What will you win?

Social housing has been promised extra money in next month's comprehensive spending review, in which the chancellor will unveil his spending plans for the next three years. That's much more than has been granted to housing's main competitors – defence and law and order – so the sector knows that it is holding a winning ticket for Gordon Brown's prize draw.

Charity Shelter is probably getting its hopes up a little too high when it calls for £3.5bn a year to to build 89,000 homes, but the outlook is nothing like as bleak as the freeze on funding rises predicted by the think tank, the Institute for Public Policy Research in March.

The housing sector has seen its share of overall government investment shrink from 1% of gross domestic product in 1989 to about 0.3% today, but it looks hopeful that the settlement for the ODPM will look favourably on the sector.

A Whitehall source says: "Where the Treasury is coming from is more social housing and the establishment of a community infrastructure fund [to be spent on local facilities]. These were both pledges made in the Budget and that hasn't changed; the Treasury will start delivering on these in the spending review."

The building and the fund will both ultimately be paid for by the "planning gain supplement" payments proposed in the Barker review.

"Last time round, in 2002, there were discussions between the chancellor, ODPM and Number 10 right up to the last minute. This time round, the Labour government has publicly signed up to more money for social housing – the only question for this year's comprehensive spending review negotiations is how and when this investment will be made. Number 10 has yet to have its say on this so housing will definitely be one of the key issues for debate, alongside defence and law and order."

So far, so encouraging. But, as ever when it comes to extra resources for housing, there's a lot of competition for and, inevitably, there will be losers as well as winners.

There will be more money for social housebuilding, that is certain. The Barker Report on housing supply recommended £1.6bn extra each year for an additional 23,000 homes and stated: "The government accepts that there is a case for increased investment in social housing. It will begin to address this in the 2004 spending review."

It doesn't get more clear than that.

The precise amount is still unknown, but it will be delivered through the Housing Corporation and, possibly, English Partnerships.

Back by popular demand
There will also be a funding pot set up to help push through negative-value stock transfers – those that have stalled because the value of the homes is less than the investment needed to bring them up to the decent homes standard. This move – effectively resurrecting the much-missed Estates Renewal Challenge Fund – will delight councils including Salford, Preston, Liverpool and Tower Hamlets in east London, which all face this kind of crisis.

Ian Doolittle, partner and head of public sector at solicitor Trowers & Hamlins, says: "In order to be successful, the fund has to be at least £500m. If it's not, it'll raise people's hopes only for them to be dashed and thus cause further problems." Other experts have suggested that the pot will need to be £1bn over the next three years, although this is unlikely.

Turning to arm's-length management organisations, Doolittle thinks it would be "extraordinarily difficult" for the government to renege on funding the four rounds that have been given the green-light to date.

"The interesting thing will be to see what happens with a potential round five and what funds are available here."

The Treasury is aware that transfer is ultimately kinder to the public purse than ALMOs because it draws in resources from the private sector as well. However, ALMOs remain popular with councils – despite Camden's "no" vote in January – because they are seen as a good halfway-house option that draws in extra government funding without complete loss of the council's stock.

It's a sure-fire way of improving the homes and lives of hundreds of thousands of voters, but the government has already seen almost £2bn eaten up by just 32 councils in three ALMO rounds, with a fourth round of 12 bidders hoping for a total £1.8bn. That can only mean that cold water is to be poured on the ALMO hopes of a few reasonably well-performing councils such as Hackney and Ipswich, who have yet to decide how they will get their homes up to the 2010 decent homes target.

The picture for the private finance initiative is more interesting. Ben Denton, senior director at consultancy ABROS, says: "It sounds as though the government is becoming much more interested in larger procurement and combining projects in areas like housing, health and education for whole neighbourhoods. This would definitely be a good way forward as it would offer much more potential to private bidders who have been put off by how housing PFI has worked to date."

The ODPM has recently been making noises that PFI – although struggling to gain momentum in housing – has the potential to be extended to building affordable homes with public funds.

This would likely gain favour with the Treasury because it would tick the all-important box of expenditure in one area benefiting other government priorities.

There will also be more funding for the four housing growth areas in the South-east and the nine market renewal pathfinders in the North and Midlands. However, calls from the National Housing Federation, Chartered Institute of Housing and Local Government Association for a £350m national market renewal fund are likely to go unheard.

The ODPM is much more likely to leave low demand outside the nine pathfinders to the newly merged regional housing and planning boards.

This would not surprise Sarah Webb, director of policy at the CIH. "The amount of money available will be restricted because of commitments to raise spending on health and education," she says, predicting that while some enjoy a boost, other parts of the social housing sector can expect to be disappointed.

"Right now it seems as though Barker's arguments for more money for new housebuilding are holding sway," she continues.

Efficiency
All the anticipated largesse comes with a caveat. The prize-winners will have to agree to spend their winnings in the most efficient way possible. As a Whitehall source revealed in Housing Today last month: "The Treasury will also set out the level of efficiency gains that are achievable in a number of key areas tied to an actual monetary figure and one of these areas will be social housing (HT 28 May, page 7)."

There is no set idea yet of what the targets will be, although they are likely to centre around three schemes put forward by the ODPM as examples of what is possible.

They are the recently launched Procurement for Housing service, which aims to slash purchasing costs through bulk buying; the "system thinking" model championed by the Northern Housing Consortium, which evaluates how a process works from the point of view of the user, and work concerned with social housing construction and repairs.

Webb, though, warns that this is unlikely to be the summer when housing returns to the forefront of the Treasury's agenda. "It would be a turning point if housing had been able to divert some cash its way that had been earmarked for traditionally big areas like health and education," she says.

"This spending review was our best opportunity but, because this is an election year, I just don't think we will benefit as we should from this chance in terms of more resources."