Housing Corporation News Release

Housing associations to be given more flexibility around re-investment to build more homes

21/03/07 Ref: 29/07

A consultation has been launched today (Wednesday 21 March) on new proposals from the Housing Corporation to give housing associations more flexibility in the way they spend funds arising from house sales.

The aim is to reduce regulatory burdens on housing associations whilst ensuring that more resources are spent on new housing supply and land acquisition.

At present when a housing association sells a home funded by Housing Corporation Grant, a sum equivalent to the original grant is placed in the association's Recycled Capital Grant Fund (RCGF), which must be spent on new homes within the same region, in accordance with regional housing priorities.

For homes funded from April 2008, the Housing Corporation is proposing to link the sum that needs to be paid into the RCGF to the value of the properties sold rather than the initial grant input.  Where property prices have risen, that will increase the funds paid into the RCGF.  This reflects the recommendations of the recent reports of the National Audit Office (on low cost home ownership) and the Treasury's Shared Equity Task Force - that the Corporation should work with Government and associations to ensure that equity growth in grant funding is captured and recycled, including by considering linking the amount recycled to the growth in value of the initial grant.

However, the consultation also proposes greater flexibility for associations in the way they use funds in the RCGF, in particular:

• to allow the use of RCGF to fund land banking;

• to allow expenditure across regions on an exception basis.

Housing Corporation Chief Executive, Jon Rouse, said, "We believe that this is a sensible change and a balanced package of reforms.

"The consultation sets out the ways in which change could be effected and we invite comments on which method would work most effectively for all stakeholders.  We are also inviting comments on the effects on associations' business plans and bidding strategies."

Chief Executive of Shelter, Adam Sampson, said, "Any new approaches aimed at increasing new housing supply will help give the 1 in 7 children currently trapped in bad housing and homelessness in Britain the chance of a brighter future.

"We look forward to responding to the consultation to help ensure that the final proposals include ways housing associations can use the Recycled Capital Grant Fund more flexibly and efficiently."

The consultation document, setting out the grounds for the change, is available on the Housing Corporation website.

Responses and comments should be sent to:
Madeline Homer
The Housing Corporation
149 Tottenham Court Road
London
W1T 7BN

The closing date for comment is Wednesday 13 June 2007.

Ends.

Notes to Editors:
1) For further information, please contact Naomi Evans on 020 7393 2118.

2) When a housing association sells a property, the receipt from the sale is available to be reinvested into housing and related activities. Many housing association properties were originally provided with a financial subsidy from Government, paid through the Housing Corporation or a local authority, in the form of grant. When these properties are sold, rather than having to return the grant to the Housing Corporation, the housing association can reinvest it in line with national and regional housing priorities.

3) The Housing Corporation is the Government agency responsible for investing in new affordable homes and regulating nearly 2,000 housing associations across England.  Its biggest ever investment programme of £3.9 billion for 2006-08 will fund 84,000 homes;  49,000 of these will be for affordable rent, and 35,000 will be for affordable sale through the Government's new HomeBuy initiative, helping people to get a foot on the property ladder.

4) The Housing Corporation is working with English Partnerships and Communities and Local Government to establish the proposed new national housing and regeneration agency, Communities England.