09 July 2004
In less than a year's time, council-owned housing companies expect to be competing for government grants to build new homes.
Providing the Housing Bill becomes law, the Housing Corporation will be given the capacity to award grants to arm's-length management organisations and private developers as well as registered social landlords.
But whereas private firms and RSLs will be able to supplement any grants they receive with further borrowing, it seems unlikely that Almos will be in such a fortunate position. The scent of betrayal hangs in the air.
Just over two years ago, when the first eight Almos swung into operation, it was expected that the top performers would be given extra borrowing freedom on top of the money that all Almos receive for gaining two or more inspection stars.
To date, five Almos have gained the maximum three stars but the prospect of being able to borrow money – to build houses or improve their existing stock – seems as distant as ever.
Last month, at the Chartered Institute of Housing's annual conference, outgoing chief economic adviser to the Treasury Ed Balls confirmed what most people in the Almo movement had been fearing for some time. Any new freedoms were bound to be restricted, he said, because Almo spending must be accounted for on the public sector balance sheet.
So has Labour gone back on a promise made when Almos were launched as an alternative to stock transfer? Or were councils living in dreamland to believe the government might place Almos in a similar position to housing associations?
Ian Dethick, chief executive of Ashfield Homes, says it appears that the Treasury stepped in to stamp on the Office of the Deputy Prime Minister's intention to give Almos more flexibility. 'I'm not saying anything was promised but we were certainly given the impression that high-performing Almos would be given some sort of vehicle to deliver new housing.'
Ashfield, in Derbyshire, was one of the first Almos to gain three stars. By autumn 2005, it expects all its 7,600 properties to meet the decent homes standard, but it wants to build more houses to make up for those lost through demolition or the right to buy.
Sarah Webb, director of policy at the Chartered Institute of Housing, is not surprised that Almos feel let down. She partly blames the situation on the departure last year of Mike Gahagan, former director of housing at the ODPM. 'What we are seeing reflects the fact there is not a natural champion for Almos at the ODPM,' says Webb.
Talks over extra borrowing freedom have been continuing between the ODPM and the National Federation of Almos for more than a year. The federation accepts that Almos will always remain subject to the public sector borrowing requirement, but wants ministers to show their hand and state what Almos can do, rather than just stressing what they can't.
'There are still potential freedoms on the table,' says Gwyneth Taylor, NFA policy officer. 'The carrot is still there but it's not quite such a juicy carrot as it was.'
Possibilities include allowing three-star Almos to spend more of their right-to-buy receipts (at present, all councils are limited to 25%). Alternatively, it could adjust the housing subsidy system and grant Almos more flexibility over debt repayment, giving them greater opportunity to borrow.
Phil Davies, director of Almo Derby Homes, says it might make sense for the government to effectively write off the debts of some Almos and let them opt out of the subsidy system. 'The cost to the government would be far less,' he says. 'There is room for a win-win situation.'
If borrowing restrictions are not relaxed, two-star Almos might decide they have no incentive to gain maximum stars when they are re-inspected. But Chris Langstaff, managing director of Hounslow Homes, says his Almo will be going all out to achieve that. The two-star Almo has already received £100m to spend on its 15,000 homes but is keen to support wider regeneration.
Langstaff believes that Almos could end up relying on the new prudential borrowing framework to gain extra money, in the same way as authorities without housing companies. In the meantime, he does not want a rushed decision, in case Almos are 'tripped up' later.
'When Almos were first thought about there was a really big incentive [to gain three stars],' he says. 'It doesn't look now as though it will be quite as substantial as we thought, but it's still a reasonable incentive.'
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