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Local housing companies: nearing the finish

Local housing companies: nearing the finish

The government's target for new-build homes is now a very ambitious one, particularly in a difficult housing market. How are these 3 million new homes going to be delivered by 2020? There are many factors in play, not least the availability of local authority land and support.

The government recognises that one of the difficulties in recent years has been to secure local authority involvement in the delivery process and now is addressing the need to bring local authorities into the new-build programme as an active partner. The housing green paper last July was heavily focused on delivery vehicles and the role of local authorities in those vehicles.

The term "local housing company" was there used in the context of a particular joint-venture model, in effect sponsored by English Partnerships. It has since become clear that in fact there are a number of models that deserve a "local housing company" label and no one in the "business" of delivering new build is precious about prescriptive models.

But whatever local housing company structure is deployed, the local authority is heavily involved. Only if it is will the local authority and its members be likely to look positively on the opportunities for using local authority land – at least on a large scale – for building new homes and in particular the new affordable homes that so many local housing authorities need to respond to rising demand.

We are now at the stage where local housing company models are past their formulation stage, with the unavoidable legal and tax issues fully explored. Does the council have the power to create the local housing company? Can it deliver low-cost homeownership as well as rented affordable housing? Will the new properties be outside the housing revenue account (HRA) and not subject to the right to buy? Can stamp duty land tax (at 4%) be avoided - and, if so, to what extent? What about using a charity to avoid corporation tax (at 28%)? And will VAT (17.5%) be payable? All these and other important "drivers" have now been addressed and optimum structures devised.

We are now at the documentation stage, getting professionals and market players (including contractors) familiar and comfortable with legal provisions and the way they allocate risk and opportunity. Government, including English Partnerships, are fully engaged, so that the necessary government consents will be forthcoming at the end of the process.

Consent will be required if HRA land is to be sold, and even if it is not HRA land government consent might well be necessary or appropriate. There are also consents if, as is likely, other local authority support (in the form of "free" or less-than-market-value land) is made available.

All in all, the green paper's agenda for local housing companies is well on the way to realisation and, despite all the market difficulties, the signs are that, with local authority involvement - including the release of local authority land - at least some of the badly needed new affordable homes can be delivered in this way. Many models are now available, to reflect the participation of the various players – local authorities themselves, arm's-length management organisations, registered social landlords, and developers and/or contractors – who will be playing a part.