Sir – The past few years have seen an extraordinary period of change in the finances of housing providers. The collapse of the financial markets, budget cuts, fundamental changes to development funding and housing benefit changes have meant that housing providers have been regularly revisiting their business plans and sometimes their funders.
However, just when finance directors could at last feel justified in thinking that they have their income streams under control, the financial world is throwing more spanners into the works.
The latest news is that the new financial regulator, the Prudential Regulation Authority, is imposing a requirement for some of the banks who fund housing providers to hold more capital against their loans. Under this proposal, banks could be required to hold capital of 35 per cent against loans to corporate bodies which, of course, includes housing providers, and capital of 45 per cent for unsecured debt.
At the moment, most housing provider portfolios require just 10 per cent of capital to be held; if this change happens, it could lead to the re-pricing of around £40bn of loans with increased lenders costs and more expensive debt.
This will not do much for the financiers’ appetite for lending to housing providers. They are already considering the fact that earlier this year, Moodys downgraded some UK housing providers because it lacks faith in the Homes and Communities Agency’s ability to support landlords who run into financial difficulties.
The good news is that the HCA is aware of the problem and is taking steps to restructure its regulatory teams. Seven new senior members of staff are set to be appointed in a bid to boost its effectiveness. This follows concerns expressed by the regulation committee members last year that it does not have the ‘resources to function effectively’.
Slowly and surely, the HCA is turning itself into a fully-functioning body that funds new affordable housing and regulates registered housing providers. In fact, it’s beginning to look a lot like the Housing Corporation that it replaced several years ago at enormous cost to taxpayers.
Director of development, Shelton Development Services