In this instance, PFI will deliver new social housing, although most readers will be familiar with PFI's promotion as a means of bringing investment into existing council stock. The news couldn't be more timely, given the recent setbacks to local government's attempts to meet decent homes targets after tenants in Birmingham and on the Aylesbury estate in south London rejected stock transfer.
A two-horse race?
The housing green paper of 2000 set out three principal ways in which traditional local authority borrowing could be supplemented by private finance. One of them was PFI, the other two were arm's-length management and transfer. It seemed clear at the time that transfer would continue to be the main route for improving stock, and I don't think anyone has claimed otherwise.
However, of late, commentators have begun to say it will be a two-horse race between transfer and ALMOs. PFI has neither the track record of transfer nor the freshness of the arm's-length concept, and it has echoes of the unpopular London Underground public-private partnership. Added to this is the fact that PFI was never going to be a quick fix; after all, it's about negotiating a contractual framework to improve properties and deliver services to the highest standards over 30 years.
However, now that Birmingham tenants have demonstrated that transfer does not work everywhere, local authorities will again need to reflect on alternative routes to investment. This is especially true where high service standards are going to be difficult to deliver, preventing access to the freedoms created by removing formal borrowing constraints.
The ‘p’ for ‘private’ in PFI is misleading as it’s really about a long-term framework for service delivery
Partnership for improvement
The PFI route is capable of delivering what local authorities and tenants want on many levels. There will be enforceable service standards – if they are not met, the PFI operator will not be paid. There will also be upfront investment to deliver decent homes targets and standards in life-cycle maintenance. Added to this are the more subjective results: the ownership of the stock doesn't need to change and there are no adverse implications for tenants' rights. Indeed, the "p" for "private" in PFI is misleading as it's really about a long-term framework for service delivery and properly allocating risk and reward between the public and private sectors. A better label would be "partnership for improvement".
Getting through the birth pangs
PFI in housing is taking time to get going, as it did in other local government service areas, and has presented many challenges for public and private sectors alike.
However, the front-runners are now making real progress. Manchester has appointed a preferred bidder with whom it is negotiating a scheme to improve the Plymouth Grove estate, and Islington and North East Derbyshire are down to final shortlists of two bidders for their schemes. The contractors, RSLs and funders who are the main players on the bidding side are inevitably frustrated by the time taken but can see how lessons learned from these schemes will speed things up in future.
Source
Housing Today
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