Rebalancing the housing system: New council homes – a simple way of removing some restrictions


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As part of our series of pieces analysing the Affordable Housing Commission’s report “Making the Housing Affordable Again: Rebalancing the Nation’s Housing System”, here we take closer look at one of the specific recommendations on council housebuilding.

The starting point

The recent Affordable Housing Commission chaired by Lord Best made the following Recommendation (7).

The Commission supports the government's encouragement to councils to build again at scale, directly and through local housing companies. Achieving that ambition will require increased resources for councils to deliver a high proportion of social housing in mixed tenure developments.

The opportunity

This is of course partly about numbers – but it is more than that. Councils can lead as well as follow the local market – giving confidence to commercial housebuilders and developers. They also often take on difficult or potentially risky sites. So there is real scope for additionality - in other words, added value in every sense.  

Council assets  

Councils intent on new build have lots of 'positives':

  • No debt cap
  • Access to cheap PWLB money – and others sources (increasingly bond finance)
  • An unimpeachable covenant
  • Statutory powers

Their limitations are man-made or otherwise artificial:

  • A mass of complex legal rules – councils can only do what the law authorises
  • A sub-stratum of correspondingly complex Government consents 

The challenge

In theory therefore Parliament and Government can remove any or all of these limitations and in theory councils will be able to make full use of the resulting freedoms.

But 

  • Statutory change will take too long – we need to focus on the sub-stratum of administrative rules
  • Freedoms are not sufficient – councils need to be confident about the long-term viability of their new build programmes

This means that any new build measures must be deliverable by MHCLG officials and reassure council officers – in housing and finance.

The idea

The proposal is that MHCLG would relax the current rules for specific projects or programmes – self- certified against straightforward criteria, including scale and deliverability.

The freedoms thus made available for council new build would be designated the 'New Council Homes Consents Package.'  It would include:

  • Simplified consents – to dispose (s32 Housing Act 1985 and s123 Local Government Act 1972) and to give financial and other support (under s25 Local Government Act 1988)
  • Adjustments to the Right to Buy cost floor to protect delivery plan cash flow from rents    
  • Relaxations of rules for appropriating land into the Housing Revenue Account (as contemplated in a recent Government consultation)  
  • Wider use of RTB receipts – i.e. those already proposed for high demand areas
  • Directions to remove unnecessary  HRA / General Fund barriers – i.e. maintaining the HRA ring fence but making specific exceptions to allow for the use of identified assets and /or income therefrom to support the new build programme

MHCLG would therefore not be flying blind – it would be relaxing the rules in the right circumstances – and getting something in return.

The proposed relaxations are modest – and do not, in our view, qualify as 'novel, contentious or repercussive' – and would require no or little Parliamentary time to adopt.

And it is likely that councils will be able to achieve significant levels of social housing, alongside other types of sub-market housing and using cross-subsidy from market rentals, without needing direct Government support – i.e. MHCLG would not be providing more resources.

A modest proposal – but with real potential?

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