By Neil Merrick
30 July 2009
Local authority leaders are considering a way of reforming the housing finance system that would avoid councils taking on the debts of others.
The move follows the government’s statement last week that councils would need to agree a one-off reallocation of debt for a speedy dismantling of the housing revenue account.
Otherwise, said ministers, local authorities should expect to wait until 2012/13 before legislation was passed. Even then they might end up with a system that involved the government controlling some of the money raised in rents.
But the Local Government Association, which doubts it would be possible to reach agreement over debt reallocation, said there might be a third way.
Instead of high-debt councils passing some of their burden on to others, all authorities could become self-financing. They could then use their rent income to pay off debt they are deemed to have accrued for homes built in the past 80 years.
Ruth Lucas, an LGA consultant, said the association wanted to test the feasibility of councils carrying individual debt with them as they leave the HRA. ‘We need to see how it will stack up for different authorities and whether it gives them enough headroom to borrow and fund their stock,’ she said.
According to the government, councils owe a notional £18bn. But the LGA claims some of this has already been paid through money raised from right-to-buy sales, and is disappointed that the Treasury is unwilling to write off the remainder.
Councils in London and large metropolitan boroughs generally owe the most, but the LGA argues that many of these authorities own homes in areas with high property values that could be used as assets to fund borrowing.
Gwyneth Taylor, policy officer at the National Federation of Arm’s-Length Management Organisations, said councils could be left in an invidious position if they did not pass some debt on. ‘Do we want a situation where they are pretty much paralysed by overhanging debt?’ she said.
Yet both the NFA and the Association of Retained Council Housing, which represents councils with traditional housing departments, accept that it will be tricky to persuade councils to take on extra debt.
Ted Czerniak, director of housing at Broxtowe Council and a spokesman for Arch, warned: ‘People are going to take a polarised view and look at exactly what it means for them.’
30 July 2009
Local authority leaders are considering a way of reforming the housing finance system that would avoid councils taking on the debts of others.
The move follows the government’s statement last week that councils would need to agree a one-off reallocation of debt for a speedy dismantling of the housing revenue account.
Otherwise, said ministers, local authorities should expect to wait until 2012/13 before legislation was passed. Even then they might end up with a system that involved the government controlling some of the money raised in rents.
But the Local Government Association, which doubts it would be possible to reach agreement over debt reallocation, said there might be a third way.
Instead of high-debt councils passing some of their burden on to others, all authorities could become self-financing. They could then use their rent income to pay off debt they are deemed to have accrued for homes built in the past 80 years.
Ruth Lucas, an LGA consultant, said the association wanted to test the feasibility of councils carrying individual debt with them as they leave the HRA. ‘We need to see how it will stack up for different authorities and whether it gives them enough headroom to borrow and fund their stock,’ she said.
According to the government, councils owe a notional £18bn. But the LGA claims some of this has already been paid through money raised from right-to-buy sales, and is disappointed that the Treasury is unwilling to write off the remainder.
Councils in London and large metropolitan boroughs generally owe the most, but the LGA argues that many of these authorities own homes in areas with high property values that could be used as assets to fund borrowing.
Gwyneth Taylor, policy officer at the National Federation of Arm’s-Length Management Organisations, said councils could be left in an invidious position if they did not pass some debt on. ‘Do we want a situation where they are pretty much paralysed by overhanging debt?’ she said.
Yet both the NFA and the Association of Retained Council Housing, which represents councils with traditional housing departments, accept that it will be tricky to persuade councils to take on extra debt.
Ted Czerniak, director of housing at Broxtowe Council and a spokesman for Arch, warned: ‘People are going to take a polarised view and look at exactly what it means for them.’
