Criticism of Whitehall plans to force £3.6bn of new housing debt on to local government could be short-lived, if ministers agree to fund a backlog of Decent Homes cash, The MJ has learned.
A small, but vociferous, group of town halls this week criticised radical CLG plans to devolve complete control of council housing finance to local authorities by dismantling the loathed Housing Revenue Account (HRA) system.
The proposals were announced by housing minister, John Healey, on 25 March. But Birmingham City Council expressed concern that Mr Healey planned to transfer to local government an additional £3.6bn of housing debt as part of the deal.
Cllr John Lines, Birmingham’s cabinet member for housing, said: ‘Sadly, I’m not convinced about Mr Healey’s deal because we will still be saddled with extra debt of £3.6bn nationally. This equates to £2,000 per property nationally, if it was shared equally, and, frankly, this isn’t good enough.’
Birmingham recently borrowed £150m to fund its Decent Homes programme and claims it would not have that debt if it had been able to retain council house receipts sooner.
However, a senior local government housing source told The MJ that if ministers agreed to hand to councils capital grants sufficient to cover a £3.2bn backlog in the centrally-funded Decent Homes programme, then the level of new debt assumed by local government would effectively be just £400m.
The Local Government Association is seeking clarification from the CLG on future funding arrangements for the Decent Homes backlog.
Under Mr Healey’s plan to dismantle the HRA, councils would keep all revenues from future council house rents, and all cash from the sale of land or buildings, while the Treasury would lose the £350m it takes out of the national HRA system each year. The complex system of council cross-subsidies, which currently ensures high-performing authorities subsidise poor performers, would also be scrapped.
Mr Healey said his proposed system ‘should free up sufficient cash to build an extra 10,000 council homes every year’.
In return, Mr Healey explained, councils must assume responsibility for the extra £3.6bn of housing debt. Town halls already cover £21.5bn of debt within the housing system.
Many local government experts backed the CLG’s plan. CIPFA said it was ‘pleased to see the Government had listened to the concerns raised by so many local authorities’ in dismantling the HRA.
John Bibby, secretary of the Association of Retained Council Housing and a housing director at Lincoln City Council, said Mr Healey’s debt reallocation proposal was ‘more reasonable than we feared it might be’.
