21 April 2006
It is almost a year since the Audit Commission warned that the housing finance system is, if not cracking up, certainly creaking.
Nobody expected the Office of the Deputy Prime Minister to change the 18-year-old system overnight, but, as discontent grows among local authorities, ministers' lips have been sealed.
The commission's report, Financing council housing, published last June, concluded that the system was unsustainable because stock transfers meant that the 82% of authorities that subsidise the rest are rapidly dwindling in number.
Among those with the biggest axe to grind are the 98 councils that expect to meet the decent homes target without transferring their stock to housing associations or setting up arm's-length management organisations.
These councils argue that, if it were not for the fact that they subsidise other councils, including those with Almos that receive extra funding, they could bring their homes up to scratch sooner and achieve a higher standard.
Swindon Borough Council loses almost £7m each year via the subsidy system. 'Why should our tenants pay for repairs to houses in other parts of country?' asks director of housing Bernie Brannan. 'It's money that is being raised locally.'
But the first councils likely to leave the system are those with high-performing Almos. The ODPM's review, which has already taken 18 months, is expected to give top Almos the opportunity to become self-financing after the Treasury pays off their debts.
Ironically, it is councils with Almos that have least to complain about, as most are among the 18% that benefit from the status quo. 'There are hardly any Almos contributing to the subsidy system,' says Gwyneth Taylor, policy officer at the National Federation of Almos.
Taylor believes that to keep everyone else happy, the ODPM will eventually offer councils without Almos the chance to leave the subsidy system if they gain three inspection stars for housing management. But she acknowledges that this will take years to implement. 'Every time ministers think about replacing the system, it fills them with horror,' she says.
The issue came to the fore again recently after an overhaul of management and maintenance allowances was suddenly scaled back. Councils in the North of England faced severe cuts to their expected increases in allowances when the ODPM extended protection for some London authorities facing heavy losses.
A Northern Housing Consortium study later showed that councils as a whole were keeping less than one-third of the extra money they raised in rents this year. The rest is going back into the subsidy system, partly to pay for Almos and Private Finance Initiative schemes.
Rents went up by an average of 4.7% this month as councils brought them into line with those of housing associations. Richard Bramley, a consultant who carried out the NHC study, says this year's settlement shows that reform is not in the government's interest in the short term.
'The extra money generated by rent restructuring is being recycled back to the government,' he says. 'If it allowed more of the housing revenue account to be spent on maintenance, it would have to find other resources to pay for its initiatives.'
Ken Lee, chair of CIPFA's housing finance panel, says the unfairness of the system is more apparent because it is no longer used to pay housing benefit subsidy to councils. 'A lot of authorities are starting to realise that it's a subsidy system from councils to the government, not the other way around,' he says.
When the Chartered Institute of Housing tried to raise the issue with the ODPM late last year, it was told that the government considered that the system worked and reform was not high on its agenda. But CIH policy adviser John Perry warns that councils currently doing well that are discouraged from 'rocking the boat' should look further ahead.
'There must come a point where there are questions about the system when so many local authorities are outside it and Almos have a special relationship,' Perry says. 'The ODPM probably feels it's got enough on its plate, but the system is so complex and unfit for purpose that it needs a radical reappraisal.'
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