Institute warns councils over HRA debt plan

That was the warning from the Chartered Institute of Housing this week, in a preliminary response to government proposals for ‘dismantling’ the national council housing finance system. The response states the settlement with councils could end up providing ‘additional resources for government’.

In July housing minister John Healey proposed handing local authorities full control of their housing finances, in exchange for a one-off redistribution of around £18 billion of housing debts currently held by some councils.

The plan is opposed by some debt-free councils and by the Local Government Association, which is calling for the debt to be written off.
The institute’s paper is likely to add fuel to the fire, with its warning that the Communities and Local Government department’s proposed mechanism for debt settlement could ‘reallocate’ more debt than there actually is in the system.

The government’s proposal is to redistribute debt among all stock-holding councils based on their ability to service it and maintain their homes.
This will be based on a calculation of their expected rental income over 30 years, and the amounts they need to spend on management and repairs.

The consultation suggests that management and maintenance allowances need to rise on average 5 per cent, and major repairs allowances by 24 per cent.

The CIH estimates that, if debt is allocated on the basis of these figures, it would almost certainly amount to more than £17 to £18 billion.

But the institute rejects the LGA’s call for debt write-off. 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.’

LGA housing programme director Martin Wheatley said: ‘There is a spectrum of positions between debt write-off, in which councils would clearly be in a strong position to support investment in existing and new stock, and redistribution of debt and an extra amount on top of that, which might leave few if any councils with a sustainable business plan.’

A CLG spokesperson said it would ‘look closely’ at responses to the consultation.

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