A force for good
Council housing self financing has begun, but what will the new era bring? Steve Partridge examines the possibilities
It’s feels like it’s been a long time coming but we’re there.
The national subsidy system has been abolished, and a new era of council housing self financing has begun. For the first time in modern times, local council housing authorities will be able to keep the rent income they raise from their tenants.
The case has long been presented and the debates wide ranging; following a one off settlement last week, £19 billion changed hands between 167 local authorities and central government to end the unpopular and discredited subsidy system.
“The reality has been that the only way to run the business as a business was to transfer it to a housing association.”
The details have been well rehearsed: the allocation of more resources following detailed research into spending needs, the low borrowing rates but with the imposition of a debt cap to prevent authorities borrowing too much too early; to the more technical issues around debt and depreciation.
And generally speaking, despite a couple of potential stings in the tail, the settlement remains a good one, enabling spending at a sustainable level, more investment and a more secure future for council tenants.
Council housing has suffered from decades of under-investment. Even the injection of money for decent homes in the last few years was limited to only half the sector. The reality has been that the only way to run the business as a business was to transfer it to a housing association.
But that’s all changed. Keeping the rent income is critical as this is a relatively stable business – if homes are maintained, they will continue to generate a stable and growing income, enabling better planning and more investment.
So what are the extras that authorities can invest?
- More money for major repairs – for the first time a reasonably decent allocation.
- Cheap borrowing - available to those who have taken debt on.
- Future rent income no longer returned to government.
- For many, the chance to borrow up to the debt cap (and, despite some concern in some quarters, the Budget last week does not affect this ability).
And where can that investment go?
- Well funded, hard-pressed services, using resources wisely to help address the growing pressures on the poor and vulnerable.
- A proper long-term major repairs programme that permanently lifts standards.
- Dealing with outstanding regeneration, the ability to reprovide council owned housing.
- The chance to build or acquire new homes (the holy grail for most).
All of which means the chance to see council housing as a really positive force for investment within local authorities as a whole – the HRA becoming ‘centre stage’.
However, with this potential has come some unfortunate downsides.
The borrowing cap remains a nonsense, a major restriction on the ability to release the potential capacity in council housing. And we still need to find out from government what the words in the Budget meant.
Also, the right to buy changes are not ideal, with the extension of discounts providing uncertainty when plans should be predictable; but at least authorities can reinvest what additional receipts there will be locally.
Many might point to welfare reform as the biggest potential threat to the future. But whilst this is a massive factor, it applies equally to housing associations and other providers.
In summary, there’s plenty to play for, but the playing field with housing associations is still not level – this settlement represents a major step on the way.
A final thought: as the new world begins, for new housing at least, government and councils have the same aspirations. Take the government at their word: invest resources, release capacity, deliver new homes, use your plans and all the headroom you have to deliver what you need, what your communities need and what your tenants deserve.
Steve Partridge is director of financial policy and development at the Chartered Institute of Housing