It was almost four years ago today, in a meeting at the Housing Corporation's Maple House headquarters, that Richard McCarthy realised Peabody was going to have to make some tough decisions to get its stock up to the decency standard by 2010.
A year into his job as the Peabody Trust's chief executive, McCarthy and his team sat down with Simon Dow, then interim chief of the corporation, and laid their cards on the table. It was not a good hand.

Peabody needed to invest £220m in the 40% of its 19,500 homes that failed the standard. It would struggle to do this without cutting costs elsewhere. McCarthy hoped to convince Dow to commit £12m to match Peabody's intended £10m a year investment.

Dow listened carefully before asking McCarthy and his team to revisit their figures before his committing any funds. It was not the answer McCarthy wanted. The trust then embarked on a three-year review of its stock and the investment amount needed to meet the 2010 target.

"The corporation was hoping these figures would fall away somewhat, but this did not happen. Our review showed that the original figures were broadly in line with what needed to be done," says McCarthy, now director general of sustainable communities at the ODPM.

"I doubt if any other RSL– excluding large-scale voluntary transfer associations – have spent more on their stock than Peabody. Despite this, we met with the corporation as we knew there was a great deal more that was required to meet decent homes by 2010.

There has been an intensive period of discussion and analysis. The suggestion that Peabody has waited until now to invest in its stock is ridiculous

Richard McCarthy, former Peabody chief

"There has been an intensive period of discussion and analysis. The suggestion that Peabody has not moved before now to invest in its stock is ludicrous."

The hope at the trust was that the corporation would agree to press the ODPM to allow it to commit more funds to help associations meet the decent homes target. It has committed some funds toward individual schemes, but nothing like the £12m McCarthy asked for.

The choice facing the 15-strong board of governors when it met last year was stark. It had access to £151m in loan finance, but was reluctant to use this as it already had to service debt borrowed at high rates in the early 1990s. Although its annual accounts listed £105m held in reserves, this was not cash and represented surpluses from previous years that had already been invested in housing. The only option left was to try meeting the target with existing revenues. Fifty-one jobs were lost.

McCarthy left in October last year, before the cutbacks. This has led to some accusations that he left Peabody in a parlous state.

Source

Housing Today