Alternative funding models won't work, east London council says
Tower hamlets council is struggling to fill a funding shortfall in its plans for partial stock transfer.

As a result, the east London authority has repeated its call for gap funding to support its partial transfer programme – despite being told by the Office of the Deputy Prime Minister to look at alternative funding models.

The government has been promoting partial transfer since the PSA Plus review in February. The aim is to win more "yes" votes for transfers by involving fewer homes in each.

Tower Hamlets has applied to have three of its estates – totalling more than 2500 homes – included on the 2003 transfer list. However, the cost of repairs outweighs the value of the property on at least two of the bids.

The exact amount required to balance the transfers is understood to be the subject of negotiations with the ODPM.

An ODPM panel is consulting lenders, ratings agencies and finance consultants on ways of funding transfer.

It is examining three models:

  • a vehicle that would allow several smaller transfers to be bundled into one bond issue
  • greater use of structured finance models mixing standard, subordinate and mezzanine loans in order to save money
  • a housing version of an NHS programme used to build GPs' surgeries.

If funding is not forthcoming, it could be the homes cannot be made decent by 2010

Liz Ormston, housing stock manager, Tower Hamlets council

The panel is meeting on 26 June to discuss feedback from the finance sector and plans to produce a consultation paper this summer.

However, a source at Tower Hamlets has expressed scepticism that the alternative finance models could remove the need for public subsidy. Liz Ormston, housing stock manager at Tower Hamlets, said that although efforts were being made to cut the repair costs, housing associations were unlikely to provide the extra money needed.

"Housing association partners may be able to step in and help, but they can generally only do so once – they can't take too many risks.

"If funding is not forthcoming, it could be the homes cannot be made decent by the 2010 deadline," she said.

Last month, the ODPM advised councils hoping to proceed with negative-value partial transfers to take their funding claims to the regional housing boards (HT 23 May, page 10).

Source

Housing Today