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More councils looking to build for market rent Matthew Warburton - 07/03/2014

ARCH_PRSInside Housing magazine has given me a good opportunity to plug ARCH's timely seminar on New Approaches to Market Renting by running a story which draws attention to several more councils which are making plans to build or acquire homes for market rent. 

 

The magazine reports that Broxbourne Council, which transferred its housing stock in 2006, has established a company, Badger BC Investments, to provide market rented properties for key workers, such as teaches in local schools.


The story suggests that building for market rent is particularly attractive for stock transfer councils sitting on large cash reserves derived from stock transfers because with interest rates so low, homes for rent offer a more attractive rate of return. Rob Beiley at Trowers and Hamlins solicitors is quoted as knowing of half a dozen other councils thinking of a taking similar initiatives.


However, plans to provide for market rent are not confined to councils which have transferred their stock. The article also mentions that Newham council - which has retained its stock and now manages it directly - is planning to build 3,000 homes for market rent and acquire another 500 over the next 13 years. Our ARCH seminar on 17 March will hear from Stephen Hills of South Cambridgeshire District Council which has established a company to provide homes for market rent. Ashford Borough Council in Kent - another stock-retaining council - have done the same.


All these councils are responding to a need for good-quality market rented housing arising in those parts of the country - the majority of areas - where house prices have risen beyond the reach of younger households on average incomes or below.


But what makes direct council intervention an attractive option is the low interest rates at which councils can borrow, coupled with the need to find other sources of income to make up for the withdrawal of government grant to support General Fund expenditure.


The irony is that, because these homes count as a General Fund activity, not only are councils able to use cash reserves, but they can also borrow up to prudential limits to finance their provision. Debt caps do not apply.


Given the pressure on the General Fund, many councils will want to use surpluses arising from providing homes for market rent to defray General Fund spending. However, as ARCH has argued in our submission to the Lyons Review, allowing councils the option of providing for market rent within the HRA could both provide them with the financial capacity to increase the scale of such activity and allow surpluses to cross-subsidise the provision of additional social housing.


I am looking forward to an informative and useful event on 17 March. Alongside Stephen Hills we will hear from David Pipe of CIH, who will present the findings of a major CIH project on market rents, and from Martin Pereira of LB Havering about the operation of their social lettings agency. If you have not done so already, it is not too late to book your place.

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