Housing associations that renegotiate loan deals to secure better terms, such as lower interest payments, will be able to count the reduced costs as efficiency savings, the Housing Corporation confirmed this week.

The government has demanded that housing associations make £792m in efficiency savings by 2008. They have been told to make these savings in four areas: new build; capital works; management and maintenance; and the procurement of goods.

Housing finance specialists had expressed concerns – following the publication of a Housing Corporation efficiency savings guidance note on 24 March (HT 24 March, page 8) – that associations, which can make “millions” in savings by renegotiating better loan terms with lenders, would not be able to count such cost reductions as efficiency savings.

Malcolm Levi, chief executive of Home Group, said: “If you have a loan and interest is 10%, and then after a refinance it comes out as 6%-7%, that means a large sum of money is available to spend on reaching the decent homes standard, for example.

“If it’s not counted, that’s a mistake, as it’s a sign of greater efficiency. Interest rates are low and lenders are keen to lend to housing associations.”

Des Kelly, policy officer at the National Housing Federation, said: “It’s not one of the efficiency savings that the government has laid down, but it’s suggested that housing associations include information about treasury management [in their annual efficiency statements]. RSLs can save millions if they’re astute on financial management of debt.”

The Housing Corporation said this week that it would count improved loan terms as efficiency savings.

Clare Miller, Housing Corporation director of regulation policy, said: “It’s not identified as an individual efficiency item, but any reduction in running costs would count as an efficiency gain.”

Source

Housing Today