Alistair Darling promised about £1.5bn today on “thousands of new and modernised social homes as well as regeneration projects.”

The money may soon be there. Spending it is easier said than done, however. Last week I reported on how the credit crunch has hit housing associations. Many are struggling with their finances and development is drying up.

The National Housing Federation  - which represents over a thousand registered social landlords - today warned that funding rules need to be changed as soon as possible.*

NHF chief executive David Orr said: “Ministers must ensure that this money is used to increase grant rates to housing associations forthwith. Otherwise, the situation is so serious that associations simply won’t be able to build new social homes next year. This would be a catastrophe for the millions of people on waiting lists for affordable housing – and would only serve to compound our national housing crisis.”

*

This is how the NHF explains the situation:

“Unless the money is used to pay the builders of new social homes higher grant rates the supply of new, affordable housing could dry up in 2009 – which would have a devastating impact on the Government’s housing targets.

“Currently housing associations pay around 60% of the costs of building new social homes through raising cash from private lenders and selling homes on the private market – with government grants covering the remaining 40 % cost.

“However, the credit crunch has badly hit the ability of associations both to raise money privately and sell homes on the open market. This means that, the new money that the government is bringing forward to pay for the building of new social homes must be used for increased grants otherwise associations simply won’t be able to afford to build any homes in 2009 at all.”

November 24, 2008 8:24pm in Alistair Darling, Budget, Gordon Brown, Housing, UK politics | Comment