Council housebuilding: back with a vengeance

Manchester City Council came in second with 1,396 homes delivered, including 930 through joint ventures. Similarly, third-placed Newcastle has delivered 820 homes, including 356 through its Scotswood ‘DevCo’ (development company) joint venture with Keepmoat and Barratt. King’s Lynn and West Norfolk came out top among non-stock-retaining councils with 267 homes completed, 230 of which were for market sale. Wakefield and Eastleigh also deserve honourable mentions, having delivered 152 and 144 homes respectively through housing companies.

It is worth pointing out the sheer variety of mechanisms for development. “What we are seeing is a diversification of the delivery model,” says Steve Partridge, director at Savills Housing Consultancy. “It’s very much horses for courses, people going with what works for them.”

For instance, while some councils have kept it firmly within the HRA, others – such as Stockport – have been delivering through subsidiary housing associations set up by their ALMOs. Runnymede has funded a huge 223 homes through its general fund. Hammersmith & Fulham has chosen to channel its HRA capital into housing associations as the means for delivering affordable homes in the borough.

All this is particularly evident in the rise of housing companies. A report produced this summer for the Royal Town Planning Institute by Janice Morphet and Ben Clifford of the Bartlett School of Planning at UCL found that 78% of authorities now have some form of housing company.

“There are so many ways this is being done,” Ms Morphet observes. “Each have their own pathways and are on their own voyage of finding out about what they can do. And it’s evolving – if you looked again in 2020 you would see even more complexity.”

Note: Not all councils provided tenure breakdowns

*Includes shared ownership and Rent to Buy

Source: Freedom of Information Act requests obtained from local authorities

The HRA is very much the dominant delivery mechanism according to our research, accounting for 73% of homes completed. Housing companies, including joint ventures and homes retained by ALMOs, made up 22%, with 5% otherwise delivered using general fund investment.

Tenure breakdowns are presented below – note that not all councils were able to provide these.

Counting net figures does not flatter every authority, or necessarily reflect their activity in this area. For example, Nottingham City Council – including through its ALMO Nottingham City Homes – has built 496 homes over the period analysed but has demolished 807. This includes the redevelopment of five ageing tower blocks at Lenton Green into 142 new homes, and is a useful reminder that housing delivery is more than just a numbers game.

Looking ahead to the next five years, things get very exciting.

Together, the councils we analysed expect to build 78,651 homes in total. Clearly this is an estimate – some councils based their figures on schemes with planning permission, others provided an indication of their ambitions that might not be fully realised. However, it is likely to be an underestimate if anything, with 29 councils expressing a desire to get building without yet knowing exact numbers.

Source: Freedom of Information Act requests obtained from local authorities

Town halls told us they have earmarked £8.4bn to fund these programmes – although again, that is likely to be a drastic underestimate, with many councils as yet unsure of budgets.

Tellingly, 21 councils that have not built in the previous five years have outlined plans to start in the next five, with combined plans for 3,120 new homes. A dozen more are either setting up a housing company or actively considering doing so.

There are councils that previously transferred their housing stock seeking to reopen HRAs. Liverpool and Peterborough councils have already announced their intentions to do this, and others are understood to be planning similar moves.

“We get people asking us about this all the time,” says Mr Partridge. “Our general advice is that there’s a technical accounting aspect here which you have to get comfortable with. We may think it’s simply a case of opening an HRA and then building lots of lovely social housing, but there are legal challenges. Of course, the big upsides are around being able to bid for grant.”

Interestingly, only 54% of these new homes are anticipated to be delivered within the HRA, while 36% are slated for housing companies. That is driven largely by the huge ambitions of councils like Barking & Dagenham and Croydon, which are plotting 3,088 and 2,916 homes through their respective vehicles.

Source: Freedom of Information Act requests obtained from local authorities

Ms Morphet notes that “it takes about two years from the company being set up to actually getting on site” and thus expects to see the scores of new companies recently established to really get going towards the end of 2020.

Nine of the 10 councils with the loftiest housebuilding ambitions captured by our data are in the capital. Darren Rodwell, leader of Barking & Dagenham Council and executive member for housing at London Councils, is not surprised.

“It’s fair to say that London is pulsing and we are bursting at the seams when it comes to the need for good-quality affordable homes,” he says. “I think we’ll be the new, larger entity of London housebuilding moving forwards.”

He believes that the “perfect storm” currently facing housing associations and the private sector – a heady combination of housing market slowdown and huge fire safety costs – will see local authorities step up to the plate “to deliver for the great need in our communities”.

Notably, Birmingham anticipates the net delivery of 1,167 new homes over the next five years – making it unusual in stepping down its development. There may be a cautionary tale within this case study.

Source: Freedom of Information Act requests obtained from local authorities

“All the low-hanging fruit has been picked; there are no easy sites anymore and that is going to be a challenge,” explains Ms Trethewey.

That means the council is now turning to trickier projects – such as regenerations that will require extensive community consultation, as well as looking at building at higher densities and trying out modular development.

“Unlike a developer we have more of a commitment to the community, so we have to be very careful and mindful of their priorities.”

The low-hanging fruit conundrum is a “key theme”, Mr Partridge remarks, noting that more complex schemes also come with higher costs. And bear in mind all the other enormous bills on the horizon, from building standards and fire safety to energy efficiency and the zero-carbon agenda.

That brings us to the next big question: whether councils’ ambitions can be delivered. Mr Rodwell describes himself as “optimistically concerned”.

“I’m optimistic because I think the will is there; I’m concerned because I think the national politics is not helping our authority programmes,” he says.

He cites the Becontree Estate in his borough, where 27,000 council homes were built in 12 years under the Addison Act a century ago. “If they could do it 100 years ago using horse and cart, the question is, why can’t we?” he challenges.

In today’s money, building the Becontree would cost around £18bn – double the government’s entire affordable housing grant programme for 2016 to 2021. For Mr Rodwell, therein lies the issue.

“One thing we always need to remember is: who’s going to do the building?” Mr Partridge asks. “There are issues around capacity obviously, and around skills and expertise. We’ll need to see greater collaboration, with authorities, housing associations and developers all working together in order to share risk and reward.

“Whenever you talk about new build it’s always worth reminding people that there is a lot of work to do and not enough people to do it.”

That hard work starts now.

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