For example, a council might have £1m in basic credit approvals for housing, and choose to spend it on regeneration or a swimming pool rather than on council housing work covered by the housing revenue account.
Alongside this borrowing, the council gets roughly £80,000 of subsidy paid into the HRA to repay the debt. As long as the authority can service the debt from general funds, it can use the £80,000 to pay for another £1m loan through the prudential borrowing regime. This second loan could be spent on housing.
Many English councils already spend basic credit approvals on projects other than council housing.
Consultant Richard Bramley, who developed the idea, emphasised that it was at a very early stage and would need further discussions with councils and government offices.
He said: "It's an opportunity to maximise borrowing to spend on decent homes. To some small districts with 2000 to 3000 properties, an extra £1m could be significant."
The extra borrowing, combined with increased management and maintenance allowances, could help some northern authorities stave off transfer for an extra seven years, he added.
But it would not work for all councils, such as those that use the subsidy paid into the housing revenue account to keep the account afloat. If it is used to pay off debt, the account will run out more quickly.
Councils would also need to find a way to service the basic credit approval debt – perhaps from council tax or by building a service that makes money such as a leisure centre or car park.
This option would not be open to councils that had already spent their basic credit approvals on housing or that wanted to remain debt-free so did not spend them at all.
The Northern Housing Consortium sent Bramley's paper to its members on Monday.
Source
Housing Today
No comments yet