Government wants councils to ensure all social housing achieves the Decent Homes standard by 2010, if necessary by transferring their housing stock. But it may not be that simple

There are few more iconic issues for the Labour Party than council housing. The word council house is engraved on many a Labour breast. Margaret Thatcher’s right-to-buy programme was opposed so bitterly because it disposed of the very altar plate of the Labour temple. Labour councils resented their dethronement as social housing providers by housing associations. They objected even more to the Conservative transfer programme, only to find that the incoming Labour government not merely did nothing to stop it but actually set a target of 200,000 transfers a year. Now, near the end of Labour’s second term in power, a last-gasp campaign is being launched to defend the traditional concept of the council house.

The chosen battleground is the programme to achieve the decent homes standard for all social housing by 2010. The government has given councils until July of next year to set out how the decent homes standard will be achieved. Unless the council is able to finance the programme out of its own resources it has to choose between three options:

  • Transfer to a new owner (Large Scale Voluntary Transfer, or LSVT)
  • Transfer to a council-owned but independently managed company (the arm’s length management organisation, or ALMO)
  • Transfer under a private finance initiative package, usually under a 30-year contract.

The one thing that the government expressly rules out is the so-called “Fourth Way” – government funding of councils to bring their stock up to the necessary standards while councils retain ownership and management. John Prescott told the House of Commons “the fourth option they talk about is not an option.”

A pamphlet by Labour rebel Jane Sillett entitled Housing: the Right to Choose claims that funding councils to carry out the work would be cheaper than transfers. Other Labour MPs are pressing for investment allowances – an idea floated in a paper two years ago within the ODPM. Prescott now says the borrowing regime for councils means the idea has no future.

Sillett’s pamphlet also asks what happens to housing in areas where tenants reject all the options set out by government. The government’s answer is a straightforward one: hard bloody luck. If tenants say no then the tenants will have to live with the consequences.

But the government has got dilemmas of its own. There are still more than 2.5 million council homes, and it needs to maintain the momentum of the transfer programme. The problem is that over recent years the ALMO option has outstripped the classic LSVT transfer because councils have preferred to retain ownership of the stock. There are 400,000 homes on the ALMO programme against half that number on the transfer schedule. The problem for the government is that while transfers do not score against public debt, ALMOs do because the funding takes the form of borrowing approvals.

Government argues that tenants in transferred organisations have the highest levels of satisfaction

The government has acted to make transfers more attractive by paying off overhanging debt (where the capital receipt does not meet the full debt); allowing partial transfers; and, most recently, making £180m available to bridge the gap where income from rents does not meet the cost of renewal. Objectively, an LSVT transfer is still the “best buy.” There is no limit on the investment which a receiving owner can make, while ALMO funding is designed to meet the decent homes standard and no more. No one expects PFI to play more than a marginal role in the programme. The government argues that tenants in transferred organisations have the highest levels of satisfaction and the highest involvement in management of the estates.

The government needs to recover from the failure of the Birmingham whole-stock transfer of more than 80,000 homes, vetoed in a tenant ballot. A pattern is emerging of estate-by-estate transfers using a mixture of classic and ALMO transfers with occasional PFI deals permitting more involvement of tenants in the process.

It is just worth remembering that before a single “Barker home” opens its doors 1 million council houses will have transferred to the private sector. Now that’s a pretty iconic figure.

David Curry is MP for Skipton and Ripon