Social Rented Housing – Parliamentary Written Answer

Mr Jim Cunningham: To ask the Secretary of State for Communities and Local Government (1) what steps the Government is taking to ensure that local authorities are able to build or purchase properties for social housing; 

(2) how much the Government has set aside for local authorities to build or purchase properties for social housing in each of the next five years

Kris Hopkins [holding answer 6 February 2014]: Following the reform of the Housing Revenue Account and introduction of self-financing of council housing in April 2012, all stock-holding local authorities have a stable source of funding with which to make long-term business plans, which can include the provision of new affordable homes. The Government will also be making available an additional £300 million Housing Revenue Account borrowing, across 2015-16 and 2016-17, to support about 10,000 new affordable homes. In addition, local authorities can bid for a share of the £3.3 billion of Government funding to support delivery of 165,000 affordable homes between 2015 and 2018. An independent review, led by Natalie Elphicke and Keith House, will review the role that all local authorities can play in housing supply, which is due to report by end 2014.

25,000 Homes to Be Built Thanks To HRA Change

English councils will build up to 25,000 new homes in the next five years as a result of the freedoms that came with last year’s self-financing revolution. The figure, calculated for the first time, comes from a report by the Association of Retained Council Housing. The report will show that the end of the housing revenue account subsidy system, which allowed local authorities in England to keep rental income rather than pay it into a centralised pot, has sparked the first major wave of council building programmes for a generation.  Read more on Inside Housing.

Outsourcing Model to Fund New Build

A new repairs outsourcing model has been developed that could increase the borrowing power of councils and finance new house building projects.  If successfully implemented, it could create hundreds of millions of pounds of additional ‘headroom’ underneath councils’ government-imposed borrowing caps following reform of the housing revenue account system. The new model works by delivering a minimum 10 per cent saving on major works by using private sector partners.  The savings would be used to make regular payments to a private sector company, which it could use to borrow against and return the capital funding for investment.  According to proposals from housing consultancy Is4, councils faced with limited borrowing capacity as a result of self-financing rules would be able to fund new house building programmes by outsourcing major repairs work.  Read more on Inside Housing.

Call for Councils to Get Same Borrowing Powers As Housing Associations

The Chartered Institute of Housing said it will campaign for a change in borrowing rules that would allow councils to get the same powers as housing associations.  The scrapping of the Housing Revenue Account (HRA) gives councils the chance to plan their housing budget for the first time since the Second World War.  However, Steve Partridge, director of financial policy and development at CIH, said the CIH would continue to campaign to give stock-owning councils the same borrowing rights as housing associations.  He said:  “We will continue to campaign to change arcane borrowing rules, which do not allow sensible and prudent investment by councils in line with their housing association colleagues.  Investment in affordable council-owned housing is good for communities, good for the economy and good for jobs.” Read more on the CIH website.

Budget 2012 - Effects on the Housing Sector

This year's Budget concentrates on reforms to the tax system that aim to reward work and support growth.  In his speech, Chancellor George Osborne was keen to point out that his budget was 'fiscally neutral' - ie all spending would be paid for by cuts elsewhere.

Key announcements affecting social housing include:

    *a cap on the additional costs of Universal Credit of up to £2.5bn a year in the next spending review

    *a consultation on the use of social housing Real Estate Investment Trusts (in Finance Bill 2013)

   *a pledge to 'take action' if HRA reform increases public borrowing by current OBR estimates

Read more on the CoalitionWatch blog.

Concern over HRA U-Turn

CIH has raised concerns over reform of the Housing Revenue Account (HRA) detailed in the Budget. Grainia Long, chief executive of CIH, expressed worries over the government’s plans to re-examine the amount councils are allowed to borrow after April 1 because the impact on public sector debt might be greater than expected.  She said: “Ministers stated during the passage of the Localism Bill that once set these caps wouldn’t be changed. The statement made in the budget may mean this promise is set to be broken and if so will severely disrupt council plans.”  Reform of HRA would, according to the Office of Budget Responsibility, increase public borrowing more than originally estimated.  “These are just estimates but if they do not change then the government has said it will take action to address the increase in public debt. This is very concerning and is a departure from the original commitment.”  Read more on the CIH website.

Council to Double Spending On Housing

A council is set to invest nearly £5 million in housing as part of its 2012/2013 budget, following HRA reform. Despite now servicing a £95.4 million debt taken on to buy the houses from central government, Wokingham Borough Council says it will double its spending on its housing stock compared to last year. Historically, the council has had to pay some 44 per cent of its tenants’ rents to Central Government in the housing subsidy system, a total of £5.7 million in 2011/12. The interest payment for 2012/13 is estimated at £3.4 million – more than £2 million below the rent share paid to the Central Government the year before. Read more on 24dash.

