By Neil Merrick
July 2, 2009
The discredited system of funding council housing is poised to be dismantled – giving local authorities more incentive to build homes.
Housing minister John Healey this week joined critics of the housing revenue account, which redistributes money between authorities, and agreed councils should retain all their rent income and receipts from right to buy sales.
Healey’s statement on June 30 follows a year-long review of housing finance. In the short term, the revised rules will apply only to new homes. But following a further consultation this summer, the government is expected to introduce legislation to scrap the HRA and make all councils with homes self-financing.
Healey, who took over as housing minister less than a month ago, said he wanted to move ‘as rapidly as possible’ and would set out a full timetable for reform before the summer recess of Parliament.
‘I want to provide more flexibility in finances and more transparency in the operation of the system,’ he said. ‘I want to devolve control to local government.’
The announcement surprised many in the sector, which expected the government to be more cautious and announce a range of options. John Perry, policy adviser to the Chartered Institute of Housing, was delighted that self-financing was the only option on the table. ‘It gives the impression this is the common-sense solution,’ he said.
At present, all council rents are pooled along with 75% of right to buy receipts. The Local Government Association has claimed that councils could afford to build 300,000 homes over ten years if they did not contribute to the HRA.
Healey said the government had still to decide how much latitude to give councils that wish to use their extra income to fund borrowing. The dismantling of the HRA is likely to encourage more to set up local housing companies, he added.
The LGA, holding its annual conference in Harrogate, welcomed the move. LGA chair Margaret Eaton said: ‘‘We are pleased the government has listened to the LGA's calls for reform of the housing finance system. We have campaigned long and hard for councils to be able to keep all the proceeds from their own council house sales and council rents. We continue to call for councils to have the financial independence to invest in their housing stock.’
The Campaign for Fair and Local Housing Finance, supported by more than half of all local housing authorities, also welcomed the announcement. But it said the government should cancel councils’ historic housing debt for the full benefit to be realised in terms of capital investment in new homes.
Mary Orton, chief executive of Waverley Borough Council and co-ordinator of the campaign, said: ‘I am delighted that the government now intends to dismantle the housing revenue account subsidy system. This is a real breakthrough. However, as it stands, this proposal will not be able to deliver on this intention because of the treatment of debt.’
The announcement came 24 hours after the government pledged an extra £1.5bn for social rented and other affordable housing over the next two years
About £500m will be used to kick-start stalled housing and regeneration schemes, on top of £400m set aside in April’s budget. The Homes and Communities Agency has already received 305 bids for the kick-start programme.
Prime Minister Gordon Brown said the new money, reallocated from government departments, would allow an additional 20,000 homes to be built and create about 45,000 jobs. Housing associations and other developers will get a further £750m and councils £250m.
HCA chief executive Sir Bob Kerslake said: ‘The sector’s capacity and appetite for housing delivery is strong, and the knock-on effect house building has in terms of jobs, businesses and the wider economy is well established.’
July 2, 2009
The discredited system of funding council housing is poised to be dismantled – giving local authorities more incentive to build homes.
Housing minister John Healey this week joined critics of the housing revenue account, which redistributes money between authorities, and agreed councils should retain all their rent income and receipts from right to buy sales.
Healey’s statement on June 30 follows a year-long review of housing finance. In the short term, the revised rules will apply only to new homes. But following a further consultation this summer, the government is expected to introduce legislation to scrap the HRA and make all councils with homes self-financing.
Healey, who took over as housing minister less than a month ago, said he wanted to move ‘as rapidly as possible’ and would set out a full timetable for reform before the summer recess of Parliament.
‘I want to provide more flexibility in finances and more transparency in the operation of the system,’ he said. ‘I want to devolve control to local government.’
The announcement surprised many in the sector, which expected the government to be more cautious and announce a range of options. John Perry, policy adviser to the Chartered Institute of Housing, was delighted that self-financing was the only option on the table. ‘It gives the impression this is the common-sense solution,’ he said.
At present, all council rents are pooled along with 75% of right to buy receipts. The Local Government Association has claimed that councils could afford to build 300,000 homes over ten years if they did not contribute to the HRA.
Healey said the government had still to decide how much latitude to give councils that wish to use their extra income to fund borrowing. The dismantling of the HRA is likely to encourage more to set up local housing companies, he added.
The LGA, holding its annual conference in Harrogate, welcomed the move. LGA chair Margaret Eaton said: ‘‘We are pleased the government has listened to the LGA's calls for reform of the housing finance system. We have campaigned long and hard for councils to be able to keep all the proceeds from their own council house sales and council rents. We continue to call for councils to have the financial independence to invest in their housing stock.’
The Campaign for Fair and Local Housing Finance, supported by more than half of all local housing authorities, also welcomed the announcement. But it said the government should cancel councils’ historic housing debt for the full benefit to be realised in terms of capital investment in new homes.
Mary Orton, chief executive of Waverley Borough Council and co-ordinator of the campaign, said: ‘I am delighted that the government now intends to dismantle the housing revenue account subsidy system. This is a real breakthrough. However, as it stands, this proposal will not be able to deliver on this intention because of the treatment of debt.’
The announcement came 24 hours after the government pledged an extra £1.5bn for social rented and other affordable housing over the next two years
About £500m will be used to kick-start stalled housing and regeneration schemes, on top of £400m set aside in April’s budget. The Homes and Communities Agency has already received 305 bids for the kick-start programme.
Prime Minister Gordon Brown said the new money, reallocated from government departments, would allow an additional 20,000 homes to be built and create about 45,000 jobs. Housing associations and other developers will get a further £750m and councils £250m.
HCA chief executive Sir Bob Kerslake said: ‘The sector’s capacity and appetite for housing delivery is strong, and the knock-on effect house building has in terms of jobs, businesses and the wider economy is well established.’
