Prefab, prescott and punk

First, a sombre portrait of philanthropist George Peabody. Second, a small but significant postcard of The Clash. "I love The Clash," says the chairman of the National Housing Federation and Peabody Trust chief executive, recalling the days when he went to no fewer than six of their gigs. The postcard, McCarthy says, was sent by a colleague in the sector, who knew about his passion for punk.

The Peabody and punk juxtaposition sums up 44-year-old McCarthy's character. He has a passion for housing which reflects the commitment of Peabody's idealistic namesake, but mixes this with a modernising agenda. Under his three-year leadership, Peabody has become London's largest charitable housing trust, providing over 19,500 homes across the city. It has led the prefab revival with the award-winning Murray Grove and cultivated a sophisticated, corporate image rarely seen in the public sector.

This week, McCarthy's modernising stance on housing will be on display at the National Housing Federation conference. One of the driving forces behind the sector's rebranding scheme, he is urging associations to drag themselves into the 21st century with a revamped image.

Over the past two decades, McCarthy explains, he has seen housing associations change from being on the periphery of the housing movement to taking centre stage. "When I started we were still seen as the third way of housing provision, and what has happened is that has changed significantly. This has brought resources, opportunities and a bigger profile – we've professionalised."

Another vital change, says McCarthy, is that the sector is shifting its focus. "We're becoming a more sophisticated sector developing strategies based on need." As chairman of youth homelessness charity group Safe in the City, he regards housing as more than bricks and mortar. According to a senior civil servant, for example, McCarthy is passionate about the "prevention not cure" approach to issues such as homelessness. "Housing fits into a wider jigsaw. When we have estates, we have other services – it's a recognition that just providing a home with a caretaker is not enough. It's legitimate to say that 'we just want to provide housing', but we should be thinking about how that housing is connected with other services and economic prospects. If there needs to be a health centre, then you should be concerned about that – you don't necessarily need to provide it – but you should be lending your voice to getting that service provided. You do need to understand the context of housing and the role it plays. It's about being collaborative with other sectors and agencies."

For McCarthy, these issues are linked to the sector's rebranding. "We're trying to help the sector establish a positive brand that brings it recognition and acts as a motivational force – and that is a real challenge. If what we do and the services we provide do not stand up to the image we are trying to project, then we're in deep trouble."

As far as the Peabody brand goes, McCarthy and his staff have developed a mission statement of sorts – the words "dynamic, effective, empowering, innovative, reliable", which is proudly emblazoned on tea coasters in his office.

"We think it describes the way we want the organisation to be in the future, which can apply to some parts of Peabody but it's not an attempt to say that we walk on water – they're aspirational." When asked which of the words best describes him, McCarthy says quickly: "I'd hope I was the top two."

Within the sector McCarthy is also considered as an accomplished public speaker – one former colleague goes so far as to say he might have made a good politician. Certainly, when speaking on controversial issues, he displays the politician's gift of giving the impression of talking off the cuff, but doing so with caution and control.

McCarthy has seen the sector from the front line up, after starting as a trainee housing officer, and has retained a down-to-earth attitude. One professional acquaintance describes how rare it is to find a housing VIP who still eats in the staff canteen, while another expresses amazement that his office is possibly the pokiest in the building. But McCarthy thought it wise to save the bigger spaces for meeting rooms.

We should focus on creating the structures and mechanisms to get the best we can from the level of investment currently being provided before we go back and ask for more

So why housing? "It was a conscious choice. I was into urban geography and thought housing policy – its failures and successes – were hugely interesting." As a student McCarthy became secretary of a short-life cooperative and developed an interest in the sector, eventually taking a job as a housing officer at Hyde Housing Association. "I wanted to work in housing but I didn't know where that would end, though I knew I wanted to influence decisions and make decisions."

Among the issues that concern McCarthy in housing at the moment, alongside the perennially important one of supply being "woefully inadequate", is the decent homes target. Describing the 2010 deadline as unrealistic, he has a novel idea for how to improve stock. "I'd say that for some organisations, including Peabody, there's a powerful argument for assistance from the government towards our asset management strategies," he suggests.

McCarthy believes that, in some cases, it might be appropriate for the government to provide "gap funding" to help associations improve existing stock – rather than associations spending more money on increasing their stock. "At the moment very limited amounts of money are made available via the Housing Corporation for major repairs and improvements, and I'd like to see those merged into a single-asset management grant and be treated as a form of gap funding. It would vary by case, according to what that organisation can afford to put in, what the needs are, what the case for retaining the housing is. But the question to ask is whether this is more economical than building 60 homes down the road?"

All of this is wishful thinking, however, unless the sector demonstrates to the government that it is dedicated to improving its stock. "We need to show we understand it if we do understand and show our commitment to maintaining and investing in our own stock, then we will have a stronger case over time as the need grows for more investment via government."

As Peabody is a pioneer in the resurgence of modular housing – interest in off-site manufacture soared after the association's Murray Grove – McCarthy welcomes any new government investment. He adds however, that any funds need to be long term if production of modular units is to have any impact on the affordable crisis. "We need cost continuity, but modular housing could be part of the answer to the problem – not the entire solution. I don't think the deputy prime minister would see it as the entire solution."

As far as the spending review is concerned, McCarthy believes the funds are welcome albeit insufficient, and the government's failure to issue detail is not necessarily a bad thing. "We're pleased from an NHF point of view that there's more money, and we see an opportunity in the lack of detail at this stage to try to influence how that money is spent. First we should focus on creating the structures and mechanisms to get the best we can from the level of investment and spending being provided and then we go back and present the case for more. Sitting on the sidelines, saying it's not enough isn't sufficient. We mustn't just go back with proposals on how the money is allocated, but on how we'll work with regional agencies to get the maximum benefit."

Of the controversial spending review-related issue of a single inspectorate for the sector, he urges caution. "The government should be very careful about the separation of investment streams and regulation," he stresses. "There is already a range of investment streams and no one is suggesting that only one agency should invest in housing associations, but to separate regulation from investment brings many dangers with it. Secondly, to separate inspection from regulation is equally hazardous. Thirdly, we are not public bodies and the Audit Commission regulates public bodies. Those are the warnings the government needs to consider."

McCarthy works hard and plays hard. He plays tennis regularly, calling it "a tremendous release from work". The theatre is another passion. McCarthy admits that as a child, he wanted to be an actor. He acted at university and set up his own theatre group, until children and the pressures of a career meant his theatrical pursuits fell by the wayside.

Claiming he can't recall "any useful" examples of roles he played, he will only say that he "never did a full Shakespeare but modern plays or pieces we developed ourselves". When pushed, he admits to always having wanted to play the Joel Grey role of the MC in Cabaret and admiring actor Al Pacino. Just talking about film and theatre fires up McCarthy's enthusiasm. He comes from a musical family – his brother directs opera and his sister runs the Glyndebourne touring company – and he entertains colleagues in the Peabody box at the Royal Albert Hall.