Proposals set out to reform council housing finance
Housing minister John Healey has said he wants to move ‘as rapidly as possible’ to reform the way council housing is financed.
Launching a consultation on proposals to ‘dismantle’ the housing revenue account subsidy system, Mr Healey challenged local authorities to work with him to drive through the changes.
Under the proposals, councils would be able to keep all the money they get from rents on their properties, and any proceeds from houses sold under the right to buy.
The existing system sees revenue channelled into a central Treasury pot, and then redistributed according to rules set by central government.
The alternative set out in the consultation is designed to give councils more freedom to manage their resources. In return they would be expected to take on part of the £17 billion of housing debt that local authorities have accumulated, and set thirty year business plans.
The consultation also proposes the continuation of the decent homes standard, which is currently tied to a target due for completion in 2010.
Mr Healey said: ‘The proposals I am publishing today will free councils from annual funding decisions so they can plan long term and improve the management of their homes, secure greater efficiencies and improve the quality of services to their tenants.
‘The challenge now is whether local government is ready to work with me and ministerial colleagues to make these radical reforms through detailed work together.’
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Readers' comments (2)
Just a Tenant | 22/07/2009 5:26 am
Mr Healey, councils already have 30 year business plans!
I can't quite get my head round how we will be better off, we are currently debt free but contributing 49% of our rent revenue to the subsidy you are suggesting that the 17bn debt be shared amongst us, we don't yet know how much our share will be, how much will it cost us? will we continue to lose 49% but with a different title? In your consultation paper you state the retention of ringfencing the HR but we all know the LA's can find holes in the fence!!!
Council Housing Finance has always been an anathema, I have heard many say that there are few people that really understand it, I hope that those few people can understand these proposals and explain them fully to those that will have to work with them.
If you think this post is difficult to understand try reading the consultation paper and all the sub papers that go with it.
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michael barratt council tenant | 22/07/2009 7:47 am
“The assumed lifetimes of some components are not the same between the
MRA and Decent Homes and/or may not be realistic (it is currently assumed that kitchens and bathrooms will last longer than is likely in practice). Page 24 - 3.11. Reform of Council Housing - Consultation Document
How long do you think New Labour has known that for?
Mr Coughlin Chief Executive of Crawley Borough Council claimed in his letter to a tenant dated 5th September 2006:
“A life cycle of 30 years has been adopted for bathrooms, which again is the industry standard and has also been adopted throughout the country…. It is Savills’ and the Council’s experience that a lifespan of 30 years for a bathroom is realistic…. With regards to kitchens, the position is very similar. A life of 20 years for kitchens is the industry standard and many people argue that a 20 year life is totally unrealistic, with many kitchens failing prematurely.”
DCLG permitted and continues to permit local authorities to only retain from its own rental income an annual sum based upon the depreciated value of kitchens over a period of thirty years and bathrooms over 40 years. Since quite evidently those items apparently fail by common consent long before those projected lifetimes the consequence there is created a multimillion pound shortfall in my LA's housing finances to 2010 and beyond over a 30year horizon. A funding shortfall often characterised to tenants as though it was an underlying financial failing of local Authority housing finances rather than an artificially created deficit that might be remedied at the stroke of a pen. ODPM/DCLG has not been oblivious to realistic lifetime cycles when it suited their agenda, for example: ALMOS have receive funds from ODPM/DCLG on the basis of lifetime cycles of 20 years for kitchens and 30 years for bathrooms in order to bring those elements up to Decent Homes Standard.
The use of incorrect lifetime cycles of elements and/or a higher standard other than stated in the ODPM/DCLG DHS guidance is likely to have resulted in some elements appearing twice in stock options thirty year horizon appraisals rather than once (e.g. kitchens) others once rather than not at all (e.g. bathrooms) and in the process skewering those predictions. By extension, a concern arises that the application of incorrect lifetime cycles etc has resulted in local Authorities transferring their housing stocks to housing associations for many millions of pounds less that would have been the case if the correct lifetime cycles of elements had been applied. Given have Savills agreeing they have adopted the same methodology or with slight variations throughout the country when conducting stock condition/stock option appraisal, a concern arises that former council tenants might have voted for transfer to a housing association on the basis of receiving flawed information concerning the occurrence of decent homes failures.
A cynic might forgiven for concluding the Government (ODPM/DCLG), working with compliant local Authorities and a cabal of consultants have deliberately created, actual and apparent financial underfunding in respect otherwise viable local Authority housing departments in order to promote privatization. With Government and others characterising local Authorities funding shortfalls as being the result of local failings that might be remedied by the transfer of local Authority housing stocks to an ALMO or a housing association.
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