G15 launch Capital Finance report

London’s largest housing associations have launched a new report stressing the importance of surplus generation to invest in communities and new affordable homes and calling for a more effective partnership between government agencies and associations.

A recent study by the Housing Corporation into the sector’s financial capacity suggests that housing associations have billions of pounds of untapped capacity which could be used to support more home building.

However, the G15 housing associations argue in their new “Capital Finance” report that surpluses are pumped into a range of vital community projects and should not simply be used to pay for more homes.

The Capital Finance report shows that the G15 associations are responding to the Corporation’s challenge to deliver more for less by:

• Investing in diverse activities like build for sale to cross-subsidise new affordable homes and create mixed, sustainable communities
• Land-banking sites to secure certainty and speed in development
• Using their reserves to build community centres and fund community projects for local people
• Refinancing loans to create interest payment savings
• Generating economies of scale through stock transfers and mergers, again to deliver more homes and better services into communities.
• Investing in IT systems to create future cost savings

David Montague, Group Finance Director, L&Q Group, and Chair of the G15 Finance Directors, said: “If we are to fulfil the range of objectives the government has set us – which go well beyond building new affordable homes – housing associations must be allowed to make strong surpluses and keep control of the money we generate. “These surpluses are what determine our ability to invest and achieve more in communities year by year. The greater the surplus we make, the more we can borrow, the more we can invest and the lower the bill to the taxpayer.

“The challenge to all of us is finding the right balance between public, private and housing association reserve investment, between investment in existing homes and neighbourhoods and investment in new homes, between short term demand and long term sustainability, and between making the best use of our balance sheet and remaining a good bet for lenders.”

Over the last 10 years, the G15 has trebled its investment in new homes whilst cutting its overall grant rate from 68% to 52%. This has been done by quadrupling the amount borrowed from banks and quadrupling revenue reserves. As a consequence, the G15’s gearing – the amount borrowed compared to government grants and revenue reserves – has doubled.

As grant rates are set to reduce even further, increasing borrowing capacity through increased surplus generation will become even more critical in the future.
Mr Montague said: “Surplus is not a dirty word - every pound we make goes towards investment in the communities we serve, and our track record shows that we are making our money work harder than ever before.”

“We are looking creatively at new ways to increase our financial capacity and we will continue to do so, because it helps our residents, improves our ability to act as social businesses, and meets government social objectives.”
He added: “But the government could do more too; by giving more flexibility on rents, changing the tax regime and encouraging mergers, for example. “
“What the G15 housing associations are about is sustained investment in neighbourhoods, so we can create the sustainable communities which are a core objective for the government. We are committed to communities for the long term, and have to maintain our financial strength to deliver investment for the long term.”

For a copy of G15’s Capital Finance report please contact Janette Rolls (jrolls@lqgroup.org.uk, tel: 020 8557 2062). A PDF version can also be downloaded at G15

The current G15 members are:

Affinity Sutton
AmicusHorizon Group
Catalyst Housing Group
Circle Anglia
Dominion Housing Group
East Thames Group
Family Mosaic
Genesis Group
Metropolitan Housing Trust
Notting Hill Housing Group
Network Housing Group
Peabody Trust
Southern Housing Group
The Hyde Group
The L&Q Group

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