Councils will have the power to manage their own housing stock in the future, after the Housing Revenue Account (HRA) subsidy system was formally scrapped, housing minister Grant Shapps has announced.
The new financial deal means local authorities no longer have to pay council rents directly to Whitehall, which subsequently decided how the cash should be re-distributed.
The new self-financing model will allow councils to make direct changes to their housing stock. There will be a ‘one-off’ adjustment to councils’ housing debt, after which they will be able to retain rental income.
According to the Department for Communities and Local Government (DCLG), the funding for management, maintenance, repairs and adaptations will be 14% higher than under the current subsidy system.
Although put together as part of the Localism Bill, the original decision to axe the HRA system was taken by former housing minister John Healey in March 2010.
At the time, councils feared the move would lead to massive debts for local authorities, such as Birmingham City Council. The adjustment payment should resolve this issue, although the extent to which it will remains to be seen.
Mr Shapps said: ‘By giving local authorities clarity on their future revenue and the freedom they have to decide what is best in their local area, they can now start preparing for this council house revolution that will begin next year.’
