18 January 2008
Millions of pounds raised in council rents are set to be snatched from the housing subsidy system by the Treasury and used for general public expenditure.
New projections by the Department for Communities and Local Government show that, by next year, the housing revenue account will be running at a surplus of £194m. Within ten years, the annual surplus is forecast to exceed £500m, with the trend set to continue well beyond 2020.
The figures are based on projections by six councils taking part in a government pilot to assess the implications of leaving the HRA system. They show its financial health has changed dramatically in the past two years. In 2005/06, it was running at a loss of almost £250m.
John Perry, policy officer at the Chartered Institute of Housing, said the turnaround occurred because rents are rising to bring them in line with those of housing associations, while many authorities have achieved the decent homes standard and are no longer spending so much on repairs and maintenance.
Unless rents were pegged or investment in council housing increased, more money would be 'creamed off' by the Treasury.
'We have reached some sort of crunch point,' said Perry. 'This is surely the time to give local authorities autonomy over their housing finances.'
Martin Wheatley, housing programme director at the Local Government Association, said the figures demonstrated the urgent need for the review of the HRA announced in December by housing minister Yvette Cooper.
'A system that is taking so much money out of tenants' pockets is clearly no longer sustainable,' he added.
The Defend Council Housing pressure group wants the DCLG to give extra funds to authorities whose tenants have voted against stock transfer and to increase management and maintenance allowances.
A recent report by London Councils showed that, while allowances were raised nationally this year by 2.95%, they were frozen for authorities in the capital.
At the same time, 16 boroughs are poised to raise rents by more than £5 per week.