Council housing could soon be just a memory as local authorities hand over the keys to social landlords, who will use them to unlock billions in private finance. But will the result just make the overheating in the industry even worse? Josephine Smit takes the temperature
Ballot papers have been dropping through letterboxes in Birmingham, Bradford, Crewe and Nantwich, Herefordshire, Liverpool and Glasgow. For council tenants on the receiving end, the ballot offers the promise of new central heating, a refit of the kitchen and bathroom, maybe even a new roof – in return for agreeing to have their home taken out of council hands and handed over to a housing association.

Now, multiply those fairly basic home improvement works by 180,000, which is the total number of council homes being transferred annually to housing associations in England under the Large Scale Voluntary Transfer process. On that scale, simple bathroom and kitchen refits could generate substantial work for contractors. But they also have the potential to bring an industry already in the grip of a skills shortage to crisis point.

LSVTs have hit the headlines over the past few months after tenants rejected the transfer of London's Aylesbury Estate, and the massive quantities of council housing stock set to change hands in Birmingham and Glasgow. What is driving councils to transfer their stock to registered social landlords, often newly created from existing council housing departments, is the need to secure private funding to pay for essential upgrading works.

The government wants to see the country's £20bn housing repairs backlog tackled and has determined that all tenants should be living in a "decent home" by 2010. It has set out a clear definition of what a "decent home" should have, which is why most LSVT repair programmes concentrate initially on kitchen and bathroom refurbishment.

"All local authorities will be looking to meet the decent homes standard, so they are now all working on an eight-year time-frame," says Nigel Minto, projects manager with the National Housing Federation. With few local authorities having the means or the will to fund repairs, the expectation is that nearly all social housing stock will be transferred out of council hands by 2020. The main transfer vehicle will be LSVTs, although other routes, including the PFI, are available.

So far, more than 600,000 homes have been transferred through 151 LSVTs, and £9.8bn of private finance has been raised to purchase and upgrade stock. Despite this, the programme is behind schedule. The government controls the LSVT process, with councils applying to the DTLR for their stock to be included among the 180,000 units transferred each year. The next batch of successful bidders has just been announced.

The 1988 Housing Act paved the way for LSVTs. Initially, however, only Conservative-run county councils with relatively trouble-free stock, requiring less upgrading, wanted to make the change. Many larger urban authorities were ideologically opposed to letting council housing out of their hands, and the poor quality of their stock often meant that no bank or funding institution would lend against it.

The Labour government has demonstrated its commitment to LSVTs by agreeing to bail out local authorities in this situation. For instance, the Glasgow transfer required a £900m "dowry" in the form of a write-off of housing debt. That has paved the way for applications for transfer from larger urban authorities with housing stock requiring serious attention. "We're moving into a new phase with these transfers," says Minto.

That is producing the prospect of a substantial workload for contractors – even those in urban areas with no large-scale LSVTs on the horizon. "Although contractors in London and the South-east have not got one big transfer on the way, there are probably 35-45 estates that we've identified and are chasing," says Jeff Adams, managing director of contractor United House. "That's 252,000 units, or £1.9bn of work over five years. We are seeing bigger supercontracts, involving partnering over four or five years."

But there are concerns that the industry could get too much of a good thing. "LSVTs are putting billions into the building economy in a very short space of time," says Rob McNaughton, director of management consultant Barony Group. "The rate of generation of newly created RSLs [registered social landlords] is going to lead to problems in finding resources."

The Midlands is about to see the biggest influx of work in England. Coventry's housing has already been transferred to Whitefriars Housing Group and 19,700 homes are being upgraded with a spend projected at £230m the five years after the transfer. Whitefriars is considered a success, with strategic partnering rolling out 93 economic kitchen and bathroom upgrades a week.

Near neighbours are now seeking to follow Whitefriars' example. Walsall council tenants have voted to transfer, and new housing association Walsall Housing Group starts its refurbishment programme for 24,500 homes later this year, aiming to spend £300m over five years. Coventry and Walsall will be dwarfed by the Birmingham transfer, which will spend more than £1bn on 55,000 homes if tenants give the go-ahead. Under the circumstances, Midlands contractors could well be relieved that council tenants in Dudley voted against transfer.

Because of the projected scale of the Birmingham transfer, the city council has already talked to the Construction Industry Training Board about labour supply. It is estimated that 730 jobs will be created for site workers over the next 10 years – but can enough people be found to do them? The ability to source labour was one of the factors that influenced the Whitefriars Housing Group to look to national contractors to carry through its programme, and it entered into five-year strategic partnering arrangements with Carillion's social housing division (since acquired by Lovell, Morgan Sindall's affordable housing arm) and Wates.

