Councils unhappy with lack of changes to housing finance

18 Jun 09
Housing minister John Healey has disappointed local authority leaders by failing to unveil changes to the housing finance system.
By Neil Merrick in Harrogate

Housing minister John Healey has disappointed local authority leaders by failing to unveil changes to the housing finance system.

Speaking at the Chartered Institute of Housing’s annual conference on June 16, Healey promised that the results of the government’s year-long review would be announced ‘soon’. But he declined to indicate whether it would herald the break-up of the housing revenue account system.

The Local Government Association claimed this week that councils could build more than 300,000 homes over ten years if they left the HRA – under which rent receipts are pooled nationally – and became self-financing. About half would be paid for through extra borrowing after the government wrote off historic debts.

But Healey said there was nothing to stop councils from playing a more active role now through prudential borrowing or using reserves. ‘For councils simply to use the alibi that government is not giving them the money they need isn’t good enough,’ he told Public Finance following his speech in Harrogate.

With the HRA in surplus, the Treasury is expected to use £216m that was collected in rents for non-housing services this year. Paul Bettison, chair of the LGA’s environment board, urged the government to make the break-up of the HRA its ‘parting gift’ to councils.

But Sir Bob Kerslake, chief executive of the Homes and Communities Agency, warned that the review would not be ‘the last word’ on housing finance as the next spending review was just as important. The HCA this week set up an advisory group to look into new sources of private finance.

Healey’s speech came just 11 days after he was appointed Labour’s fourth housing minister in two years. If councils did not build directly, he said, they could commission other organisations to provide homes as well as setting allocation policies for social housing based on local labour markets.

He added: ‘If people don’t see the public investment that’s going into housing and don’t believe that it makes a difference to them, then they won’t support taxation or the tough choices that need to be made to fund it.’

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