11 August 2009
A fairer footing for council housing
John Bibby
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Following the launch of the Government’s consultation on housing finance, John Bibby hopes issues around allocation of historic debt can be resolved so that stock retained authorities can finally fulfill their potential to meet local needs.
A collective sigh of relief was breathed among those of us whose residents have voted for their council to be their landlord when housing minister, John Healey, pledged to dismantle the hugely-unpopular housing finance system.
The Association of Retained Council Housing (ARCH) has lobbied long and hard on behalf of its members and residents of stock-retained authorities for a fairer, more stable and transparent system.
And publication of the Government’s consultation on reforming the Housing Revenue Account (HRA) subsidy system takes us a lot further towards achieving our key objectives. In particular, we welcome the minister’s desire to devolve control to local government and see councils play a larger part in delivering new, affordable homes.
ARCH believes the most sensible model would be to move to a devolved system under the ‘self-financing’ option – placing more control and responsibility with local government and local people.
This is, potentially, a real step forward, both for housing services and for making the most of the ‘place-shaping’ role of councils, of which housing makes up a significant element.
However, there are issues around the self-financing arrangements which are not entirely straightforward, and require detailed examination.
We are pleased to see a recognition in the consultation paper that even if a national system for funding of council housing is to remain, the Government has acknowledged that the provision for management and maintenance costs needs to be increased by 5% above current levels, and that the Major Repairs Allowance for tackling new, arising investment needs should be uplifted by an average of 24%.
Despite significant increases in investment in recent years to deliver the Decent Homes programme, much more needs to be done to maintain and improve that standard beyond 2010 – to protect the investment already made and improve common areas of estates, and improve the energy efficiency of the housing stock.
While, on the whole, the proposals are positive, a big question mark remains over the way in which £18bn historic debt will be treated. One ideal solution for councils would have been a write-off of the debt, but ARCH realises this is unlikely to take place under any administration.
The key to achieving an acceptable solution will, therefore, lie in how the proposal to calculate the proposed one-off reallocation of debt will affect each authority.
At this stage, this is unclear. The debt-allocation formula must be appropriate and not lead to a ‘winners and losers’ situation. There are concerns that what is proposed is not a redistribution of existing debt but rather the calculation of buy-out debt, based on the commuted value of future cashflows. There is also a worry that interest rate risk on the £18bn debt will pass to councils.
We welcome the minister’s desire to work with local authorities to move swiftly and set out the terms an offer by spring 2010.
We are very concerned at the indication that, otherwise, the reforms necessary may not be brought forward until 2012-13 – some five years after the review of council housing finance was first announced.
Responses to the consultation paper are sought by 27 October. Between now and then, ARCH will be examining proposals in detail, consulting with members and running events to examine the nitty-gritty implications of new arrangements.
We look forward to continuing to work with the CLG to introduce a fairer, more stable and transparent housing finance system.
With the right finance system, councils could finally fulfil their undoubted potential to meet local needs. After 20 years during which direct council provision has been the ‘poor relation’ of the social housing world, we hope this can be achieved.
John Bibby is secretary of ARCH and director of housing and community services at Lincoln City Council
A collective sigh of relief was breathed among those of us whose residents have voted for their council to be their landlord when housing minister, John Healey, pledged to dismantle the hugely-unpopular housing finance system.
The Association of Retained Council Housing (ARCH) has lobbied long and hard on behalf of its members and residents of stock-retained authorities for a fairer, more stable and transparent system.
And publication of the Government’s consultation on reforming the Housing Revenue Account (HRA) subsidy system takes us a lot further towards achieving our key objectives. In particular, we welcome the minister’s desire to devolve control to local government and see councils play a larger part in delivering new, affordable homes.
ARCH believes the most sensible model would be to move to a devolved system under the ‘self-financing’ option – placing more control and responsibility with local government and local people.
This is, potentially, a real step forward, both for housing services and for making the most of the ‘place-shaping’ role of councils, of which housing makes up a significant element.
However, there are issues around the self-financing arrangements which are not entirely straightforward, and require detailed examination.
We are pleased to see a recognition in the consultation paper that even if a national system for funding of council housing is to remain, the Government has acknowledged that the provision for management and maintenance costs needs to be increased by 5% above current levels, and that the Major Repairs Allowance for tackling new, arising investment needs should be uplifted by an average of 24%.
Despite significant increases in investment in recent years to deliver the Decent Homes programme, much more needs to be done to maintain and improve that standard beyond 2010 – to protect the investment already made and improve common areas of estates, and improve the energy efficiency of the housing stock.
While, on the whole, the proposals are positive, a big question mark remains over the way in which £18bn historic debt will be treated. One ideal solution for councils would have been a write-off of the debt, but ARCH realises this is unlikely to take place under any administration.
The key to achieving an acceptable solution will, therefore, lie in how the proposal to calculate the proposed one-off reallocation of debt will affect each authority.
At this stage, this is unclear. The debt-allocation formula must be appropriate and not lead to a ‘winners and losers’ situation. There are concerns that what is proposed is not a redistribution of existing debt but rather the calculation of buy-out debt, based on the commuted value of future cashflows. There is also a worry that interest rate risk on the £18bn debt will pass to councils.
We welcome the minister’s desire to work with local authorities to move swiftly and set out the terms an offer by spring 2010.
We are very concerned at the indication that, otherwise, the reforms necessary may not be brought forward until 2012-13 – some five years after the review of council housing finance was first announced.
Responses to the consultation paper are sought by 27 October. Between now and then, ARCH will be examining proposals in detail, consulting with members and running events to examine the nitty-gritty implications of new arrangements.
We look forward to continuing to work with the CLG to introduce a fairer, more stable and transparent housing finance system.
With the right finance system, councils could finally fulfil their undoubted potential to meet local needs. After 20 years during which direct council provision has been the ‘poor relation’ of the social housing world, we hope this can be achieved.
John Bibby is secretary of ARCH and director of housing and community services at Lincoln City Council
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