Self-financing proposals mean authorities take on £3.6bn government debt
Majority of councils back HRA overhaul
The vast majority of councils have told the government they support plans that would see them leave the current housing subsidy system and become self-financing.
Sixty-eight per cent of the 177 councils and arm’s-length management organisations that responded to government consultation say they agree with broad plans published last year. Just 2 per cent indicated they would oppose them under most circumstances. The news is significant because the government - which published its detailed plans for reform last week - needs the support of almost every council if it is to press ahead.
Inside Housing has learned that officials from the Communities and Local Government department have private-ly indicated they could press ahead with reform if between 10 and 15 councils object. A source close to negotiations said: ‘If they could get to a position where they have got no more than 10-15 refuseniks it would be perfectly justifiable to go ahead and push legislation through’.
Initial analysis from Trowers & Hamlins gives a preliminary take on the impact of the changes on all of the councils concerned. The deal assumes councils’ existing housing debt is £21.5 billion - the sum that would be used in subsidy calculations for April 2011. It adds on £3.6 billion of central government debt which will transfer to local authorities to make the deal fiscally neutral for the Treasury, which is forgoing billions of pounds worth of housing subsidy by allowing councils to keep all rents and sales income.
Barking and Dagenham Council is one of the councils that would take on the most additional debt under the proposals.
But David Woods, its corporate director for customer services, said the plans were a ‘good step forward’ and, subject to detail, ‘I hope local authorities will grasp the opportunity to get out of the HRA’.
Alex Colyer, executive director for corporate services at South Cambridgeshire Council, which would take on an additional £197 million of debt, said ‘in policy terms this is better than the current regime’ but ‘not all members and tenants think it is right to take up this debt’.
However, John Lines, cabinet member for housing at Birmingham Council, which will take on an additional £317 million of debt according to the Trowers analysis, said he was disappointed about the extra debt.
Paul Wenham, deputy chief executive of Waverley Council which would take on £173 million debt, added: ‘For a council with less than 5,000 homes it’s totally unacceptable.’
The National Federation of Arm’s-length Management Organisations gave the proposals its firm backing.
- No council should be worse off
- Opening debt level must leave room for additional borrowing
- Exclude housing debt from public sector net debt
- No revisiting of opening debt levelat a later date
- Improved post-2010 self-financed decent homes standard
- Certainty over rent policy
- HRA to remain ring-fenced
Do you agree with a deal to reform housing finance?
Agree, subject to level of debt
Too early to say
Do not agree, because of debt
Agree, but dislike allocation of debt
Do not agree, other
House Proud readers’ panel
Brendan Nevin. Housing professor and regeneration expert
Anything that frees up resources to build affordable housing has got to be welcomed in the light that supply is going be so constrained looking forward because of public expenditure cuts.
The challenge will be for areas that have still got problems with stock such as Leeds or Hull, which are still major owners
Reform gives us freedom - almost
Last week’s announcement felt like the classic World War II film The Great Escape.
We have been working on self-financing since about 2005 and during that time we’ve dug lots of tunnels and walked around the compound many times, kicking the dirt around. So, it was a sense of relief when the announcement came. We might be outside the subsidy system but, just like Steve McQueen’s escapees in the film, we have dug a long tunnel to find we are still 50 metres short of the trees and real freedom.
What we have from government is a revenue-only deal with a cap on future borrowing. We have higher allowances and more funding for repairs — but we’re still looking to break free completely.
For us in Cornwall there are more resources to spend on management and repairs than inside the subsidy system. We can start a debate on better use of assets; we have just completed our first new council-owned housing in Cornwall and the excitement generated among tenants and young people was great. There is even a Facebook page (set up by some young people not by the landlord) supporting new build. Continuing the Great Escape analogy, real freedom is not just about escaping the compound. Real freedom would be a future change putting all new debt outside of public sector net debt. Unlike the film, I hope we all get away.
Mike Owen is chief executive of Carrick Housing