Watchdog seen as key to guaranteeing billions of pounds of bank lending for housing development

Housing minister Grant Shapps is working up plans to make the Homes and Communities Agency regulate social landlords, averting fears that billions of pounds of lending to the sector would be put at risk.

Shapps is expected to hand the role to the Homes and Communities Agency in a speech to the Chartered Institute of Housing conference in Harrogate next week. The move, which suggests the HCA will survive the “bonfire of the quangos”, would also spell the end of the Tenants Services Authority (TSA).

The shake-up has yet to receive full Whitehall sign-off, leaving a chance that it could be postponed or abandoned. But the source said: “Barring a last-minute change of plan, we understand that Shapps will [next week] launch a paper that talks about putting the regulatory function back into the HCA.”

The abolition of the role of the TSA had been widely feared by the housebuilding sector, which sees financial regulation of social landlords as essential to generating cheap development finance. A spokesperson for the Council of Mortgage Lenders (CML) said the abolition of regulation could jeopardise the £58bn lent to the sector by banks.

Housing associations built most of the 56,000 social homes constructed last year. Despite this, Shapps previously described the TSA as “a quango too far”.

Shapps has been convinced of the continuing need for regulation. He gets it

Industry source

However, one industry source said in the past few days that Shapps had been persuaded to maintain a regulatory role. The source said: “We gather that in the last week he has been convinced by the CML of a continuing need for regulation. He gets it.”

Housing consultant Derek Joseph said: “I’m fairly sure the banks will have told Shapps in no uncertain terms that abolition would cause the default of a large number of loans, and would be incredibly expensive.”

Access to bank lending is particularly important given the much reduced public funding available to housing associations for development. Shapps said last week: “The cash has really run out. We’re not just softening you up here.”

The news will come as some relief to the housebuilding sector in a week that it emerged that all uncommitted HCA spending is likely to be permanently lost unless money can be found to fill the £610m hole in the body’s finances in next week’s Budget.