Housing associations could consider radical ways of raising funds for new affordable homes – as the sector faces up to a dramatically different operating environment, according to a new report from the National Housing Federation.

'Facing the future: Evolution or revolution?' explores a range of financing options and organisational changes that housing associations could adopt as the sector faces up to the unprecedented challenges created by the financial crisis and recession.

Unconventional routes to accessing funding, such as issuing shares on commercial parts of their businesses, could be a potential source of raising revenue for investment in affordable housing and neighbourhood services, it suggests.

Many associations already have non-registered commercial subsidiaries, which in practice could be able to issue share capital.

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If these businesses were floated, the housing association as the parent company would retain a majority of the shares in these subsidiaries to ensure they could not be bought out. The business would stand as a separate entity to the parent company – meaning the core business would be protected and the risk limited.

These businesses could prove attractive investments for pension funds, according to the report, including providing an opportunity to meet their corporate social responsibility objectives.

The housing association sector remains financially robust, but the global downturn means social landlords need to plan for the future and focus on how they want their organisation to develop.

The in-depth report stresses it is not recommending any of the proposals to housing associations or making an offer to government, but believes many boards may want to explore the options given the much changed operating environment for the sector.

Federation Chief Executive David Orr said: "Our sector has a tremendous track record of innovation and creativity in the face of change and we will be called upon to display those qualities once again as we consider the best response to our new operating environment.

"Housing associations and their boards may choose to adopt one or other of the strategies or none. Quite properly, only they are best placed to identify the right path for their organisation and only they can execute it.

"Whatever choices associations make we can be sure that they will be motivated by a desire to maximise the contribution that they can make to meeting the needs of those households and communities in housing need."

(CD/GK)