By Steve Partridge, member of the CIPFA Housing Panel and Director at Savills Affordable Housing Consultancy
The lifting of the Housing Revenue Account borrowing cap in 2018 marked the end of a somewhat contentious era for local authority housing policy. After nearly 30 years of this system being put in place (partly lifted in 2012 with the introduction of self-financing), local councils now have the spending freedom to consider setting up meaningful and impactful affordable housing programmes; signifying a turning point for the state of the nation’s housing crisis.
An increase in social rent homes in England and Wales could be the key to solving a number of issues facing the housing economy today. Firstly, a move away from private renting into social housing would help to alleviate the financial pressure on low income families. This, in turn, would allow the local authorities to make savings in the amount of LHA housing support they are currently providing.
The lack of affordable housing has also been at the heart of the homelessness crisis – as there are simply not enough houses to fulfil demand. This has put the government in an increasingly vulnerable position as they have had to rely on getting emergency short-term accommodation from private landlords, which can often be at inflated prices.
In the current climate, it is safe to say that the more social housing that is available, the greater the benefits for both the public and the state. However, the question of exactly how this is going to happen still remains at large. Two thirds of councils plan to increase housebuilding in future and the other third have already put plans in place to do so. However, research done by the LGA last year says that 97% of councils said that more national advice and guidance is needed to increase housebuilding.
With the low amount of resources that authorities have received over the past two to three decades, it is very likely that a lack of knowledge and expertise in the housebuilding sector may act as a further barrier to a council’s progress. Some councils have also raised the Right to Buy Scheme as a concern for any future housebuilding projects, as there is a possibility of these houses eventually being sold off to tenants at a discounted rate. The availability and cost of acquiring new land is also a cause for concern for many councils.
So, how can local authorities both manage and achieve a transformation of the social housing sector? With these lifted restrictions, an increasing importance needs to be placed upon establishing indicators as required by the Prudential Code by setting a level of borrowing capacity. Councils will also need to establish a clear framework for investment, including risk buffers, loan interest and a definitive loan to value level.
The issue surrounding the capacity and level of expertise within councils also needs further attention. A survey conducted by the District Councils Network (DCN) stated that greater capacity is particularly needed in land identification and acquisition, procurement, viability modelling and management in affordable housing development programmes.
In recognising that lifting the cap on borrowing is not the only factor in the build of new houses, there have also been calls for changes to policy to allow councils to build a successful housing strategy. This includes devolving the power of setting discount levels for right to buy homes and controlling this at a local instead of national level, along with the time period that any receipts for this can be used. There have also been calls for further support and coordination from government agencies to help bolster progress in outlining a definitive housebuilding strategy and resourcing the capacity to get houses built on the ground.
Although the future remains bright for councils, it is clear that there are many other factors to be considered and many questions which are still yet to be answered of how this landmark policy can achieve its full potential. What’s apparent is that, if done correctly, this is a huge opportunity for local authorities to take significant strides in solving the housing crisis.
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- Ongoing expert help, best practice and case studies from authorities and organisations across the UK around the issue of HRA and social housing is available with a subscription to CIPFA's Housing Advisory Network