Social Housing Speed Read – European Investment Bank halts funding
29th August, 2017
The European Investment Bank has recently confirmed it will be freezing its UK operations, over a year since Britain voted to leave the EU and five months since the Government triggered Article 50. We look at what this means for the sector.
The value of the European Investment Bank to the UK
The European Investment Bank has financed £6.9 billion of public infrastructure projects in the country in the last year, with £1 billion of this given to UK social housing projects.
Now the world’s biggest lender has decided to put a halt to new UK long-term loans as a result of Brexit.
Since Article 50 was invoked, only three UK projects have been granted funding and we haven’t seen any projects being financed since June 2017.
Henry Gregg, member relations director at the National Housing Federation (NHF), previously highlighted that it was unclear whether the Bank will continue to invest post Brexit. This recent announcement has since provided some clarity that for the immediate future, there will be no investment.
As Neena Gill CBE, MEP for the West Midlands, states: “With the social housing sector already strained, we cannot afford to lose £1 of funding, let alone £1bn.”
With the European Investment Bank having provided £4bn of investment in social housing over 10 years, the moratorium could therefore come at a cost to the sector.
Need for change?
Neena Gill proposes two legislative changes that she believes will assist in curtailing the current housing crisis by encouraging the development of more housing:
- Amending the Land Compensation Act 1961 to allow local authorities to purchase land at its current use value. Councils are obliged to pay an inflated price when purchasing land to build housing (as the price includes potential planning permission). Ms Gill states this inflates pricing and discouraging the building of homes.
- Update the regulations on green-belt land. Ms Gill considers that “much of the so-called ‘green-belt’ land is hardly green at all” and states that “within the M25 which circles greater London there are 110,000 hectares of green-belt land” and highlights that more than one million new homes could be built on just one quarter of this area.
The imminent future
Although this is upsetting news for the sector, private finance will remain an option for housing associations.
Chief executive of The Housing Finance Corporation, Piers Williamson, believes it is “unlikely” that the uncertainty created by Brexit “will impact on the availability of private finance for housing associations”.
There are also perhaps too many other changes and uncertainties impacting the sector for Brexit to be a priority, including the forthcoming Local Housing Allowance cap, the rent cut and Universal Credit – although perhaps this is set to change, with the loss of the country’s biggest funder of social housing (at least for the time being).
If you have any questions on the above and how it will affect social housing providers, or any other questions as a social housing provider, please do not hesitate to contact John Murray or a member of our expert Social Housing Team.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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