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Independent housing review calls for evidence Matthew Warburton - 28/03/2014

eye_on_future_300The independent review of the council role in housing supply, led by Natalie Elphick and Keith House, set up by the Government in January, has now issued a call for evidence to be submitted by 23 May.


ARCH will be making a substantial submission, building on the material pulled together for the Lyons Review, but refocused on the specific questions posed by the CLG review team in their call for evidence. We are keen that as many member councils as possible contribute to the ARCH submission or make their own.


The call for evidence asks how councils are using the opportunities provided by self-financing to build new homes, and then asks what more they could do. There are specific questions about the scope for disposal of housing assets and use of surplus or redundant local authority land. It will be important for councils to show that they have looked carefully at both these questions and made sensible plans, particularly if it becomes necessary to counter inflated expectations in some quarters of Government about the potential for financing new housing through asset sales in preference to new borrowing.


Linked with their interest in surplus local authority land, the review team is keen to explore new ways of financing social housing, particularly those which harness investment by private institutions, including pension funds. Since the review's terms of reference preclude any departure from the government's current fiscal strategy, this emphasis is unsurprising.


Many ARCH members have experience of providing housing through joint ventures of several kinds with private sector partners and it is essential that the lessons of these initiatives - positive and negative - are put to the Review. While the attraction of such arrangements is normally that the private sector finances the investment and takes a share of the risk, there are also suggestions that such arrangements are expensive to set up - requiring, for example, high-level legal expertise - and run, and, for this reason, unlikely to be attractive to smaller councils or for smaller schemes.


There are also risks that council will lock themselves into long term financial arrangements that do not stand the test of time - a decade ago PFI was seen as "the only game in town" for much new public sector investment, but changed economic circumstances have shown many such deals to be very poor value for money in the long term. That mistake must not be repeated.


The review team seems concerned that some councils may lack the skills or capacity to undertake large-scale development, and their general expectation is that councils will need to work with partners: "it will be rare for a local authority to 'go it alone'", they comment. Their expectation is probably that councils will need to work mainly with private sector partners, but the ARCH submission could also usefully explore the scope for councils to work with each other and with ALMOs to build up their development skills and capacity.


Lastly the call for evidence asks what local authorities are doing or could do to release more resources for investment by reducing management and maintenance costs and increasing value for money. Here again the example given is by working with private sector partners. However, the starting point for ARCH's submission on this issue will be to confront the Review's assumptions about how value for money should be assessed.


One goal of self-financing was to level the financial playing field between councils, ALMOs and housing associations, and reverse the history of chronic underinvestment in council housing, which was reflected not just in lower levels of capital investment in the council stock, but in lower spending on maintenance and management, too.


In a different financial climate one might have expected self-financing to lead to an increase in revenue as well as capital spending on the existing stock; in practice most councils have looked for savings in HRA costs in parallel with the savings they have been forced to make in General Fund spending. However, the Review should not be allowed to lose sight of the need to ensure that Government policy does not return council tenants to the status of second class social tenants from which they have so recently escaped.

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