Councils vow to build homes if given financial control
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Councils have told the government they could get 30,000 new homes built over the next decade if it cancels their housing debt and gives them control of their housing revenue.
In a letter to the Treasury the cross-party leaders of Barking and Dagenham, Portsmouth and Waverley councils argue that the current council housing finance system is ‘broken beyond repair’, as debt-ridden councils spend £1.3 billion each year servicing their debt and those without the debt burden lose up to half their rental incomes to other councils.
The councils argue that writing off councils’ housing debt and letting them keep their rental incomes would enable them to build 309,000 new homes over the next decade, compared to the current council house building rate of less than 300 homes a year. They say it would also boost the economy by increasing the number of new housing jobs and cutting housing benefit costs and homelessness.
In a letter to chief secretary to the Treasury, Yvette Cooper, they write: ‘It is unfair and unsustainable that council tenants should be forced to pay a tax of up to 50 per cent on their rent to central government, and even those councils that do receive a “subsidy” from the Treasury are forced to use it to pay off historic debt, rather than on improving their existing housing stock.
‘Over a 10-year period, we believe that enabling councils to use the additional revenue stream from rental incomes and releasing them from the historic debt would enable an extra 139,000 social houses to be built. If councils had the flexibility to borrow against their assets, this figure could increase to 309,000.
‘We urge you and [housing minister] Margaret Beckett to be bold on this issue by giving council tenants a fair deal on the rents they pay and to give local authorities the freedom to invest in local housing for the benefit of the communities they represent and for the wider UK economy.’
Giving councils control over their housing revenue through ‘self financing’ is one option being considered by the government as part of its current review of the housing revenue account system.
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