Headline-hitting closures should not mean the end for council-owned housing companies

With this in mind – and given that some council-owned companies are still new or not yet running at capacity – we should take stock of what we have learned from those companies that are delivering and note any hallmarks of success.

In my experience there are five key themes common to successful local authorities and their companies.

First, and perhaps most importantly, agreeing clarity of purpose between the company, its board, council officers and elected members is critical.

‘Clarity of purpose’ can mean many things: it may relate to tenure, financial return or the nature of a development. But without consensus it is impossible for the council and its members to monitor or audit the company and thus gauge its performance. From the company’s perspective, lack of clarity risks racking up costs on schemes that might not find favour with the council and perhaps inevitable delays waiting for approvals.

Second, and arguably linked to clarity of purpose, is the importance of leadership. Clear alignment between the council leader, the chief executive and the Section 151 officer is vital and gives the company confidence that it can progress schemes without hurdles being thrown in its way.

Third, councils should beware the ‘impossible ask’. All too often, housing companies have been tasked (perhaps with the best intentions) to deliver something that no other developer, public or private, is capable of. This might be the delivery of a long-standing ‘problem site’, or an unviable scheme (the social rent, Passivhaus development that also delivers a mythical land receipt and a developer profit, anyone?). Having a sensible, pragmatic view of what is possible is so important.

Fourth, and easier said than done, councils must take a long-term view. (One serious competitive advantage of council housing companies is the lack of pressure to produce short-term shareholder returns). Let’s remember that the great council housebuilding programmes of the early part of the last century were based on 60-year borrowings, so it is perhaps unrealistic to assess financial success over the short term.

This is not to say that companies should not be carefully monitored or that there is an excuse to throw good money after bad, but councils and their elected members shouldn’t necessarily be afraid of a company showing an accounting loss if that will lead to a future surplus.

“Often, local authorities are not skilled at developing housing for sale, so why not partner with somebody who is?”

Finally, I would always suggest that councils and their companies should acknowledge their weaknesses. Many of the most successful authorities have done so by bringing in expert skills where necessary. This could include hiring consultants and expert board members or – more strategically – entering into joint ventures with housing associations or the private sector. Often, local authorities are not skilled at developing housing for sale, so why not partner with somebody who is?

Council housing companies form an important part of the housing delivery landscape. Alongside the direct development of affordable housing using Housing Revenue Accounts, local authorities have the capacity to build more. They should not let the closures of some companies detract from what could prove a successful delivery model for their area.

Rob Beiley, partner, Trowers & Hamlins