Councils must share debts to speed up housing reform

23 Jul 09
A major shake-up of housing finance might have to wait until 2012/13 unless local authorities agree to take on the debts of others.
By Neil Merrick

23 July 2009

A major shake-up of housing finance might have to wait until 2012/13 unless local authorities agree to take on the debts of others.

The government this week ruled out any suggestion that it might pay off £18bn of debt held by councils to speed up the dismantling of the housing revenue account system.

Instead, money collected in rents from tenants will continue to be used to service debts built up by councils. A Department for Communities and Local Government consultation paper, published on July 21, said: ‘It would be unaffordable and unfair to ask the general taxpayer to support this debt in future.’

Housing minister John Healey has already agreed that councils can keep all rents and capital receipts from new homes they build. The same rules could be applied to existing properties without the need for legislation if councils agreed to ‘voluntary self-financing’, under which debt-free councils support those with debt.

About a quarter of the 205 councils in the HRA system are debt-free, while others owe the equivalent of up to £30,000 per property.

‘The challenge now is whether local government is ready to work with me and ministerial colleagues to make these radical reforms,’ said Healey.

The Local Government Association, which claims that HRA debt is ‘notional’, repeated its call for the money owed by councils to be cancelled. ‘It could prove a major sticking point,’ said LGA consultant Ruth Lucas. ‘Some authorities will not want to take on others’ debts.’

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