Over the last year we have seen an increasing number of local authorities begin the process of establishing their own registered providers of social housing (RPs). These have been either direct subsidiaries of the local authority, or subsidiaries of established local authority housing companies. What has prompted local authorities to consider delivering social housing in this way?
We have seen two primary motivations. The first is access to Homes England or Greater London Authority grant. While local authorities can access grant in their own right, Housing Revenue Account (HRA) constraints (either existing, or the requirement to re-open one) can make it difficult for local authorities to deliver grant-funded schemes which are financially viable in their own name.We typically see local authority owned RPs funded through a combination of grant and on-lent Public Works Loan Board monies (the recent interest rate rise does not yet seem to have had any significant impact on project viability). Grant funded homes let by local authority owned RPs can be subject to the Right to Acquire (where the other conditions in the Housing and Regeneration Act 2008 are met), but tenants would not be eligible for the Right to Buy. The Government has, of course, considered various ways of extending a version of the Right to Buy to RP tenants – most recently through the concept of a 'shared ownership' Right to Buy – but none have yet been implemented.
The second motivation is to widen the approach taken by local authorities to the delivery of housing. Affordable housing mandated by a s106 planning obligation must be let by an RP. In some areas, there is a perception that 'traditional' RPs are not coming forward to take these homes, stymying housing delivery generally. In such cases, local authorities see their own RPs as a way of making sure these homes are let and in setting up their RP are facilitating continued affordable housing supply. In other cases, councils have been developing their own mixed tenure schemes (often through a local housing company subsidiary). Having their own RP to take the planning mandated affordable units allows the parent authority to retain a degree of (indirect) ownership and control over the whole scheme. While this has obvious financial benefits, local authorities have also been keen to use such schemes to improve both design and on-going management standards for new build developments in their areas.
As local authorities are all too aware, there are no single initiatives which offer a complete solution to the affordable housing supply problem. Local authority owned RPs are one of an increasing number of creative ways in which councils are seeking to address the demand for affordable housing, and one which plays its part alongside traditional council housing and local housing company provision.
