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Helping councils to build more homes Matthew Warburton - 27/06/2014

joust_300Answering the inevitable question at the CIH Conference in Manchester this week, Housing Minister Kris Hopkins gave the inevitable answer: the Government is not minded to lift council HRA debt caps any time soon.

 

But he threw down a challenge: if councils can spend the extra £300 million borrowing approved in the last Autumn Statement in full and on time, he said, we can go back to the Chancellor with a much stronger case for more. The credibility of local government's call for freedom to borrow more depends on its ability to show that it has the will and the capacity to use the money effectively to deliver the extra new homes that are needed.

 

This goes not just for the additional £300 million but for the £2.8 billion in borrowing headroom councils already have. Another question to Kris Hopkins - from a council committed to make full use of its borrowing headroom - asked what action the Government would be taking against neighbouring councils that have no plans to build. Luckily the Minister gave no clear answer. But Inside Housing ran a front page story this week suggesting that a councils have no plans to use a third of the available headroom and reporting that the Treasury has launched a review to examine why.

 

It is all too easy to make the assumption that councils not planning to build to the limit of their financial resources simply lack the political will. In reality there are other important factors in play that we need to understand better. The distribution of borrowing headroom does not reflect the need for new dwellings, but rather the historic debt management practices of councils under the old subsidy system.

 

Some councils may have decided to prioritise repayment of outstanding debt despite the fact that loans taken out to finance the debt taken on with self-financing were available at extremely advantageous and rates of interest. And attitudes to risk vary. Some councils will feel uncomfortable committing their borrowing power in full leaving no contingency for unforeseen investment needs.

 

But finance is not the only factor constraining new development. In many areas a shortage of land that can be readily developed may be more of a constraint than finance. Most of the council building that has begun in recent years is infill on housing land already owned by councils. Other sites in council ownership may be expensive to develop or lack crucial infrastructure.


Acquisition and assembly of land not currently in council ownership takes time and trouble. Then there are issues about skills and capacity. At the onset of self-financing many councils had not built homes for more than two decades. They have needed time to rebuild or buy in development teams and build up the capacity to procure new housing contracts. And there are questions of scale - what is feasible for a city or metropolitan borough may not be an easy go-it-alone option for a rural district.


These are all good reasons for giving councils and ALMOs the opportunity to meet and share their experiences in grappling with the challenges of building more homes, as ARCH will be doing, in association with the NFA, for councils and ALMOs in the East Midlands on 9 July.

 

We are hoping that participants will be able to learn from each other how to overcome the hurdles that stand in the way of council housebuilding, make a more realistic assessment of the risks involved and how best to manage them, and identify opportunities where working together, possibly sharing resources, could bring benefits. If the event is a success, ARCH and the NFA will be looking at the possibility of further events in other regions. 

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