Friday, 22 May 2015

Councils fear increased debts will make it hard to maintain their stock

HRA reform prompts wave of stock transfers

Housing revenue account reform is prompting councils to sell off homes in a new wave of stock transfers.

From the end of this month, local authorities will be able to retain rental income in return for taking on a combined £30 billion of debt from central government as part of a 30-year business plan.

But some councils say they are concerned by the level of debt they are taking on and fear rental income will not be enough to cover maintenance costs to their stock.

Speaking at the Tenant Services Authority board meeting last Wednesday, Anthony Mayer, the regulator’s chair, flagged up the prospect of more stock transfers as an ‘orange light’ for the new Homes and Communities regulatory committee as it must ensure decisions to transfer do not affect organisations’ viability.

Jonathan Walters, deputy directory of regulatory operations at the TSA, said there was ‘anecdotal evidence’ that HRA reform was causing authorities to consider stock transfer.

The watchdog last week approved the registration of South Lakes Housing - formerly an arm’s-length management organisation - as a housing association to receive 3,155 homes from South Lakeland Council, in Cumbria.

South Lakeland will take on £69 million of debt from 1 April under the HRA reform and says the debt means it will be unable to deliver improvements and maintain homes without delays to work.

Similarly, Northampton Council, which will take on £193 million of debt under the new system, agreed last week to put £1 million of funding into examining whether to transfer some or all of the council’s 12,000 homes to a housing association. Also, Rochdale Council is expected to transfer its stock to its ALMO, Rochdale Boroughwide Housing, by the end of March on the back of HRA reform.

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