Rented Housing (Hansard, 10 November 1987)

§ Mr. Ridley

I believe the potential for housing associations to raise private finance will be greatly enhanced by the formation of a new body called the Housing Finance Corporation. This has been set up on the initiative of the Housing Corporation, the National Federation of Housing Associations and a number of City interests. I understand it will have as a primary object the giving of assistance in providing finance for registered housing associations. This is an objective the Government whole heartedly support as a means of bringing additional non-public sector resources into housing associations.

Until the development of the Government's new private finance initiatives, registered housing associations have been very largely dependent upon finance from the Exchequer for their development and renovation work. 109W This has been in the form of loans from the Housing Corporation and local authorities, partially refinanced by housing association grant (HAG) paid by the Exchequer. In future the Government hope that an increasing proportion of the loan finance needed by housing associations will come from the private sector. But Exchequer grant support will clearly continue to be necessary in many cases as well in order to enable registered housing associations to charge rents at a reasonably affordable level for their tenants, most of whom have low incomes. In future, therefore, a growing number of registered associations will need to look to mixed sources of finance to support their work, partly public and partly private.

The Housing Corporation is a non-departmental public sector body whose members I appoint. It already carries out certain functions in connection with the payment of public sector grants to registered housing associations and I intend that this role should be expanded under provisions to be included in forthcoming legislation. I commend the initiative of the Housing Corporation in helping to promote the formation of the Housing Finance Corporation as one particular vehicle to help raise private finance for registered housing associations. I know they have been able to rely in their endeavours upon valuable advice and assistance from CIPFA Services Ltd. and James Capel and Co. I understand that it is intended that the Housing Finance Corporation will have a particular role in assisting some of the smaller associations which may initially need more help in this matter.

I understand that the Housing Finance Corporation expects to operate by raising loan finance in the capital markets in substantial tranches and then lending to individual registered housing associations for identified schemes and programmes. In lending to housing associations it and other providers of loan finance will need security from the associations concerned, which will often take the form of charges upon the associations' assets, most of which are the housing they own. The Housing Corporation will need to approve the giving of such charges under its powers under section 9 of the Housing Associations Act 1985. I am asking the Housing Corporation to satisfy itself that associations do not over-commit their assets as security for private sector development loans, and to use its best endeavours to ensure that associations plan to generate sufficient income to service their loans and maintain their property adequately. On this understanding I have indicated that I am content that charges can be given by associations and approved by the Housing Corporation and that recovery of housing association grants will be subordinated to the private sector charges.

The Housing Corporation has proposed that it should be a member of the Housing Finance Corporation, and that the chief executive of the Housing Corporation should be one of its directors. It has proposed this in view of the importance of developing new channels of private finance for registered housing associations, and of ensuring that these are well harmonised with the Housing Corporation's own supervisory and grant functions. The Housing Corporation has, however, made clear that its involvement with the Housing Finance Corporation in no way implies any preferential treatment by it of housing associations dealing with the Housing Finance Corporation as against any other providers of private finance to housing associations, nor any financial liability towards it other 110W than a £1 nominal shareholding. On that understanding, and having regard to the particular attention to be given to the needs of smaller associations, I have approved Housing Corporation participation initially on the basis proposed.

The Housing Finance Corporation has also asked me to approve the appointment of David Hopkinson as its first chairman. Mr. Hopkinson was formerly chief executive of the M and G Group and is currently a member of the Housing Corporation. He combines great knowledge and experience of finance and housing. I believe that he will be an excellent chairman, and I have gladly approved his appointment.

The Government welcome the creation of the Housing Finance Corporation and support its objectives. I am particularly glad that the new body is being established as a purely private sector body, formally constituted as an industrial and provident society. It will make its own commercial judgments about its borrowing and lending. It will not receive any grants or subsidies from the Housing Corporation or the Government; and neither the Government nor the Housing Corporation are guaranteeing or standing behind its operations in any way. It will not distribute any profits it makes, but I understand it will aim to build up some surpluses over time to enable it to expand further its support for housing associations.

I welcome this expression of confidence by the private sector interests involved in the prospects of the housing association movement and the potential for investment in it. I hope that increasingly other lenders will also come forward to support the expansion and diversification of housing associations.