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The Week in Housing: do council housing companies ever work?
A weekly round-up of the most important headlines for housing professionals
A weekly round-up of the most important headlines for housing professionals #UKhousingGood afternoon.
Do you remember the council housing company boom?
In the second part of the past decade, councils across the country were setting up housing companies and promised that huge development pipelines would be delivered through them.
The reasons for this were clear: councils wanted to build more homes and setting up a private arms-length company to do this would remove much of the red tape if they were to do it in-house.
It also enabled them to borrow more than the caps on Housing Revenue Accounts would permit and, in some cases, allowed them to use the cross-subsidy model to use the revenues from private and affordable rent to fund the construction of new build social rent homes.
However in recent years, the once in-vogue council housing companies have taken a bit of a battering.
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This week was no different, with the news that Lambeth Council is set to fold its housing company, Homes for Lambeth (HfL), back in-house.
A review of the company, carried out by Lord Kerslake, slammed its “very poor delivery” rate. HfL had started only 65 homes. This came despite £30m being spent on the organisation since its inception.
What’s more, the review found that much of the grant Lambeth Council had secured from the Greater London Authority’s (GLA) grant programme had been largely unclaimed. The GLA withdrew grant funding from three estates in 2020 over the council’s failure to start work in the agreed time and to ballot residents.
You only need to go back to April 2020 when the council, so full of hope, declared that this new company would deliver 4,000 by 2025.
But in the short history of council housing companies, this is one of many failures.
There was the Liverpool Council’s Foundations, which promised to build 10,000 homes but was mothballed 18 months later after delivering just 18. The company also recorded losses of £700,000.
There was also the failure of Brick by Brick, Croydon’s housing company. Brick by Brick became the poster child of this brave new world of council housing companies, and promised 500 homes a year in perpetuity. The council backed the venture and put in £200m.
However, only 460 homes were ever built and the money pumped into it, as well as a myriad of other issues at the council, led to the south London authority declaring itself effectively bankrupt in 2020.
While the council housing company brand has taken a battering in recent years, the idea that such organisations equals bad is wrong.
As of 2021, more than 80% of all councils owned housing companies. While some are dormant, many operate successfully today.
These organisations are being used in different ways, whether that is for pure development, housing management, purchasing Section 106 properties or buying street properties for rent.
There are successful developing housing companies that are driving building across their areas, too. Be First in Barking and Dagenham and Populo Living in Newham are examples of those ramping up development.
But the cases of Liverpool, Croydon and now Lambeth should serve as a warning to councils. While the aims of housing companies can be noble, such organisations can be expensive to set up and, as the examples showed, it could be for very little return.
In times when cash is tight, this is not a good look.
Elsewhere, the government’s response to damp and mould issues in the social housing sector continues, with housing secretary Michael Gove coming down hard publicly on those landlords he sees as letting down tenants.
Yesterday, he once again singled out Clarion, the country’s largest housing association, after it received its fourth severe maladministration judgement this year. Mr Gove has summoned the management team to meet him.
Jack Simpson, assistant editor (news and investigations)
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