High Rents Prompt Concerns over HRA Debt Figures

Councils have objected to the rent figures used in the final calculations for the payments they will have to make or receive as part of the move to self financing. The government issued a final list of the payments councils must make to end the housing revenue account subsidy system yesterday. But in an accompanying summary of responses to the HRA consultation it emerged the majority complained about the way the sums were calculated. Councils are concerned about the high rent rises due in 2012/13, which are running at about 8 per cent due to a high inflation figure in September. Many called for the government to diverge from its rent setting formula to allow them to impose lower rises, but officials rejected their pleas. The rent figures are built into the complex calculations that determine how much of around £29 billion of housing debt each local authority must take on to move to self financing. Most respondents to the consultation said they would have to impose the full rent rise to get the funding needed for HRA reform. Read more on Inside Housing.

Council Seeks ALMO Switch

Shropshire Council is looking to set up a new ALMO to manage its housing stock. The council have announced plans in response to the Government's reform of the housing revenue account subsidy system, which it believe will give it more freedom to manage the revenue from its 4,000 homes. If councillors agree with the proposals at a Cabinet meeting on January 11, a consultation will take place later this year with the new organisation being set up by April 2013 if tenants are supportive of the plans. Staff currently employed in the housing team at Shropshire Council would be transferred to the new organisation, which would be run by a management board which will include councillors and tenants. Read more on 24dash.

Treasury 'Stopping Councils from Building Extra 100,000 Homes A Year'

The Treasury is preventing councils from building up to 100,000 extra homes a year by continuing to snuffle 75% of the cash from Right to Buy (RTB) sales, according to the Local Government Association (LGA). Speaking about the Government's new home swap scheme for social housing tenants, Gary Porter, housing expert at the LGA said the scheme was great in principle, but wasn't the solution to the housing shortage. He said: "We certainly need to build more homes than we’re doing at the moment and the key to that is in the Treasury. "The Treasury is preventing councils from being able to deliver as many homes as they should be able to. We need some better changes to the Housing Revenue Account system to allow that to be implemented. We could build over 100,000 extra homes a year if we were allowed to keep all the capital receipts from the council houses we sell under RTB. At the moment the Treasury is proposing they take three quarters of those receipts away from us." Read more on 24dash.

Localism Bill Passes through Parliament

The government’s flagship Localism Bill has completed its passage through Parliament, 18 months after it was unveiled by the coalition. The bill, which includes plans to introduce flexible tenancies and reform the Housing Revenue Account system, is expected to gain royal assent by the end of the year. MPs have now voted to accept the amendments put forward by the Lords to complete the bill’s readings in both houses. The bill has caused controversy on a number of grounds: the scrapping of regional planning targets and the abolition of the Tenant Services Authority have proved controversial moves by the government. The Localism Bill intends to hand power to local people for planning and development decisions in their area through initiatives such as neighbourhood plans and the community right to build. Read more on Inside Housing.

Council Seeks Transfer to Dodge £145m Bill

A council is seeking to transfer its stock to a housing association to avoid taking on £145 million of debt through reform of the housing revenue account. Swindon Council has begun the first stage of a formal consultation with residents on transferring their homes to a housing association. This will run until 21 November, after which the council will decide if it needs to amend its proposals, and whether to go ahead with a ballot. The council wants to transfer its stock to avoid taking on debt when the housing revenue account subsidy system is reformed in April next year. Under the reforms stock-owning councils will have to take on a share of historic debt, currently held by the Treasury, in return for greater financial freedom to manage revenue from housing. The amount of debt varies from council to council, but Swindon is in line for around £145 million. Read more on the Swindon Council website.

Council Credit Rating 'Constrained' By HRA Reform

Credit ratings agency Standard & Poor’s has said that it has ‘constrained’ the rating of Birmingham City Council because of additional debt it will take on as a result of the housing revenue account reform. Nevertheless, the agency still gave Birmingham a AA+ rating, the second highest possible, stating that the council’s financial management had a positive effect on its rating. It added that the supportiveness of the UK’s institutional framework helped Birmingham achieve its rating, with liquidity supported by its ability to access the Treasury’s Public Works Loan Board for financing. Meanwhile, a second ratings agency, Moody’s, gave Birmingham the highest possible triple A rating. Read more on Inside Housing.

