14 March 2008
The government has given local authorities the green light to tear up the housing subsidy system and keep the money they raise in rents.
An 18-month study into self-financing by six councils shows they would operate more efficiently and find long-term planning and asset management simpler if they were not constrained by housing revenue account rules.
The study, set up by the Department for Communities and Local Government, involved three authorities with arm's-length management organisations and three that manage their homes through traditional housing departments.
Its conclusions, published on March 10 as ministers formally launched an in-depth review of the HRA, show that self-financing would allow for more effective local decision-making. Not only could councils spend rent income on other services, but they would have greater potential to use land and other assets to raise private finance.
Even councils with large historic debts, such as Sheffield, would benefit from leaving the HRA if the government was willing to write off what they owe, concludes Self-financing of council housing services.
Until recently, the Treasury was paying more into the system than was raised in council rents. But with about 80% of councils now getting less from the HRA than they pay in, it is forecast to generate a £194m surplus by the end of 2008/09.
The Housing and Regeneration Bill, currently going through Parliament, gives the government powers to waive HRA payments by councils that show they can become self-financing.
The review, to be undertaken jointly by the Treasury and the DCLG, will look at how councils pay for the management and maintenance of homes and will compare council rents with those of other social landlords.
Mike Owen, executive director of Carrick Homes, which participated in the study, said he expected the government to make wholesale changes to the HRA system rather than scrap it completely.
'It would be better for our tenants if we came out of it, but I'm not saying that everybody should,' he added.
PFmar2008
