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Council house building is back
Sadiq Khan’s funding programme and recent government announcements all seem part of a new trend towards council house building becoming part of the solution, writes Steve Partridge
The announcement by the mayor of London of a new £1.67bn fund for council house building is eye-catching and very welcome.
Savills has highlighted the need for 100,000 sub-market rented homes to be built each year across the country and that councils can help boost delivery (see: Investing to solve the housing crisis).
But perhaps the most exciting element of the move by Mr Khan is that it forms part of a series of recent steps across England to bolster the ability of councils to build more homes. So, what does this all mean for the potential for local authorities to contribute, in a meaningful way, to boosting the supply of sub-market rented homes?
First, let’s deal with the London mayor’s announcement. It is an explicit and major commitment to see 10,000 council houses built by 2022 (at least social homes to be owned by councils), providing direct funding of up to £100,000 a home for local authorities (as opposed to housing associations or any other provider) and at rent levels which are genuinely affordable in the traditional sense.
“The most exciting element of the move by Sadiq Khan is that it forms part of a series of recent steps across England to bolster the ability of councils to build more homes.”
Second, let’s look at the context in which Mr Khan made his announcement. It followed the news at the Conservative Party Conference last October of £2bn grant for social rented housing.
There was then the commitment in the Autumn Budget to a Housing Revenue Account Borrowing Programme in which stock-owning authorities will be able to bid for debt cap extension of a total of £1bn.
More recently, local authorities now have the opportunity to engage directly with the Ministry of Housing, Communities & Local Government to reinvest Right to Buy receipts more flexibly. To my mind, this does all seem to be part of a clear trend.
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So are we turning the clock back? Are we seeing a roll-back to a time when council housing dominated the supply of affordable housing?
Well that’s a stretch, actually the delivery options remain very wide.
Whether it is the widened definitions of ‘affordable’ in the updated National Planning Policy Framework, the large-scale Homes England investment programmes to deliver numbers at scale whatever the tenure, or the guarantee programmes around Build to Rent. Yet, the key point is that council housing programmes are now taking their place as an important part of the solution.
It is an interesting set of policy responses.
“Council housing programmes are now taking their place as an important part of the solution.”
Local authorities asked for the ability to bid for grant for social housing, the release of the debt cap and for greater flexibility around the Right to buy.
In turn, each of these requests has had a response. Perhaps this has not yet been at the scale requested or required of course, but at a meaningful scale that invites a serious response.
The previous local authority borrowing extension programme under the coalition government was under-subscribed, principally because of the heavy constraints on eligibility.
By contrast, the signs are that these latest programmes will encourage investment, and to the extent that ministers can persuade the Treasury there will be flexibility around delivery. And that will be welcome, as all that local authorities have ever really asked for is a level playing field with other housing providers.
Quietly, and with a minimum of fuss, local authority direct delivery has seen some of the most innovative responses to austerity and lack of housing supply.
We’ve seen around 150 new housing and development companies established, and we are seeing some of these delivering at truly large scale. This is testament to the fact that where opportunities lie and where the rules allow, local authorities will deliver.
Challenges remain.
Typically, these are challenges faced to an extent by all affordable housing developers: increasing costs of delivery, a long-term shortage of skills and capacity to run large development programmes.
“We’ve seen around 150 new housing and development companies established and we are seeing some of these delivering at truly large scale.”
Yet, many authorities have taken the opportunity to build their skills base in the last few years, and many are also turning to housing association partners to share skills, knowledge, expertise and resources.
Also, particularly in London for the mayor’s current programme, there is the challenge of a shortage of land – or rather that the ‘easy win’ land already in council ownership is being used up.
Whether the government has genuinely accepted that new homes at social rent are part of the much-needed supply of affordable housing, or whether it has been pushed there by an effective lobbying campaign from the local authority sector, is in the end of secondary importance.
The fact that the programmes are in place is evidence enough of the opportunity for local authorities to continue to step up to the plate and be innovative with the Housing Revenue Account.
It promises to be an interesting few months as the programmes are put in place.
Steve Partridge, director, Savills Housing Consultancy
