At the crossroads

What has happened so far?

Local authorities’ take a back seat The momentum over the past 20 years and more - from successive governments - has been towards expanding housing associations through stock transfer and development, allowing local authorities to gradually take a residual role as a social landlord. At the last count, housing associations owned around 2.3 million homes compared with around 0.5 million in 1990, while local authorities had reduced to 1.8 million homes, down from around 4.2 million in 1990.

Alternatives to associations Proposals to try to arrest this trend and give remaining landlord authorities another option emerged from various pieces of work carried out over the past five years. Arguably, this was driven by the work carried out on arm’s-length management organisations’ financial freedoms by the Chartered Institute of Housing and others in 2005 and 2006 - the principle of self-funding then being extended later on by a separate government project.

Fresh direction This created the platform for the housing revenue account review and the initial ‘debt redistribution’ proposals produced by consultancy Tribal for the Communities and Local Government department in 2008. A variety of other papers were produced at that time outlining various options.

Debt redistribution Ideas about debt redistribution - under which local authorities in the HRA system pay off their collective debt in order to gain financial freedom - were met with some scepticism at first, especially from local authorities with low or no debt. However, many understand that debt distribution could be the necessary price to pay to get out of the much reviled ‘housing subsidy’ system. The key is whether authorities, individually, are happy with the government’s overall offer and whether they think this might be supported by a future government.

What happens next?

Uncertainty Here’s the rub. Where do the opposition parties stand on the government’s proposals and where do they see the future of council housing and arm’s-length management organisations? To date, the Conservatives and the Liberal Democrats have been similarly dismissive of the current HRA system without giving complete approval to housing minister John Healey’s proposals - perhaps because the detail has yet to emerge. The next consultation paper, due to be published later this month, will take us into a post-election period. If there is a new minister at that time, the key issue is going to be how that person sees the future of the social housing ‘domain’. The deal on offer from the current government will, almost certainly, be more attractive than the current subsidy system. In many cases, though, it will not be as good a deal at a local level, from a financial angle anyway, as that which was previously on offer via stock transfer.

Weighing options Mr Healey has put a stop to new transfers under the existing rules pending his announcements. However, if there is a change in government one of the first things any new housing minister will probably want to do is become familiar with how the deals differ, not only from a financial perspective, but also from a social and strategic point of view.

First principles And thus, we return to the fundamental questions: are local authorities intrinsically better placed to provide social housing?; and can they really have the same freedoms as housing associations, given their geographic constraints and continued adherence to public sector accounting rules and governance arrangements? Should we be looking at something more akin to that which is used abroad - a quasi-public sector corporation?

Long-lasting ramifications Perhaps it seems strange to pose these questions at a time when so much effort has been put into this subject in recent years. But this is a big one-off deal, which is even more sensitive at a time of unprecedented levels of public sector debt. Decisions made now will shape the way the housing sector develops in years to come.

David Hall is a director at housing consultancy Tribal

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