23 January 2009
By Neil Merrick
New homes built by local authorities will not be governed by national housing finance rules, the government announced this week.
In a move that might signal the break-up of the housing revenue account, ministers said councils would be able to keep all rental income raised from new properties and retain all receipts if homes were later sold through the right to buy.
Although councils can apply for development grants in the same way as housing associations, just five – all with arm's-length management organisations – have so far received funds via the National Affordable Housing Programme.
A consultation paper, published by the Department for Communities and Local Government on January 21, admitted that the current system did not encourage councils to build because rental income was pooled nationally through the HRA subsidy system and 75% of receipts from sales were paid to the Treasury.
Housing minister Margaret Beckett said the government was determined that house building would continue during the recession. 'The long-term need for more homes is not going to disappear,' she said. 'These new freedoms will encourage councils to play a bigger role in driving forward the delivery of new affordable homes.'
Paul Bettison, chair of the Local Government Association's environment board, said councils would need to study the consultation paper closely but added that every 'inducement' was welcome.
'We will have to understand how effective these measures will be for councils,' he said. 'Not all fiscal measures help all councils equally.'
Alan Walter, chair of campaign group Defend Council Housing, said the measures vindicated its long-running campaign for a 'fourth option', where councils could raise money without transferring homes to housing associations, creating Almos or using the Private Finance Initiative.
The consultation paper precedes a government review of the HRA that is due to report later this year and could lead to some authorities taking all their homes out of the national subsidy system.
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