Re-opening the Housing Revenue Account
It is now recognised that councils have a major role to play in the supply of new housing. Councils are building again, at scale; and this renaissance has encouraged some stock transfer councils back into ownership. Their motivations and ambitions vary but the number of re-entrants is becoming significant - well into double figures. Now is a good time therefore to reflect on the issues a council needs to consider when it decides to be a landlord once again.
What is involved in ‘re-opening’ the HRA?
From a legal point of view the formal and not entirely facetious answer is, nothing. A council must simply account separately (i.e. ring fenced from the General Fund) for any property provided under Part 2 of the Housing Act 1985. The Secretary of State can however waive that requirement by making a ‘direction’ and MHCLG’s website guidance explains that obtaining a direction to hold up to 200 dwellings in the General Fund will usually be a formality. Most of the councils which have ‘re-opened’ their HRAs are those which have either reached that number or expect to do so.
What HRA rules have changed?
It is five years or more since the last whole stock transfer and most of the transfers took place before the abolition of the HRA subsidy system in 2012. Some of the new ‘HRA councils’ have not owned stock for 25 years or so. They will need to remind themselves of the old rules and familiarise themselves with the new ones. They may be disappointed to find that the last official HRA Manual appeared in 2006-7 (though MHCLG’s website guidance is a valuable starting-point and resource). Most of the significant changes arise from the introduction of self-financing in 2012 but councils will appreciate that the debt cap which was imposed then was removed two years ago.
What else has changed?
The key change is regulation. Councils have formally been registered providers for many years but it is only recently that this has had a real impact. The Regulator of Social Housing has been particularly concerned to ensure that councils are aware of their health and safety responsibilities and has served enforcement notices on a number of councils In addition, the Rent Standard was applied to councils for the first time from April this year, with the effect that social rents for secure tenants are restricted in the same way as for assured tenants.
What is likely to change in the future?
All local housing authorities will be aware that current Government policy is difficult to predict; but the main features of ‘A new deal for social housing’ - the Green Paper published two years ago - may well be implemented. If so, councils with stock can expect to be subject to closer scrutiny from tenants (and leaseholders), KPI-based performance monitoring and streamlined complaints procedures - together with a more expensive Decent Homes standard (driven also by the Green agenda), not to mention the new building safety regime. None of this is likely to deter councils determined to provide more homes for their residents, but there are challenges now which they did not have to face before stock transfer all those years ago.
Please ask Ian or your usual contact at Trowers for the firm’s Unofficial HRA Manual.