Housebuilders could lose major estate regeneration work because one of the UK's biggest housing associations looks set to pull out of stock transfer schemes.
The board of Southern Housing Group, one of the G15 network of leading registered social landlords, will decide when it meets later this month whether to accept a recommendation by chief executive Tom Dacey to stop bids for stock transfers, which transfer council housing to housing associations.
He said: "We are going to take a strategic decision that in the future we should not get involved in any stock transfers for refurbishment."
Dacey said that one of the key factors forcing Southern's hand had been Treasury "clawback" rules. These state that housing associations will have to pay back government estate regeneration subsidy if the schemes are more profitable than anticipated in the business plan. The rules stipulate that gap funding will have to be paid back on a sliding scale.
He also said that Southern was reconsidering its position because of the political backlash that it, along with other RSLs, has encountered in the east London borough of Tower Hamlets where MP George Galloway's Respect Party has been running a vitriolic campaign against the council's stock transfer plans.
The departure of a leading RSL from the transfer market would be a blow to the government's faltering programme to bring the UK's council housing to Decent Homes standard by 2010. Communities minister David Miliband has already admitted that 10% of social housing will not be up to scratch by this point.
Brendan Sarsfield, Mosaic Housing Group chief executive, warned that although his RSL was not introducing a blanket ban on new transfers, it would look cautiously at such activity in the future. "Most of the transfers were successful because of falling interest rates. The risk is that interest rates are low now and that building costs will eat into your business plan."
David Williams, Circle Anglia Housing Group new business director, said the uncertainty surrounding stock transfer was compounded by the failure on the part of the government to rule out allowing councils to borrow for housing investment purposes.
The risk is that building costs will eat into our business plan
Brendan Sarsfield, Mosaic
Ministers have been embarrassed by a succession of Labour Party conference votes to give councils powers to borrow so that they can carry out improvements themselves. Emboldened anti-transfer campaigners have pledged a series of legal challenges against transfers.
Rocketing building cost inflation is also threatening to disrupt the refurbishment plans of a number of arm's length management organisations in the capital. In north-east London, where a number of councils are planning to set up ALMOs to improve their stock, building cost inflation is rising much faster than retail price inflation, which forms the basis on which the government provides them with subsidy.
In Hackney, for example, the newly established ALMO faces annual BCI of 16% even before work on the nearby Olympics site has begun.
However Harvey Griffiths, Gleeson group business development director, expressed confidence in the estate regeneration market. He said:
"There is a need for long-term stock improvements, however it is procured."