Councils building houses – updated

UPDATE:  I had a great response to my post and tweets about council housing, which fed into my contribution to this useful feature in the latest issue of Local Government Chronicle.

After several decades of central government seriously limiting the role of councils in the provision of affordable housing, reducing council house building to virtually nothing (400 units nationwide in 2008), and pushing councils to divest of their housing stock, the tide may be turning.

Speaking last week, the Prime Minister said he is considering, favourably, the idea of councils building houses.  I talked to Sir Bob Kerslake, of the Homes and Communities Agency about it yesterday, and later to former housing Minister, Nick Raynsford.  They confirmed the renewed interest in the role that councils could play now in kick-starting local house building, which would be good for the economy, and provide much needed additional affordable housing.  Here’s the a-b-c:

a) the council puts the land in for free

b) the Homes and Communities Agency provides grant aid

c) the council borrows and starts building.

There are two main stumbling blocks – we need to persuade government to change the rules on the Housing Revenue Account, and convince sceptics at the Treasury who will be concerned about the effect of councils borrowing on the PSBR and the government’s liability.

Housing Minister Margaret Beckett published a consultation document on 21 January on proposed changes to the revenue and capital rules that apply to new council housing.  It is positive and we need councils to weigh in on the consultation.

As for the Treasury, we need to pull together ideas for a framework that gives the Treasury some assurance, such as an aggregate limit on local authorities borrowing against the PSBR.  Your ideas welcome.

In addition to council housing, we should also look at other good ideas for increasing supply, such as Community Land Trusts and Mutual Home Ownership.

    1. Paul – I think it’s great you are using the opportunity to build council homes to be innovative – small can be beautiful.

      And councils being creative will be a weapon against those who fear ‘ghettos’ – the focus will be on quality not just quantity. Building new homes can be part of a wider strategy to tackle residualisation, and to achieve more socially mixed communities – with a mix of new build, acquisition, sales, and partnership working. Though housing policy can only do so much here – wider socio-economic change is required.

      But there is no doubt – we do need urgent investment into rented homes, so how can we persuade the Treasury to go further than Margaret Becket’s consultation? There is, of course, already money in the system but the current surplus is not ring-fenced – councils should be able to keep all the income from existing homes. Councils should be able to borrow against their assess, and maybe the accounting rules need challenging.

      But we also need a new approach: a robust economic model that measures the costs of not doing something and the value of doing it in the longer term – so, in this case, the costs of increased homelessness, broken schooling, ill mental and physical health and of course, the collapse of construction jobs and skills. Additional funding for new homes is then clearly an investment and not a drain on the future economy.

    2. Paul Corazzo says:

      North Kesteven DC are building three council houses next year… (subject to planning)
      The interesting thing about it is, they will be made from straw…
      If the Council house building is aligned with renewable and sustainable policy, then it can only be a good thing.

    3. Matt Bryant says:

      Great idea, lots of people I speak to in the housebuilding industry are genuinely worried that we will lose construction workers, roofers etc during the current downturn in the market, who will then retrain so they can keep working. Their fear is this will result in nobody being able to build the things once the market picks up again. And so we will be back in a situation where demand rapidly outstrips supply. This would be a good way of ensuring this doesn’t happen, but more importantly keeping people in jobs / careers that they have chosen for themselves.

      Just a thought – obviously there are a lot of councils who are clamouring to do this and they should be empowered to do so. But I have heard a couple of council leaders say, worryingly, that even if given these powers they wouldn’t go down this path because – and this is a direct quote from one – “we don’t want to build ghettos.”

      How do we counter this (other than at the ballot box) – is it just a matter of education re. basic good planning, or will DCLG look to incentivise councils?

    4. Gavin Phillipson says:

      This is indeed exciting news: the imperative the recession has produced to stimulate the economy by creating jobs may turn out to be the social housing silver lining in the downturn cloud…

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