The package announced in the Consultation Paper on Changes to the Rent Surplus Fund and on ADP Investment Policy for Works to RSLs Stock, taken together with measures on grant recovery and grant recycling introduced earlier this year, are designed to assist RSLs to repair, upgrade, and where necessary replace their portfolios of pre-1988 (and post-1988 Act special needs) housing stock more effectively and without unnecessary public intervention.
The new measures in the consultation paper include:
-- The release and simplification of the Rent Surplus Fund (RSF)
Over half of the current RSL stock has been built or bought in since the 1988 Housing Act under financial arrangements which were, and are, designed to enable RSLs to self fund necessary future works (apart from a small number of special needs dwellings). This stock is not, and never has been, eligible for public subsidy for reinvestment other than in defined and highly exceptional circumstances.
Stock entitled in principle to consideration for public subsidy is confined to the approximately 500,000 dwellings which predate the 1988 Act. The new financial arrangements for RSLs which were introduced in 1989 were intended to enable them to retain their growing surpluses on this stock for reinvestment in it in due course, thus gradually eliminating the need for further public subsidy for reinvestment. This mechanism was, and is, their Rent Surplus Funds. Therefore most RSF is attributed to the newest qualifying dwellings and is locked up until they require major repairs or reinvestment.
The corporation's proposals would convert existing reserves into a Reinvestment Fund and unlock them for immediate use on those qualifying dwellings which most need reinvestment.
The release of locked RSF resources could provide a cash injection for
reinvestment of some£350m accumulated funds, plus a further£80 to£90m a year.
The paper also signals the corporation's future strategy for allocating investment to works to RSL stock. There will be two gates:
-- Retention of means-testing of RSLs to target limited ADP resources on those RSLs without the resources to fund their own reinvestment
-- Such ADP funds as were available would be targeted at stock owned by these RSLs which was both important in meeting long term priority needs identified in housing strategies and had an urgent need for investment
The corporation has already announced in bidding guidance that RSLs with more than£500,000 of accumulated RSF as at 30 September 1997 will not have access to reinvestment funding from the 1998/99 ADP. The corporation also wishes to continue in the future to restrict access to ADP funding for reinvestment only to RSLs who have fully spent or firmly committed their Reinvestment Funds.
'The combined effect of the changes is intended to make RSLs more self-sufficient and less reliant on public subsidy and corporation direction - although the consultation paper acknowledges that they will not provide a full solution for every RSL.
We believe the package of measures we have brought into effect over the last few months, culminating in the release of our RSF consultation paper today, will provide RSLs with some much needed flexibility in spending resources on the stock which needs the most reinvestment,' commented the corporation's assistant director (investment) June Dawes.
Copies of the paper are available from Chris Melia, Investment Division, The Housing Corporation, 149 Tottenham Court Road, London W1P 0BN. Responses are requested by 10 October 1997.