News analysis Councils consider a return to house-building

2 Aug 07
So it's official. Councils are cordially invited to the government's bumper house-building party that is due to run until at least 2020.

03 August 2007

So it's official. Councils are cordially invited to the government's bumper house-building party that is due to run until at least 2020.

While they might not discover for some time whether it is really their type of get-together, they have been asked to turn up bearing gifts of land for development and preferably to bring along a private sector partner.

In spite of the hype preceding last week's housing green paper, which promises 180,000 new affordable homes by 2010/11, a significant return to council house building seems unlikely.

In the short term, 14 councils are setting up local housing companies with developers, while ten are in line to receive development grants through the Housing Corporation's three-year National Affordable Housing Programme that starts in April.

Eight of the councils made it through the qualifying stage of the NAHP bid using arm's-length management organisations, while the other two used special purpose vehicles that include banks, developers and registered social landlords.

As expected, any home built by a local housing company, Almo or SPV will fall outside the housing revenue account – allowing councils to keep all rent paid by tenants and all receipts from homes sold through the right-to-buy scheme.

At present, 25% of rental income and 75% of capital receipts are recycled nationally. The green paper says ministers are also minded to allow councils that build homes within the HRA using their own resources to keep all rent income and capital returns – but will await views on the implications of such a move.

In the long run, it adds, councils without Almos or other vehicles could also receive grant from the Housing Corporation, but only following a rigorous selection process that demonstrates value for money and their ability to deliver the homes promised.

Housing minister Yvette Cooper told Public Finance that the government is keen to study ways of reforming the HRA but it is just as important that councils play a strategic and planning role and allow others to build most of the 3 million homes promised in England by 2020.

'We want them to work with other providers,' she said. 'We don't want a return to old-style estates with council homes on one side of the road and executive-style houses on the other. We want mixed communities.'

Unsurprisingly, Defend Council Housing claimed that the green paper fell well short of local authority expectations. 'The private sector has failed up to now to provide the homes we need and there is no indication that it will do any better in the future,' said DCH chair Alan Walter.

But Chris Leslie, director of the New Local Government Network, said things were moving in the right direction as it was clear that ministers were calling on the Treasury to be less dogmatic on housing. 'I feel that the clouds are breaking a bit and there will be a little more flexibility shown by those controlling the rules,' he said.

The Local Government Association also felt that the green paper represents progress. LGA chair Sir Simon Milton said the concept of local housing companies, or development trusts, originated from the association. It had also achieved its other key aims of allowing councils to retain receipts from selling new homes and borrow against rent income, he added.

Steve Douglas, acting chief executive of the Housing Corporation, said he expected some local authorities to work alone on house-building schemes and others to set up partnerships. 'The important thing is that they have the capability and skills to work on volume programmes, understand what's happening in their community, and take on the long-term stewardship,' he said.

The first days following the green paper were dominated by a row involving the CIH, the LGA, National Housing Federation and the Department for Communities and Local Government over whether £8bn will be sufficient to fund the extra affordable housing.

But the NHF, which was most vociferous in insisting that £11.6bn was needed, withdrew its objections after the DCLG made it clear that RSLs and other providers are not expected to build 70,000 homes annually until 2010/11 – the third and final year of the next Comprehensive Spending Review period.

The National Federation of Almos welcomed the news that all eight arm's-length management organisations that applied made it through the qualifying stage of the NAHP. Up to 25 more could join them next year now that the programme is extended to Almos with two inspection stars, not three.

Some councils with Almos, including Leeds and Manchester, are also among the 14 councils that will work with English Partnerships and developers to set up local housing companies by the end of this year. Others, such as Sunderland, have transferred their stock to an RSL.

The DCLG estimates that the first 14 companies should build at least 35,000 homes (half of which will be affordable).

Other councils are already being invited to set up companies in the hope of finding potential local authority sites for a further 60,000 homes.

The next few years are more likely to be dominated by arguments over where the new homes should be built rather than how they are provided and who foots the bill. The 45 towns and cities that make up 29 existing 'growth points' are to take 100,000 extra homes, while other authorities are being invited to become new growth points and take a further 50,000 homes, including some in the North.

Where necessary, regional plans will be reviewed to support the new growth points, along with five exemplar green developments, or eco-towns.

But Milton said councils must be allowed to take planning decisions based on local needs. 'It maybe that they can't take more housing or can't without infrastructure investment,' he warned. 'The government must not override democratically accountable decisions.'

Factfile – the green paper in brief

  • £8bn to be spent on 180,000 affordable homes during the next three years
  • At least 70,000 affordable homes will be built annually by 2010/11, including 45,000 for social rented housing
  • New goal of 50,000 social homes per year after 2010/11
  • Councils to keep rents and capital receipts from homes built with Housing Corporation grant or through local housing companies
  • National Affordable Housing Programme extended to arm's-length management organisations with two stars
  • Housing and planning delivery grant for councils with five years' development land to replace existing planning delivery grant
  • Up to 100,000 new homes to be built on surplus central government land, and 60,000 on surplus local authority land
  • New housing growth points in towns in North and South of England, along with five eco-towns
  • Discussions to continue on planning gain supplement prior to Pre-Budget Report
  • Carbon emissions from new homes to be reduced through tighter building regulations ahead of zero-carbon target in 2016


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