The Evil that Banks still do: Public Housing

There were 1.77 million families (4 million individuals) on local authority waiting lists.

Many of whom live in simply appalling housing conditions. Due to the current financial crisis I think it is fair to say that most folk think this figure will go up dramatically.

However, in the midst of this absolute and already grim housing shortage, the UK Banking sector has effectively stopped many (most?) Housing Associations from building any new public housing developments.

This future development disaster (it’s not merely a crisis any more) is mainly because Banks will not provide new loans for development to housing associations without them agreeing to renegotiate any existing loans they have and significantly increasing the interest rate for these old loans.

The Banks now think that they lent housing associations development money to build new homes in the past too cheaply. They want to rebalance their balance sheets and make more money from their existing loans. So they are effectively blackmailing housing associations by saying if you want new loans from us, pay us more for your old loans or else!

Housing associations who can build new homes at current market interest rates are being stopped from building since the cartel of Banks that provide public housing finance are making new development simply uneconomic.

Banks have refused to agree to even minor changes to loans which do not in any way make these loans less secure. They are just using their powerful bargaining position to veto changes to existing agreements which could have resulted in new homes.

Some associations have even been stopped from using equity in the value of their stock to provide security for new development unless they agree to pay higher interest on their existing loans.

The larger groups are trying to get finance from the bond markets but it is very demanding and restrictive to keep the high credit ratings needed to raise the money at any reasonable rate.

Housing associations have usually not been able for understandable reasons to “attack” their lenders over this situation. So there is no public campaign for change.

The state has nationalised many Banks and owns significant chunks of others at great cost to the taxpayer.

What is happening to future housing developments is arguably nearly as bad as mass repossessions? Due in part to pressure by the Government the Banks have agreed to be sensitive to mortgage repossession cases. What about the 4 million on the overcrowding and homeless register who are being effectively refused future rehousing opportunities by the actions of the Banks?

Land prices have collapsed, building contractors are cutting tenders, higher levels of grant are being made available but unless the Banks play ball desperately needed homes will not be built.

It goes without saying that it was irresponsible and unsustainable lending practices which were of course the reason why the housing market is in the mess it is in the first place!

Things have got to change.