contractors find themselves in an uncomfortable position in this debate. They are unsure of how the shift could affect their relationship with their RSL clients. "We only ever work for housing associations and local authorities and do our private housing in mixed schemes. We have strong alliances with RSLs and the pitfall for us is that we could alienate them," says Mary Lynch, strategy director with Lovell Partnerships. Lovell is having its own meeting with the Housing Corporation in the coming weeks about its concerns.
Countryside Properties, which is a private housebuilder and a social housing contractor, sees both sides of the argument and supports a partnership approach. "This change suggests a more level playing field," says Alan Cherry, chairman of Countryside Properties. "Housing associations are allowed to undertake speculative development so I see this as an extension of that. But we have good relationships with housing associations and we wouldn't want to compete with them, so wherever possible we'd like them to apply for the grant.
"We'd still want associations to manage housing and we'd want to retain their experience in the social sector. It will lead to much closer relationships between housing associations and developers."
Cherry predicts that the shift will cut some RSLs out of development. "This will consolidate the sector," he says. "Smaller housing associations aren't sufficiently experienced in the development of social housing to work effectively with developers."
The corporation itself is adopting a tough love approach to its charges. "Housing associations need to be on their toes," says Neil Haddon, assistant chief executive of the corporation. "They shouldn't have an automatic right to subsidy. They need to be aware that other organisations might be able to do it more effectively."
He adds that housing associations will have a role in managing homes built by private housebuilders. "Developers are unlikely to want Lynch's view on the government's proposal is that it could produce more of a partnership approach to development. "If housing associations get squeezed out of development, then they could form partnerships with developers," she says. to be involved in management and so they're likely to engage housing associations to do that on their behalf."
Tony Carey, managing director of London developer St George, agrees: "We would see homes still being managed by an RSL or by a private sector management company."
The development of affordable homes is likely to challenge private housebuilders, given the rigorous standards imposed by the corporation, which cover everything from the furniture that the rooms in a home should be able to accommodate to compliance with the Egan agenda and the use of off-site manufacturing technology. "We're already using off-site manufacturing," says Carey, "but we don't do it for ideological reasons. We do it to improve efficiency and to get better value."
Graeme McCallum, chief executive of Wilson Connolly adds: "Although we shouldn't compromise sensible standards, we should concentrate on building sufficient housing."
The corporation is acknowledging that its standards could be a deterrent to private housebuilders. "We have to accept this is a challenge to the way we regulate," says Haddon. "We would need to frame a regulatory system that met companies' requirements." The government will release the conclusions of its consultation process with the industry in the autumn. But conspiracy theorists say the conclusion is foregone. They point out that the Treasury is dominating the housebuilding agenda – a fact cemented by the appointment of Yvette Cooper, wife of the Ed Balls, Gordon Brown's right hand man, to the housing brief at the Office of the Deputy Prime Minister.