The government’s proposals for housing finance reform are more akin to flogging a dead horse than giving councils freedom
On July 21, the Department for Communities and Local Government published its long-awaited consultation paper Reform of council housing finance. With a closing date of October 27, there is plenty of time to pick over the recommendations. The DCLG enthuses in the paper that ‘we are at the start of a new era in the provision of social housing’. The main recommendations are:
- to strengthen the housing revenue account ring-fence
- housing authorities to use 100% of right-to-buy receipts
- a more powerful Tenant Services Authority, to control rents and delve into value for money
- to abolish housing subsidy. Under this proposal, individual housing authorities would no longer pay into or receive from the national pool. But each housing authority would have to take a calculated share of the national housing debt. All this is probably too little too late. In fact, as an enthusiastic reader-out of bedtime stories, the consultation reminds me of that children’s classic Black Beauty. The noble old horse (sorry HRA) seems about to suffer new indignities at the hands of yet another unsatisfactory owner.
Many local housing authorities no longer own any stock because they were beaten into submission by the subsidy system. (Only in the crazy world of housing finance would close on half of the local housing authorities not have any housing). The paper’s promise of ‘a fair deal for all councils’ seems a bit too late for the non-housing authorities.
Similarly, the right-to-buy horse has been well and truly worked to death by the Treasury during the years of property boom. Now it is a broken animal, councils can have the use of it. How magnanimous!
On rents, it would be curmudgeonly for anybody working in housing finance to criticise the rent restructuring policy that has spawned so much accounting activity, databases and pivot tables. But criticise we must. Who knows how the Tenant Services Authority will tame this unruly beast? The idea that councils should set their own rents seems to be ruled out. Why?
But it is the proposed repackaging of housing debt that seems bizarre. Pooling and rebranding debt (collateralised borrowing obligations) brought down the money markets. But here is the DCLG about to do the same. Because, rather than pay off the debt, the department wants to redistribute it among different local housing authorities.
Having just taken on a much increased national debt, one can appreciate the government hardly wants to write off £18bn of local housing debt. But its plan is crazy. Why should the tenants of a debt-free rural district be visited with the debt that built an inner-London estate?
Why stop at local authority housing? We could redistribute the nation’s mortgage debt in proportion to the value of everybody’s house. Some years ago, the DCLG quietly dropped the requirement that councils charge a minimum revenue provision in their HRAs. Then it seemed debt could last forever. Now it is proposed that individual housing authorities will not pay their own debt at all, only a share of every other authority’s.
While one can appreciate the technical reasoning behind the proposals, they seem to be moving ever further away from local decision-making. Where is the local freedom without the right to set rents or make local decisions unless it has TSA approval of some 30-year business plan? Where is the prudential borrowing freedom if the freedom is controlled, and most of the housing debt in the HRA is not the authority’s?
I’m sure the HRA horse could be restored if it were put on a healthy diet and allowed to gallop round the field.
If instead it remains penned up in a tight corner, weighed down with baggage previously carried by other horses, and has yet another owner tugging away at the reins 24/7, I fear its inevitable and heart-rending decline will continue.
