Institute backs plans to reallocate £17bn housing debt
The Chartered Institute of Housing has backed the government’s plans to reallocate housing debt to local authorities when it dismantles the housing revenue account.
However the institute has warned the way debt is calculated must ensure no more debt is reallocated than is currently in the system, as placing too high a burden on councils would restrict their ability to manage their housing.
Housing debt currently stands at around £17 billion. Under the current HRA subsidy system, councils pay housing revenue to the Treasury, which then reallocates the funds, subsidising councils that have high levels of debt.
The government has issued a consultation on dismantling the HRA subsidy system, and allowing councils to keep the revenue they generate from housing to reinvest in services. But to achieve this it needs to reallocate the debt to local authorities.
It favours doing this by reallocating debt according to the ability of local authorities to generate income from housing. The option of keeping debt within central government and charging councils to maintain it was also discussed, but dismissed in favour of the first option.
In its interim response to the HRA consultation, the CIH says this is the correct route to take, and ‘the only sustainable method for future council housing finance’.
But it says the way debt is calculated could lead to more debt being allocated than is currently in the system, which the government might then use as grant in the future.
It says this would create practical problems for councils attempting to become self financing, ‘notwithstanding the very obvious difficulties in a “reallocation” which actually allocates more debt’.
CIH chief executive Sarah Webb said: ‘We support the move towards self financing and the long-term reallocation of debt as the only sustainable method for future council housing finance and we urge the government to move as swiftly as possible to make this a reality.’
The Local Government Association has been calling for the government to write off housing debt, but housing minister John Healey has said this is not an option.
The CIH is also calling for a significant increase in the major repairs allowance, and a rise in management and maintenance allowances.
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