01 June 2007
It might be a brick too far to herald the return of the council house, but a Gordon Brown government will, it seems, recognise the need to provide more social housing, and be on the lookout for new ways to make it happen. He won't be distracted by minister Margaret Hodge's call for British families to be given priority over new migrants. The problem, he will stress, is shortage of supply.
When ministers embarked on the construction drive two years ago, they hoped private developers would supplement homes built by registered social landlords. But following a slow start in 2006/07, the private sector has yet to show more than limited enthusiasm for the Housing Corporation's national affordable housing programme.
Instead, another option is being floated to support Brown's desire to make housing a key feature of his forthcoming premiership. Local authorities – the main providers of social housing until 20 years ago – are being invited to dust off their hard hats and join the house-building boom.
Quite how councils will afford to build on any great scale is open to question. But last month, addressing the Commons communities and local government select committee, housing minister Yvette Cooper said the government was keen to remove barriers.
This could include taking new homes out of the housing revenue account, the mechanism that distributes rent revenue among authorities across England. If councils were allowed to keep income from new properties, it could theoretically fund borrowing. 'I believe councils need more flexibility to use their assets to help deliver the new homes and communities we need,' Cooper told MPs.
John Perry, the Chartered Institute of Housing's policy adviser, says allowing councils to build outside the HRA, possibly with the help of grants, would remove a major constraint. But they would still be bound by public sector borrowing rules.
'The largest housing associations can lever in funds at favourable rates,' he says. 'Local authorities would find it difficult to do that.'
Nevertheless, Labour activists already pressing the government for a 'fourth option' to raise money for existing homes are delighted that ministers finally appear to be singing from the same hymn sheet.
Alan Walter, chair of Defend Council Housing, says: 'If they accept the principle that councils can borrow money against their rental income and that the HRA is not sacrosanct, then we are making progress.'
But local authorities should be wary of raising their hopes prematurely. A 2004 promise by Deputy Prime Minister John Prescott that top-performing councils would be allowed to build came to nothing.
Since 2000, the number of homes built by local authorities has been a mere drop in the ocean of housing need, up from 87 to 277 per year. Most are funded through prudential borrowing, the Private Finance Initiative or asset sales, although 75% of right to buy receipts are claimed by the Treasury.
The numbers pale into insignificance compared with the 14,015 homes built by councils in 1990, or the 74,835 completed in 1980 (see box). Even those with arm's-length management organisations, which were hoping to gain similar borrowing powers to RSLs, have struggled to find ways of funding construction.
Gwyneth Taylor, policy officer at the National Federation of Almos, is confident that more will follow the example of Hounslow Homes, which is building on land owned by its parent council, but she predicts that programmes will be modest. In the short term, she adds, Almos whose councils own suitable land are likely to join forces with RSLs or developers that can raise private finance more easily, and then offer to manage the properties. 'I don't see them replacing the RSL option, but supplementing it,' she says.
Almos have an advantage over councils in that any new homes they build automatically fall outside the HRA and tenants moving into them are ineligible for the right to buy. Instead, they have the lesser right to acquire – a much less attractive option because it offers lower discounts – in the same way as housing association tenants.
But with RTB sales falling in most of the country, this might not remain a factor for long. Ted Czerniak, director of housing at Broxtowe Borough Council in Nottinghamshire, says the authority could not afford to build more than a few homes even if it kept all its RTB receipts. 'Sales have gone through the floor. They wouldn't provide enough for more than a modest programme.'
Broxtowe chairs the Association of Retained Council Housing (Arch), set up 12 months ago by councils without Almos that have not transferred their homes to an RSL. Broxtowe recently built 12 homes, funded through a section 106 planning gain agreement with developers, but believes it is more important to use other funds, such as prudential borrowing, for decent homes work.
If councils are allowed to operate outside the HRA and use rent income to build new homes, Czerniak says, those without Almos must be given a 'fair crack of the whip'. But he warns that, having disbanded their architectural teams, many would struggle to find staff with the skills needed for large schemes. 'The skills have gone from local authorities. We could not tool up in the environment that we live in at the moment.'
The future of the HRA subsidy system depends on trials begun last year by six councils, three with Almos and three without. The project will wind up ahead of this autumn's Comprehensive Spending Review but, in the meantime, those taking part are unsure about its implications for building.
Liz Bisset, director of community services at Cambridge City Council, says it wants to maximise affordable housing in the city and surrounding areas, but would need to study the terms under which it could borrow money very closely and take account of its existing homes.
'We want to make the best use of the reserves we've got,' she adds.
Ultimately, it seems unlikely that house building by councils will ever return to the levels seen in the 1960s or 1970s.
Perry says the more important issue is whether councils are seen as development partners rather than an obstacle to new homes. 'The government wants to be able to say that local authorities have the right to build, and point to a modest increase in new council homes, but the more pragmatic point is that it wants to gain access to their land.'
PFjun2007
