Is there a fourth way?

The right to choose

The government is advocating choice in public services, while denying it to millions of council tenants. Its policies for addressing the backlog of disrepair in local authority housing give tenants a "choice" between a decent home and remaining a council tenant.

Councils only get money to meet the government's decent homes standard if their tenants opt for transfer, an arm's length management organisation or a private finance initiative scheme. When tenants vote no to all three, they and their councils are left in limbo. The target of bringing all council housing up to the decent homes standard by 2010 is going to be missed. The government must change policy and concede a fourth option.

The government insists that transfer or ALMOs are better value for money because they deliver benefits such as earlier improvement to poor housing and community regeneration. It also says separating day-to-day management from strategy means that councils can concentrate on their strategic housing role.

Yet there is no consistent evidence that any of this is true.

The fastest way to meet the decent homes standard would be to allow councils to invest directly in their stock. The government's position is increasingly untenable – how can it deprive high-performing authorities such as Camden from receiving the same subsidy as two- or three-star ALMOs?

Unlike housing associations, local authorities cannot borrow against their assets. This should be changed to create a level playing field between the government's chosen options and a fourth option of investment under council control.

First, changes to how housing subsidy is calculated relating to debt repayment could release money to support borrowing, so that councils keeping their stock are treated in an equivalent manner to transfer authorities with overhanging debt. Some of the £13bn taken from council tenants' rents by the previous arrangements for housing subsidy and rent rebate subsidy could be returned to councils in phases, through a new investment allowance. This would fund borrowing against the prudential framework and councils could borrow additional resources against the major repairs allowance.

Second, tenants voting on the future of their homes need to be guaranteed the same tenancy rights, whatever council or non-council model of social landlord they choose to manage their homes, through the introduction of a single social tenancy.

The government’s position is increasingly untenable – how can it deprive high-performing authorities such as Camden from receiving the same subsidy as two- or three-star ALMOs?

Enabling councils to retain and improve their housing stock is, however, not enough. If councils are not able to directly build new housing, tenants who choose to remain with the council and new tenants will not have any option to live in new council housing, the stock will ossify and the social costs multiply. Why is the prospect of councils building such a taboo?

Councils' local knowledge, democratic legitimacy and ability to join up partnerships for regeneration make them irreplaceable. No housing association, local housing company or ALMO could ever match these strengths.

If the government wants a successful decent homes policy that applies to all council tenants and offers a genuine right to choose, ministers have no choice.

Janet Sillett is a policy officer at the Local Government Information Unit. The Right to Choose is published on 29 June. Call Central Books on 0845 458 9910 or contact mo@centralbooks.com

The people have chosen

Janet Sillett presents a flawed argument against this government's policy to deliver decent homes.

In 1997 we inherited a £19bn council house repairs backlog, with 2.1 million properties below the decent homes standard. Already we have made massive progress towards turning this around. This year will see a 1 million reduction in the number of non-decent homes.

Many councils and their tenants across England have already chosen one of the three options that will deliver extra money for decent homes: 128 have transferred some or all of their stock, 36 have chosen ALMOs and 13 are progressing PFI schemes. That's hardly evidence of our policies not working.

The call for an investment allowance is simply a request for more government aid to fund borrowing, thus increasing public spending without any link to better performance

Ms Sillett implies we are denying councils money for housing, but nothing could be further from the truth. Between 1997 and 2006 the amount of money spent on average per council home will have increased by 55% in real terms. In addition, management and maintenance allowances increased by 6% in real terms in both 2004/5 and 2005/6.

Decent homes cannot be delivered without tenants being at the heart of decision-making. This is why I require councils to demonstrate effective tenant engagement through option appraisals, which work out sustainable investment priorities, the level of management service and how these can best be delivered.

Where substantial extra sums are required, I want tenants to have more of a say in how that money is spent. I also want to see them receive more than just one-off physical improvements to their homes. Clearly transfer, ALMO and PFI deliver this by providing a dedicated management service focusing on tenants' needs as well as extra investment. And most importantly, two of these options leave homes in council ownership.

I have a duty to ensure value for money and to drive up performance. In this regard the business plan of a transfer is subject to the rigours of the private sector market, a PFI payment is tied to performance levels and an ALMO must demonstrate two-star status.

Ms Sillett's proposal for an investment allowance is simply a request for more government aid to fund borrowing, thus increasing public spending without any link to better performance. It is nonsense to say this can be funded from £13bn taken under previous subsidy arrangements: there is no money sitting in a Treasury piggy bank that could be paid back. It is true this government inherited a system in which the aggregate national housing element subsidy was negative, but that was because councils were not properly funded. The Major Repairs Allowance in 2001 put a stop to this.

There is no specific bar on local authorities undertaking new build, but the value for money of this is considered alongside other options. Under prudential borrowing councils can choose to build new homes where they decide this is a local priority. We have already changed the rules regarding set aside for receipts generated as part of effective stock asset management. Such receipts can be retained for housing investment.

Councils should use the strengths Ms Sillett lists to set the strategic vision for housing in their area. They are the directors of the show, not the actors.

Decent homes are delivered where councils are working within the framework the government has set out. There is no fourth way.