Council pledges to build 500 homes per year until 2014
Birmingham wins £92m HRA debt cut
When the Communities and Local Government department issued its latest indicative settlements as part of the review of the housing revenue account system, Birmingham was one of the clear winners.
The council - the largest local authority in England - managed to negotiate away almost a quarter of the amount it will have to repay the government under the highly contentious self-financing overhaul.
The extra debt for which the second city will be liable from April 2012 has dropped from an expected £434 million to £342 million.
In return for taking on this debt, Birmingham, like the other 170 stock-owning local authorities in England, will be allowed to keep all rental income instead of it going to the Treasury to be redistributed.
‘We have done very well,’ admits John Lines, the council’s cabinet member for housing. ‘The figure we were first given was based on the value of our stock, but my argument [to the CLG] was about the fairness of it; other councils have not invested in their own homes as we have.’
The reasoning from Birmingham was that, having already spent what Mr Lines estimates to be around £800 million over five years on bringing 99.6 per cent of its 64,848-home stock up to the decent homes standard, it was being punished unfairly for the resulting rise in value.
A reduction of almost £100 million is certainly a help - ‘it will make a big difference to our future and the security of social housing in Birmingham,’ says Mr Lines - but money is still tight for a council that, unlike many, is trying to retain ownership of its stock.
The council recently announced plans to demolish 1,500 homes in a move which reduced its HRA debt by £19 million. But Mr Lines firmly rejects the suggestion that the bottom line was the driver for the decision.
‘Those properties were going to be demolished anyway,’ he insists, adding that it would not have been cost-effective to repair the condemned homes. ‘I am sure it will make a difference [to the HRA settlement] but I am investing in hundreds of other homes that I could knock down; I believe in trying to keep neighbourhoods together.’
The council has pledged to build 500 new homes per year between 2009 and 2014.
Elaine Elkington, strategic director of housing at Birmingham, says despite the favourable result in the HRA stakes, the council still has £1.1 billion of debt that needs servicing over the next 35 years. And government policy, particularly the continuing uncertainty over the status of receipts garnered from the new push on right to buy, has put the cat among the pigeons when it comes to the council’s business plan.
‘I am nervous about it,’ says Ms Elkington when quizzed about right to buy. ‘We have made assumptions about receipts being retained locally. Our borrowing caps are still at their maximum so keeping receipts is crucial for us.’
Busting through government-set borrowing limits will be an issue for most councils when they take on their additional debt burdens next year. But while more and more are looking at the stock transfer option as a solution to the borrowing problem, it’s not on Birmingham’s agenda.
‘If it made sense to do a stock transfer and our tenants voted for it, then we would do it, but the fact is that our tenants have voted against it twice,’ says Ms Elkington.
Tenants voted against transferring to a housing association initially in 2002 and ruled it out again in 2006.
Typically forthright, Mr Lines says Birmingham is ‘big and brash and likes its independence’. He is confident that, in the long run, self-financing means that the city can compete with housing associations. ‘We will have a level playing field with social landlords and can reinvest all our rent back into housing,’ he explains.
However, initiatives such as the Birmingham Municipal Housing Trust, which allows the council to build new homes in partnership with the private sector, shows that the council can still work alongside other landlords. And those same landlords appreciate what Birmingham is trying to do.
‘If they can deliver some social or affordable homes, I’m not bothered about who builds them,’ says Tom Murtha, chief executive of housing association Midland Heart, which has 13,435 homes in the city. ‘If the council can do it better and cheaper, I have no problem with that.’
‘We are proving that you can build houses as a council,’ concludes Mr Lines. ‘Now the government has to trust us.’
Birmingham’s new debt allocation under housing revenue account reform
the amount of debt that Birmingham has to service over the next 35 years
the number of homes under construction by Birmingham Municipal Housing Trust