14 February 2003
Visions of 200,000 new houses, millions of pounds to regenerate declining areas in the Midlands and the North, and at least £1bn for houses for key workers dominated Sustainable Communities, John Prescott's grand strategic plan for the future of housing, launched on February 5.
But for local authorities, the main news to emerge was that some councils could be let loose into the financial markets within the next few years – free to borrow to repair their rundown housing.
It remains unclear how many authorities will be released from the shackles of central financial control. The first reaction was that most councils' long-held desire for greater financial independence would be frustrated yet again.
Former secretary of state Stephen Byers suggested more than a year ago that such freedom would be widespread, but this avenue is going to be available only to an elite group of authorities.
Ministers have yet to expand on the proposal buried in Sustainable Communities to allow three-star arm's-length management organisations (Almos) to leave the housing subsidy system and become self-financing.
But Gwyneth Taylor, housing programme manager at the Local Government Association, believes ministers will be careful to minimise the number of councils given this borrowing freedom. 'They won't want to over-extend themselves,' she says.
'These councils won't have subsidy or debt. The only way they can be controlled is by central government.'
Currently, councils carry out repairs to their housing stock through grants paid by government under the housing investment programme to supplement rent income.
But they are also subject to the housing subsidy system, which supports local authorities with large historic debts and helps to equalise rents around the country.
Housing associations, or registered social landlords, also receive government funding, channelled through the Housing Corporation, as well as local authority housing grants.
But RSLs are involved in other revenue-raising activities, such as building houses for sale, and can raise money on the markets.
They are seen as financially more secure than local authorities dependent on grant and variable rent income.
Almos are a halfway house. They allow councils to retain ownership of housing stock rather than transfer it to RSLs, a move that tenants often oppose, seeing it as delivering them into the hands of private landlords.
The council retains responsibility for housing strategy but the Almo takes on the landlord function. This will now be the only route to financial independence.
'Local authorities know they face a restricted menu of options,' Taylor says. 'It will give stock transfer more impetus. But a lot of councils are looking at the Almo option.'
Councils must bring all their homes up to standard by 2010 and, perhaps more importantly for the time being, tell the government how they intend to do it by July 2005. Ministers are threatening to intervene if an authority does not produce a valid action plan.
Nearly £2bn is set aside for Almos by 2005/06, although about one-fifth of this has already been swallowed up by the first 21. The Chartered Institute of Housing is in no doubt that the next two rounds of bidding will be heavily over-subscribed.
'I don't think the government has done enough to guarantee meeting the decent homes target because there is uncertainty about who is going down the Almo and stock transfer routes,' says John Perry, the CIH's director of policy. 'If they make partial transfers attractive so that authorities can mix and match, it could work.'
Although the Private Finance Initiative is being expanded, councils that retain their stock but do not become self-sufficient will mostly continue to rely on the housing investment programme.
This will take on a new look as part of a single pot to be administered by nine regional housing boards. The boards will also take over the funding of housing associations. But whereas the Housing Corporation will have seats on the new boards, local authorities will not.
The single pot opens up the possibility of competition between councils and RSLs.
But Norman Perry, the corporation's chief executive, says it is unlikely the government will allow a massive transfer of resources. 'You couldn't see a situation where ministers would agree to 80% going to council housing or permit everything to go to new build,' he says.
Once each board has had its spending proposals approved by the Office of the Deputy Prime Minister, RSL funds will continue to flow through the Housing Corporation. 'There will be a proper regional housing strategy,' says Norman Perry. '[Until now] we have been allocating in a vacuum.'
PFfeb2003
