A new report by the Smith Institute reveals the rapid rise in
the number of local housing companies directly funded by councils
which now total around 150 and could increase to around 200 by 2020
- covering just over half of all councils in England with the
largest concentrations in London and the South East.
The report 'Delivering the renaissance in council-built homes:
the rise of local housing companies' predicts that local
housing companies could deliver up to 15,000 extra homes per
year by 2022 although most local housing companies have modest
ambitions to build (averaging around 50 units per year).
The report says councils are attracted to set up local housing
companies because they have more direct control and influence and
greater flexibilities & freedoms especially over rents,
borrowing and the Right to Buy.
That local housing companies can generate income for the
council's General Fund providing a "triple dividend" in the form of
much needed extra housing, a greater stewardship role in
place=shaping and a financial return to the councils' General
Fund.
Many of the companies they studied use the profits to
cross-subsidise new affordable and social rented homes as well as
providing temporary accommodation and housing for the young and
elderly.
Speaking at the launch of the report in the House of Commons on
16 October, ARCH Chief Executive John Bibby said:
The fact that many local
authorities are exploring the idea of building new municipal
housing through a local housing company clearly illustrates their
ambition to build new housing to tackle the broken housing
market. It does however seem perverse that councils can
freely borrow £millions through their General Fund under prudential
borrowing rules to build new housing but, even though the HRA
(Housing Revenue Account) is self-financing , they are
restricted in the numbers of new social rented properties they can
build by the borrowing caps on the Housing Revenue
Account.
Councils were just getting to
grips with the new self-financing regime introduced in 2012 under
the Localism Act and were starting to invest in new council housing
when previous governments reneged on the deal and increased the
uncertainties and risks for councils by introducing a reinvigorated
Right to Buy with substantially higher discounts, imposing a 4 year
mandatory rent reduction and signalling the introduction of an as
yet unspecified High Value Asset levy, thus discouraging councils
from prudently investing more in new social housing through their
HRA.
Local housing companies can have
an important role to play, particularly in improving standards in
the private rented market and in stimulating growth in home
ownership where the private market ids failing but ARCH would like
to see the government re-instate the original self-financing
principles and allow local authorities more control and flexibility
over their HRA to make the best use of their assets and resources
locally given the evidence is that with the right long term, stable
framework that is what they were starting to do and will be able to
again.
The Government should empower
local authorities to build more homes by:
- Giving councils back control of their housing assets and
revenue by committing to the principles of HRA self-financing for
council housing under the Localism Act 2011 which has the potential
to drive a real revival in public investment in council housing if
properly supported.
- Lifting the HRA debt caps for new build purposes and
relying instead on prudential borrowing rules to enable councils to
invest in new homes and pay back the money from their rental
income.