In partnership with Mowlem, Whitefriars has established the Whitefriars Housing Plus Agency, which has secured training opportunities for 38 people to date. But with unemployment rates in Coventry falling from 6% a year ago to just 3% now, providing training opportunities is not sufficient to bridge the skills gap. "Even though we are attempting to build capacity, there just E E aren't the people around," says Mike Brown, Whitefriars' director of property investment. "We've struggled to find the people, given the construction industry's image."

Stewart Davenport, managing director of Lovell, echoes his concern. "We are worried about a potential shortage of skills, but at the moment we're coping," he says. With an eye to the future, Lovell is starting to train and directly employ multiskilled operatives who can go into a home and carry out a range of tasks on both Whitefriars and its West Yorkshire LSVT contract with Pennine Housing 2000.

In the Midlands, further action is required. "We already talk to Wates to make sure that if they're roofing, we don't," explains Lovell's Davenport. Whitefriars' Brown agrees. "Walsall will have to liaise with Coventry – we're keen to work with other LSVTs to co-ordinate our work," he says. "We're also encouraging our contractors to move to direct employment, because that will encourage people into the industry. With the transfers, we are able to offer continuity of work, which should give the industry the opportunity to employ people permanently."

But materials could also be in short supply – there is a scare story that one window manufacturer is set to devote its entire production to a Midlands LSVT for five years. "We're trying to put together supplier relationships with merchants," says United House's Adams. "We're looking at prefabrication to limit the need for skills on site, but there is only so much we can do with refurbishment."

High demand for labour and materials would raise on costs, and Whitefriars' Brown is worried. "We've managed to cap overall costs through long-term manufacturer deals, but labour costs are a concern. We're linked to the retail prices index, and the construction industry isn't, so we're encouraging the industry to increase wages in line with that." At the moment Whitefriars' contractor partners are complying. But with Birmingham's LSVT waiting in the wings, will they be able to for much longer?

Stock-in-trade: transfers currently being balloted

This is England’s largest stock transfer, with £1.25bn to be spent. The council’s stock stands at 88,000, but right-to-buy is expected to reduce this number to about 80,000 by the time of the transfer. The stock will be divided between 10 registered social landlords within the Birmingham Housing Alliance Group. The council has identified 24,500 poor quality and unpopular homes that need to be demolished, but BHAG will not necessarily build the same number of new homes, since demand for social housing is predicted to fall by 15,000 units over the next decade. The remaining 55,000 homes will be improved under two packages: “Warm and Safe” and “Modern” homes. The Warm and Safe package will be implemented in the first five years to provide central heating systems for 25,000 homes, double glazing with multi-locks for 36,000 homes, and loft and cavity insulation. Over a decade, the Modern homes package will provide 47,000 new kitchens, 35,000 new bathrooms, rewiring for 40,000 homes, new roofs for 37,000 properties, as well as new front and back doors and environmental improvements. Bradford
Bradford’s 26,100 council homes will be in line for £100m of improvements and £75m of catch-up repairs when they transfer to Bradford Community Housing Group. BCHG will be made up of six local housing trusts, each with its own spending programme. For example, the trust for the Shipley area will spend £10m over 30 years, working on just over 3000 homes to provide kitchens and bathrooms for 1300 homes, external doors for 1800 homes and rewiring for 700 homes, as well as security measures and roof repair or replacement. Herefordshire
The council is preparing to transfer 5700 homes, and has made a commitment to invest £82m over the first 10 years. Around £10m of this will go towards overcladding housing stock built of precast reinforced concrete, with the remainder to be spent on kitchen and bathroom upgrading and extensive re-roofing. Liverpool
The city council is proposing to transfer 40% of its stock, some 13,500 homes, to three new housing associations. Following the transfer, £600m will be spent to modernise kitchens and bathrooms, replace roofs, windows and doors, and improve estate environments, such as adding garden fences. The housing associations are: Colbalt Housing, part of the Liverpool Housing Trust. This will control 6500 homes, and spend £100 m in the first five years and £300m over 30. Lee Valley Housing, part of the Riverside Group, will control 3000 home. It will invest £35m in the first five years and £137m over the longer term. Berry Bridge Housing, also part of the Riverside Group, will take on 4000 homes. It will spend £48m in the first five years, and £200m in the long term. Glasgow
The largest workload for the building industry is likely to be in Glasgow, where around a quarter of the 82,000 homes are considered to be unfit and half are in poor condition. A transfer of that stock to Glasgow Housing Association would be accompanied by a £5.6bn spending commitment over 30 years, with half the money dedicated to the first 11 years. Crewe and Nantwich
Its 6000 homes are set to be transferred to Wulvern Housing, with a pledge that £56m will be spent over the first 10 years, prioritising energy efficiency.