Cost of dismantling HRA does not account for chunk of major repairs
Reform equation ignores £6bn backlog
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The government’s proposed reform of council housing finance rests on a controversial calculation of repairs costs, which excludes a £6 billion backlog of major works.
Its estimates of the cost of dismantling the system have raised questions about how it plans to deal with councils that have a backlog of non-decent homes after 2010.
Housing minister John Healey last week published a blueprint for reform which claims councils’ budgets for major repairs would have to rise by 24 per cent.
The figure is key, because it would be used to help calculate councils’ ability to carry debt while maintaining their stock to decent standards.
The minister plans to redistribute £18 billion of housing debt currently held by some authorities among all those in the system, based on their capacity to service it.
But the paper the government’s figure was based on estimates that major repairs allowances are 54 per cent too low. The Building Research Establishment found that councils needed £1,032 per home, per year - compared with a 2008/09 average of £668.
The Communities and Local Government department knocked this down to £825 - a 24 per cent increase - by stripping out the costs of replacing parts that will be outdated in 2010, and of meeting legal duties on asbestos removal and disability adaptations.
Its reform consultation paper puts the cost of replacing the backlog of outdated parts at £6 billion.
But it gives no indication of how this will be paid for, beyond saying it will require ‘ongoing capital grant separate from the [major repairs allowance]’.
Local Government Association policy consultant Ruth Lucas said: ‘We have some concerns about the MRA figure [the government has] chosen and the impact that would have.’
It was not clear from the proposals how the government was planning to tackle the backlog, she added. ‘In our discussions with civil servants on the whole of these papers we will be trying to unpick what they mean by this, and we will be consulting with our members about what the best way of tackling it would be.’
The £6 billion includes some, but not all, of the cost of tackling the backlog of council homes that will not meet the decent homes standard in 2010.
The CLG puts the cost of tackling the decent homes backlog after 2010 at between £1.4 billion and £2.9 billion. Between 25 and 30 per cent of these costs will be separate to the bill for replacing outdated parts.
Repairs
Expensive business
£668
Average major repairs allowance per home, 2008/09
£825
Average annual MRA allowance needed per home, according to the CLG
£1,032
Average annual MRA allowance needed per home, according to CLG-commissioned research by the BRE
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