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Government policy on council housebuilding 31/03/2015

ARCH Briefing 8/2015

 

Issued by:
Brandon Lewis, Minister for Housing & Planning


Date issued:
20 March 2015


Key points

 

  • Council-provided social or affordable housing should be accounted for in the HRA unless the council owns fewer than 200 homes

 

  • Secure council tenancies have the Right to Buy whether or not accounted for within the HRA

 

  • The requirement to account for stock in the HRA does not include accommodation being used to prevent homelessness or end a homelessness duty in the private rented sector or as temporary accommodation

 

  • The Government welcomes approaches where local housing companies are developing new homes for market sale or purchasing private homes for the accommodation of homeless households, particularly where their borrowing does not count as public

 

  • The Government does not support the establishment of wholly-owned local authority companies to provide social or affordable housing and deliberately to avoid Right to Buy and debt caps.

 

Background

 

Since 2012, self-financing has given councils the freedom and capacity to build new social and affordable housing within the HRA.  Council housing starts are now at a 23-year high.  But council borrowing in the HRA is limited by debt caps linked to historic debt levels, and the Government has repeatedly declined to lift them.

 

In February, the Elphicke-House report on the local authority role in housebuilding noted that councils are making use of a variety of housing delivery organisations, normally partnerships with the private sector, to deliver new housing, and argued that such arrangements offer various strengths and opportunities.  Such vehicles often take the form of a company in which a local authority has an interest but not a controlling stake, so that borrowing by the company is not classed as public.  These housing delivery organisations have been used to provide homes for sale, market, affordable and social rent, often in mixed developments.

 

The report also argued that existing rules which exempt councils with fewer than 50 rented homes without the need for an HRA should be revised to lift the threshold to 200 homes.

 

A number of councils have also established wholly-owned companies for a variety of purposes, including to develop homes for sale and market rent.  Borrowing by such companies is treated as if it were borrowing by the local authority, but is subject only to prudential borrowing rules and exempt from debt caps. Tenants of a local housing company, whether or not controlled by the council, are assured tenants and the Right to Buy does not apply.

 

In a written statement on 20 March, Housing Minister Brandon Lewis clarified Government policy on these issues.

 

  • Where councils are developing or acquiring new homes for social or affordable rent, they should do so using the powers in Part II of the Housing Act 1985 and account for them in the HRA, except  where the number of homes is very small.

 

  • The Government will accept the Elphicke-House recommendation to allow councils, on application, to own up to 200 homes without being required to re-open their HRAs

 

  • These provisos do not to apply to accommodation being used to prevent homelessness or end a homelessness duty in the private rented sector or as temporary accommodation

 

  • The Government welcomes approaches where local housing companies are developing new homes for market sale or purchasing private homes for the accommodation of homeless households, particularly where their borrowing does not count as public

 

  • The Government does not support the establishment of wholly-owned local authority companies to provide social or affordable housing and deliberately to avoid Right to Buy and debt caps.

 

ARCH Comment

 

  • The Government has made clear that it does not support the provision of homes for social and affordable rent by local housing companies, but the statement is silent on what powers it has, if any, to enforce this policy.

 

  • The statement is silent on the provision of market rented housing through local housing companies, whether or not wholly-owned.

 

Links

 

Ministerial statement

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