£1bn loan scheme may bridge stock transfer fund shortfalls

The government has been urged to launch a £1bn fund as part of this summer's comprehensive spending review that could save some of England's most deprived estates.

It would be used to make up shortfalls in transfers where the homes' value is outweighed by the amount that must be invested in them.

Steve Stride, chief executive of 4000-home transfer landlord Poplar HARCA, east London, came up with the model, known as the "loan repayment guarantee model". The Chartered Institute of Housing and National Housing Federation are believed to support the idea.

It would formalise a process piloted in areas including Glasgow and Liverpool: the transfer landlord receives a government dowry to make up the shortfall in the costs of the move.

The landlord guarantees that, when it can, it will pay the money back. It builds homes for private sale as well as refurbishing existing social housing, makes profits because of the high demand for housing in the area, and uses some of this money to pay back the Treasury.

"Our method would be to operate on an open-book basis so that once we got into a surplus situation we could either give this back to the Treasury or hopefully reinvest it in further regeneration projects," said Stride.

Stride said it would only work for low-quality social housing in areas of high demand.

Stride said he'd had encouraging noises about his model from the Treasury and ODPM.

But he pointed out that to ensure the "vast tracts of social housing across London and other areas of the South-east" met the decent homes standard, the government would at the least have to establish a £300m fund in this summer's spending review. This would be enough to ensure the 38,000 homes owned by Tower Hamlets council – where Poplar HARCA operates – were able to meet the standard.

But Stride said a £1bn fund would allow the system to be used in other high-demand areas such as Manchester and Leeds.

To illustrate the problem, he cited the London regional housing board's refusal last week of £5m for a 560-home estate in Tower Hamlets to cover a negative value shortfall.

"The ballot has had to be put back while we find the money somewhere else," said Stride.

"It is madness. Ultimately, we are playing with people's lives."