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Shelter calls for government to remove £29bn of councils’ housing debt to boost building rates
Shelter is calling for the government to remove £29bn of historic housing debt from council books, as it believes this is preventing social homes from being built.
Shelter calls for government to remove £29bn of councils’ housing debt to boost building rates #UKhousingThe housing charity said the change should be brought in as part of a new bill that would seek to remove the obstacles to council housebuilding.
Last week, it launched a petition urging Labour to announce plans for the legislation, dubbed the ‘get councils building bill’, as part of the King’s Speech next month. More than 4,500 people have signed the petition so far.
Mairi MacRae, director of communications, policy and campaigns at Shelter, said: “Councils, who used to deliver the majority of social homes, have been unable to build at scale for decades.
“One of the main causes is that they were saddled with £29bn worth of historic housing debt by central government in 2012. Since then, successive governments have broken the terms, leaving councils to pay off the eye-watering interest instead of being able to invest in new homes.
“The only way to deliver a new generation of social homes is for the government to support councils to get building again.”
The debt figure refers to the amount originally transferred to councils through the Housing Revenue Account (HRA) settlement, which was part of the self-financing agreement for council housing put in place under the Conservative-Liberal Democrat coalition government.
The change meant councils became responsible for managing their own HRAs, but in recent years local authorities have reported these accounts being under pressure.
Both the Chartered Institute of Housing and Sarah King, leader of Southwark Council, who heads up a campaign group to boost support for council housing, have called for the debt taken on in 2012 to be reduced or rebased.
Earlier this year, the Office for Budget Responsibility described many HRAs as “effectively loss-making”, with repairs and maintenance costs growing at almost double the rate of rental income over the past five years.
While a recent survey by the Local Government Association found that pressure on these accounts had reduced compared to last year, nearly half of councils polled still plan to cut their new build programmes in order to make the figures stack up.
In its petition statement, Shelter said the debt not only takes away money that could be used to invest in social homes, but also stops councils borrowing as much as they could to finance developments.
It also claimed that the government could move the debt onto its books without affecting the overall balance sheet.
Inside Housing understands that the HRA is already included in the government’s headline measure of national debt, so moving it to the Treasury’s books as part of a revising down of the original settlement would not affect this overall figure.
As well as calling for the debt to be removed, Shelter is urging the government to allow councils the same access to low-cost loans as housing associations – a move that has also been called for by a group representing the 20 councils with the most homes.
In January, the government announced that £2.5bn of low-cost loans would be made available to private registered providers of social housing, with councils ineligible to access the 0.1% interest rate funding.
Inside Housing contacted the government for a response.
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