Fears That RTB Could Jeopardise Housing Finance Reform

Council representatives have expressed concern that government plans to relaunch the right to buy could jeopardise housing finance reform. The Association of Retained Council Housing is concerned that proposal to change local government debt settlements may jeopardise plans for councils to take local control of housing resources and make long term business plans. As part of housing finance reform the government has assumed a continuation of low level of RTB sales. The Treasury will retain 75 per cent of future receipts but will adjust HRA debt settlements to reflect the loss of future rental income. The current debt settlements assume that just 8 per cent of existing stock would be sold over the next 30 years, meaning councils were compensated to the tune of £850 million for loss of rent. Read more on the ARCH website.

Councils 'Preparing to Issue Bonds' To Pay off Housing Debt

In a bid to cope with changes to the Housing Revenue Account (HRA) system, numerous local authorities hope to borrow money with the help of bonds, according to Public Finance magazine. Although public borrowing interest rates are due to be cut, it is thought that some local authorities will still look to enter the bond market for the first time in around 20 years. To buy themselves out of the current HRA system and control the rents they gain from council house stocks, 135 councils will need to make one-off payments to the Coalition Government. Read more on the Public Finance website.

Self-Financing: Planning the Transition

The CLG have issued a document updating the policy and implementation arrangements set out in the document Implementing Self-financing for Council Housing published on 1 February 2011. The purpose of the document is to:
*provide local authorities with the detailed information they need to prepare for and achieve a successful transition to self-financing
*provide an update on the wider policy and accounting context within which self-financing will operate.
The publication also contains:
*a summary which could be used to explain the reforms to tenants or other interested groups at Annex A
*Refreshed Demolitions Guidance at Annex B
Also accompanying the policy document are working drafts of the legal 'determinations' necessary to bring self-financing into effect, the powers for which are in the Localism Bill. The CLG intend to formally consult on the determinations in November 2011 but would welcome views from the sector on the current versions. Download the document from the CLG website.

Hoarding Bulk of Right to Buy Cash Will Lead to 'Thousands Fewer Council Homes'

Plans that will see the Treasury retain 75% of the cash raised by local authorities from the sale of their council homes could lead to thousands fewer council homes, the Local Government Association (LGA) has warned. Under the Housing and Revenue Account (HRA) Reform, which is due to be implemented from April 2012, councils will still be required to submit 75% of their Right to Buy (RTB) receipts. The HRA reform - which will allow councils to keep their rental incomes in exchange for a slice of the national debt - has been broadly welcomed by the sector, but councils have hit out at continued restrictions on the cash they can keep from RTB sales. Read more on the Public Finance magazine website.

Localism Means Better Housing Management, Says Council Leader

Major changes to the housing finance system will lead to better management as more authorities see their homes as an asset, Conservative council leader Stephen Greenhalgh has told housing professionals. Councillor Greenhalgh, leader of Hammersmith and Fulham Council, set out his view of the abolition of the housing revenue account (HRA) subsidy system next April, and said it would mean less direction from Whitehall as councils decide how they spend rent receipts. “Virtually every aspect of council housing is driven from the centre,” he told the Chartered Institute of Housing conference in Harrogate. Under self-financing, councils could set rents in line with local markets. “We are going to see better management,” he added. “We can attract investment and make local decisions about the level of debt we carry and the rents we charge.” Read more on the CIH website.

HRA Reform Could Halt Demolition

The new system of self-financing could deter authorities from demolishing old stock according to a report, Making the most of HRA Reform, from Pricewaterhouse Coopers and The Smith Institute. The report argues that the move to self-financing, which will lead to councils being able to keep rental income in exchange for taking on debt, could produce £54 billion of investment over the next 30 years. Read more on Inside Housing.

Holding the Purse Strings

"It is one of the most exciting or depressing times to be in housing depending on your point of view," says Paul Price, head of housing at Tendring council in north-east Essex. Sparking such mixed emotions is the biggest reform of council housing finance for decades, due to come into force in April next year. The change has left councils frantically planning for a new world order in housing management. But there is much preparation to be done before April 2012. Most councils need to create 30-year business plans for housing, looking in detail at the condition of their stock and repairs costs. They will also create asset management plans; they might find it cheaper to replace rather than repair old properties, or to demolish unpopular bed-sits and build in-demand family housing. They will also make Treasury management plans to help them deal with the debts and financial responsibility they are taking on. Read more about preparations for April 2012 on the Guardian website.